As filed with the Securities and Exchange Commission on February 26, 1997
Securities Act Registration No. 2-55301
Investment Company Act Registration No. 811-2619
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. 33 |X|
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 24 |X|
(Check appropriate box or boxes)
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PRUDENTIAL MONEYMART ASSETS, INC.
(FORMERLY, PRUDENTIAL-BACHE MONEYMART ASSETS INC.)
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE,
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 367-7530
S. JANE ROSE, ESQ.
GATEWAY CENTER THREE,
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b)
|X| on February 28, 1997 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
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Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Registrant filed a notice under such Rule for its fiscal year ended
December 31, 1996 on or about February 25, 1997.
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
N-1A ITEM NO. LOCATION
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PART A
Item 1. Cover Page ..................................... Cover Page
Item 2. Synopsis ....................................... Fund Expenses; Fund
Highlights
Item 3. Condensed Financial Information ................ Fund Expenses;
Financial Highlights;
Calculation of Yield
Item 4. General Description of Registrant .............. Cover Page; How the
Fund Invests; General
Information
Item 5. Management of the Fund ......................... Financial Highlights;
How the Fund is
Managed; General
Information
Item 5A. Management's Discussion of Fund Performance ... Not Applicable
Item 6. Capital Stock and Other Securities ............. Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being Offered ........... How the Fund is
Managed; How the Fund
Values its Shares
Item 8. Redemption or Repurchase ....................... How the Fund is
Managed; 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 and
History
Item 13. Investment Objectives and Policies ............ Investment Objective
and Policies;
Investment Restrictions
Item 14. Management of the Fund ........................ Directors and Officers;
Manager; Distributor
Item 15. Control Persons and Principal
Holders of Securities ........................ Not Applicable
Item 16. Investment Advisory and Other Services ........ Manager; Distributor;
Custodian, Transfer and
Dividend Disbursing
Agent and Independent
Accountants
Item 17. Brokerage Allocation and Other Practices ...... Portfolio Transactions
Item 18. Capital Stock and Other Securities ............ Not Applicable
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered .................... Purchase and Redemption
of Fund Shares;
Shareholder Investment
Account
Item 20. Tax Status .................................... Taxes
Item 21. Underwriters .................................. Distributor
Item 22. Calculation of Performance Data ............... Calculation of Yield
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.
<PAGE>
PRUDENTIAL MONEYMART ASSETS, INC.
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PROSPECTUS DATED FEBRUARY 28, 1997
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Prudential MoneyMart Assets, Inc. (the Fund), is an open-end, diversified,
management investment company, or mutual fund. Its investment objective is
maximum current income consistent with stability of capital and the maintenance
of liquidity. The Fund seeks to achieve this objective by investing primarily in
a portfolio of money market instruments maturing in thirteen months or less.
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 Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SEE "HOW THE FUND VALUES ITS
SHARES."
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 February 28, 1997, 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
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FUND HIGHLIGHTS
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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.
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WHAT IS PRUDENTIAL MONEYMART ASSETS, INC.?
Prudential MoneyMart Assets, 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 maximum current income consistent with
stability of capital and the maintenance of liquidity. The Fund invests
primarily in a portfolio of money market instruments maturing in thirteen months
or less. There can be no assurance that the Fund's investment objective will be
achieved. See "How the Fund Invests--Investment Objective and Policies" at page
7.
WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?
It is anticipated that the net asset value (NAV) of the Fund will remain
constant at $1.00 per share, although this cannot be assured. In order to
maintain such constant net asset value, the Fund will value its portfolio
securities at amortized cost. While this method provides certainty in valuation,
it may result in periods during which the value of a security in the Fund's
portfolio, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold such security. See "How the Fund Values its
Shares" at page 13.
WHO MANAGES THE FUND?
Prudential Mutual Fund Management LLC (PMF or the Manager) is the Manager
of the Fund and is compensated for its services at an annual rate of .50 of 1%
of the Fund's average daily net assets up to $50 million and .30 of 1% of the
Fund's average daily net assets in excess of $50 million. As of January 31,
1997, PMF served as manager or administrator to 62 investment companies,
including 40 mutual funds, with aggregate assets of approximately $55.8 billion.
The Prudential Investment Corporation, doing business as Prudential Investments
(PI, the investment adviser 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 10.
WHO DISTRIBUTES THE FUND'S 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 shares. The Fund reimburses PSI for expenses related
to the distribution of the Fund's Class A shares at an annual rate of up to .125
of 1% of the average daily net assets of the Class A shares of the Fund.
Prudential Securities incurs the expenses of distributing Class Z shares under a
Distribution Agreement with the Fund, none of which is reimbursed by or paid for
by the Fund. See "How the Fund is Managed--Distributor" at page 11.
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2
<PAGE>
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WHAT IS THE MINIMUM INVESTMENT?
Except as otherwise provided, the minimum initial investment is $1,000 and
the minimum subsequent investment is $100 for Class A shares. Prudential
Securities reserves the right to impose a higher minimum subsequent amount from
time to time as it may deem appropriate. There is no minimum initial or
subsequent investment requirement for investors who qualify to purchase Class Z
shares. 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 15 and "Shareholder Guide--Shareholder Services" at
page 23.
HOW DO I PURCHASE SHARES?
Shares of the Fund are available through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund through its transfer
agent, Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent), at the
NAV next determined after receipt of your purchase order by the Transfer Agent
or Prudential Securities. Class Z shares are offered to a limited group of
investors at net asset value without any sales charge. PSI has automatic
investment procedures pursuant to which it will make automatic investments of
free credit cash balances (Eligible Cash Balances) held in a client's brokerage
account if the Fund is designated as your primary Money Sweep Fund. See
"Shareholder Guide--How to Buy Shares of the Fund" at page 15.
WHAT ARE MY PURCHASE ALTERNATIVES?
The Fund offers two classes of shares:
o Class A Shares: Sold without a sales charge and are subject to ongoing
service or distribution-related expenses.
o Class Z Shares: Sold without a sales charge to a limited group of
investors. Class Z shares are not subject to any ongoing
service or distribution-related expenses.
HOW DO I SELL MY SHARES?
You may redeem your shares of the Fund at any time at the NAV next
determined after Prudential Securities or the Transfer Agent receives your sell
order. See "Shareholder Guide--How to Sell Your Shares" at page 19.
HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?
The Fund expects to declare daily and pay monthly dividends of net
investment income. Dividends will be automatically reinvested in additional
shares of the Fund at NAV unless you request that they be paid to you in cash.
See "Taxes, Dividends and Distributions" at page 13.
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3
<PAGE>
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FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
CLASS A SHARES CLASS Z SHARES
-------------- --------------
Maximum Sales Load Imposed on Purchases ........... None None
Maximum Sales Load Imposed on Reinvested Dividends None None
Maximum Deferred Sales Load ....................... None None
Redemption Fees ................................... None None
Exchange Fee ...................................... None None
ANNUAL FUND OPERATING EXPENSES
CLASS A SHARES CLASS Z SHARES*
-------------- ---------------
(as a percentage of average net assets)
Management Fees ................................... .301% .301%
12b-1 Fees ........................................ .125% None
Other Expenses .................................... .287% .287%
----- -----
Total Fund Operating Expenses ..................... .713% .588%
===== =====
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
EXAMPLE
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 ...................................... $7 $23 $40 $89
Class Z* ..................................... $6 $19 $33 $74
The above example is based on data for the Fund's fiscal year ended December 31,
1996. 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 the table is to assist an investor 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 and transfer agency and custodian fees.
- --------------
* Estimated based on expenses expected to have been incurred if Class Z
shares had been in existence throughout the fiscal year ended December 31,
1996.
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4
<PAGE>
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FINANCIAL HIGHLIGHTS
(for a Class A share outstanding throughout each year indicated)
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The following financial highlights, with respect to the five-year period
ended December 31, 1996, for the Class A shares have been audited by Deloitte &
Touche LLP, independent auditors, 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
capital stock outstanding, total return, ratios to average net assets and other
supplemental data for the years indicated. This information is based on data
contained in the financial statements.
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<TABLE>
<CAPTION>
CLASS A SHARES(B)
--------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of year ........................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net investment income and net
realized gains ................. .048 .054 .037 .027 .035 .058 .077 .086
Dividends and distributions ..... (.048) (.054) (.037) (.027) (.035) (.058) (.077) (.086)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year .... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ======
Total Return(a): ................ 4.97% 5.51% 3.72% 2.70% 3.59% 5.95% 8.00% 8.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ... $7,315,223 $7,221,658 $6,544,880 $7,318,633 $6,703,281 $7,138,159 $7,411,932 $8,168,972
Average net assets (000) ........ $7,326,023 $6,914,520 $7,071,381 $7,742,989 $7,116,739 $7,763,251 $8,262,329 $6,947,060
Ratios to average net assets:
Expenses, including
distribution fee ............... .71% .69% .71% .71% .66% .68% .73% .69%
Expenses, excluding
distribution fee ............... .59% .56% .58% .58% .54% .56% .60% .57%
Net investment income ........... 4.83% 5.38% 3.65% 2.63% 3.43% 5.72% 7.62% 8.57%
CLASS A SHARES(B)
----------------------------
YEAR ENDED DECEMBER 31,
----------------------------
1988 1987
---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of year ........................ $1.000 $1.000
Net investment income and net
realized gains ................. .069 .061
Dividends and distributions ..... (.069) (.061)
------ ------
Net asset value, end of year .... $1.000 $1.000
====== ======
Total Return(a): ................ 7.11% 6.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ... $5,240,662 $4,620,542
Average net assets (000) ........ $5,139,264 $4,412,175
Ratios to average net assets:
Expenses, including
distribution fee ............... .71% .69%
Expenses, excluding
distribution fee ............... .58% .57%
Net investment income ........... 6.98% 6.06%
</TABLE>
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(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
(b) Effective March 1, 1996, the shares were designated as Class A shares.
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5
<PAGE>
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FINANCIAL HIGHLIGHTS
(for a Class Z share outstanding throughout the period)
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The following financial highlights for the Class Z shares have been
audited by Deloitte & Touche LLP, independent auditors, 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 Z share of capital stock outstanding, total return, ratios to average net
assets and other supplemental data for the period indicated. This information is
based on data contained in the financial statements.
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CLASS Z SHARES
-----------------
MARCH 1, 1996 (a)
THROUGH
DECEMBER 31, 1996
-----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ................... $1.000
Net investment income and net realized gains ........... .040
Dividends and distributions ............................ (.040)
------
Net asset value, end of period ......................... $1.000
======
TOTAL RETURN(B): ....................................... 4.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ........................ $149,212
Average net assets (000) ............................... $121,135
Ratios to average net assets:
Expenses, including distribution fee ................... .59%(c)
Expenses, excluding distribution fee ................... .59%(c)
Net investment income .................................. 4.86%(c)
- ----------
(a) Commencement of offering of Class Z shares.
(b) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions. Total returns for less than a full year
are not annualized.
(c) Annualized.
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6
<PAGE>
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CALCULATION OF YIELD
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THE FUND CALCULATES ITS "CURRENT YIELD" based on the net change, exclusive
of realized and unrealized gains or losses, in the value of a hypothetical
account over a seven calendar day base period. THE FUND ALSO CALCULATES ITS
"EFFECTIVE ANNUAL YIELD" assuming weekly compounding. The following are examples
of the current and effective annual yield calculations as of December 31, 1996
for Class A and Class Z shares of the Fund:
CLASS A SHARES
Value of hypothetical account at end of period $1.000897227
Value of hypothetical account at beginning of period 1.000000000
------------
Base period return $0.000897227
============
CURRENT YIELD (.000897227 X (366/7)) 4.69%
EFFECTIVE ANNUAL YIELD, assuming weekly compounding 4.80%
CLASS Z SHARES
Value of hypothetical account at end of period $1.000921185
Value of hypothetical account at beginning of period 1.000000000
------------
Base period return $0.000921185
============
CURRENT YIELD (.000921185 X (366/7)) 4.82%
EFFECTIVE ANNUAL YIELD, assuming weekly compounding 4.80%
THE YIELD WILL FLUCTUATE FROM TIME TO TIME AND DOES NOT INDICATE FUTURE
PERFORMANCE.
The weighted average life to maturity of the Fund's portfolio on December
31, 1996 was 55 days.
Yield is computed in accordance with a standardized formula described in
the Statement of Additional Information. In addition, comparative performance
information may be used from time to time in advertising or marketing the Fund's
shares, including data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc., IBC Financial Data, Inc., The Bank Rate Monitor, other
industry publications, business periodicals and market indices.
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HOW THE FUND INVESTS
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INVESTMENT OBJECTIVE AND POLICIES
THE INVESTMENT OBJECTIVE OF THE FUND IS MAXIMUM CURRENT INCOME CONSISTENT
WITH STABILITY OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY. THE FUND INVESTS
PRIMARILY IN A PORTFOLIO OF MONEY MARKET INSTRUMENTS MATURING IN THIRTEEN MONTHS
OR LESS. THERE CAN BE NO ASSURANCE THAT THIS OBJECTIVE WILL BE ACHIEVED.
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). POLICIES THAT ARE NOT
FUNDAMENTAL MAY BE MODIFIED BY THE FUND'S BOARD OF DIRECTORS.
7
<PAGE>
The types of instruments utilized in seeking to accomplish this objective
include:
1. U.S. Treasury bills and other obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
2. Obligations (including certificates of deposit and bankers'
acceptances) of (a) banks organized under the laws of the United States or any
state thereof (including foreign branches of such banks) or (b) U.S. branches of
foreign banks or (c) foreign banks and foreign branches thereof; provided that
such banks have, at the time of acquisition by the Fund of such obligations,
total assets of not less than $1 billion or its equivalent. The term
"certificates of deposit" includes both Eurodollar certificates of deposit, for
which there is generally a market, and Eurodollar time deposits, for which there
is generally not a market. "Eurodollars" are U.S. dollars deposited in banks
outside the United States; the Fund invests in Eurodollar instruments of foreign
and domestic banks.
3. Commercial paper, variable amount demand master notes, bills, notes and
other obligations issued by a U.S. company, a foreign company or a foreign
government, its agencies or instrumentalities, maturing in thirteen months or
less, denominated in U.S. dollars, and, at the date of investment, rated at
least AA or A-2 by Standard & Poor's Ratings Group (S&P), Aa or Prime-2 by
Moody's Investors Service (Moody's) or AA or D-2 by Duff & Phelps Credit Rating
Co. (Duff and Phelps) or, if not rated, issued by an entity having an
outstanding unsecured debt issue rated at least AA or A-2 by S&P, Aa or Prime-2
by Moody's or AA or D-2 by Duff and Phelps. If such obligations are guaranteed
or supported by a letter of credit issued by a bank, such bank (including a
foreign bank) must meet the requirements set forth in the preceding paragraph.
If such obligations are guaranteed or insured by an insurance company or other
non-bank entity, such insurance company or other non-bank entity must represent
a credit of high quality, as determined by the Fund's investment adviser under
the supervision of the Fund's Board of Directors.
In selecting commercial paper and other corporate obligations for
investment by the Fund, the investment adviser considers ratings assigned by
major rating services, information concerning the financial history and
condition of the issuer and its revenue and expense prospects. The Board of
Directors monitors the credit quality of securities purchased for the Fund's
portfolio. If commercial paper or another corporate obligation held by the Fund
is assigned a lower rating or ceases to be rated, the investment adviser under
the supervision of the Board of Directors will promptly reassess whether that
security presents minimal credit risks and whether the Fund should continue to
hold the security in its portfolio. If a portfolio security presents greater
than minimal credit risks or is in default, the Fund will dispose of the
security as soon as reasonably practicable unless the Board of Directors
determines that to do so is not in the best interests of the Fund and its
shareholders.
The Fund utilizes the amortized cost method of valuation in accordance
with regulations issued by the Securities and Exchange Commission (SEC). See
"How the Fund Values its Shares." Accordingly, the Fund will limit its portfolio
investments to those U.S. dollar denominated instruments which present minimal
credit risks and which are of "eligible quality" as determined by the Fund's
investment adviser under the supervision of the Board of Directors. "Eligible
quality," for this purpose, means (i) a security rated in one of the two highest
rating categories by at least two major rating agencies assigning a rating to
the security or issuer (or, if only one agency assigned a rating, that agency)
or (ii) an unrated security deemed of comparable quality by the Fund's
investment adviser under the supervision of the Board of Directors. The purchase
by the Fund of a security of eligible quality that is rated by only one rating
agency or is unrated must be approved or ratified by the Board of Directors.
As long as the Fund utilizes the amortized cost method of valuation, it
will also comply with certain diversification requirements and will invest no
more than 5% of its total assets in "second-tier securities," with no more than
1% of its assets in any one issuer of a second-tier security. A "second-tier
security," for this purpose, is a security of eligible quality that does not
have the highest rating from at least two agencies assigning a rating to that
security or issuer (or, if only one agency assigned a rating, that agency) or an
unrated security that is deemed of comparable quality by the Fund's investment
adviser. The Fund will also maintain a dollar-weighted average portfolio
maturity of ninety days or less.
8
<PAGE>
OTHER INVESTMENTS AND POLICIES
REPURCHASE AGREEMENTS
The Fund will 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 repurchase agreement. The Fund's repurchase agreements will at
all times be fully collateralized in an amount at least equal to the resale
price. The instruments held as collateral are valued daily, and if the value of
the instruments declines, the Fund will require additional collateral. If the
seller defaults and the value of the collateral securing the repurchase
agreement declines, the Fund may incur a loss. The Fund participates in a joint
repurchase account with other investment companies managed by PMF.
LIQUIDITY PUTS
The Fund also may purchase instruments of the types described above
together with the right to resell the instruments at an agreed-upon price or
yield within a specified period prior to the maturity date of the instruments.
Such a right to resell is commonly known as a "put," and the aggregate price
that the Fund pays for instruments with a put may be higher than the price that
otherwise would be paid for the instruments.
FLOATING RATE AND VARIABLE RATE SECURITIES
The Fund may purchase "floating rate" and "variable rate" obligations. The
interest rates on such obligations fluctuate generally with changes in market
interest rates, and in some cases the Fund is able to demand repayment of the
principal amount of such obligations at par plus accrued interest. For
additional information concerning variable rate and floating rate obligations,
see "Investment Objective and Policies" in the Statement of Additional
Information.
SECURITIES LENDING
The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash collateral in an amount equal to at least
100% of the market value of the securities loaned. During the time portfolio
securities are on loan, the borrower will pay the Fund an amount equivalent to
any interest paid on such securities and the Fund may invest the cash collateral
and earn additional income. As a matter of fundamental policy, the Fund cannot
lend more than 10% of the value of its total assets. Loans are subject to
termination at the option of the Fund or the borrower. The Fund may pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities and may share the interest earned on collateral with the
borrower.
RISKS OF INVESTING IN FOREIGN SECURITIES
The portfolio may contain obligations of foreign banks and foreign
branches of foreign banks, U.S. branches of foreign banks and foreign branches
of U.S. banks, as well as commercial paper, bills, notes and other obligations
issued in the United States by foreign issuers, including foreign governments,
their agencies and instrumentalities. Accordingly, an investment in the Fund
involves certain additional risks. These risks include future political and
economic developments in the country of the issuer, the possible imposition of
withholding taxes on interest income payable on such obligations held by the
Fund, the possible seizure or nationalization of foreign deposits and the
possible establishment of exchange controls or other foreign governmental laws
or restrictions which might affect adversely the payment of principal and
interest on such obligations held by the Fund. In addition, there may be less
publicly available information about a foreign issuer than about a domestic one,
and foreign issuers may not be subject to the same
9
<PAGE>
accounting, auditing and financial recordkeeping standards and requirements as
domestic issuers. Securities issued by foreign issuers may be subject to greater
fluctuations in price than securities issued by U.S. entities. Finally, in the
event of a default with respect to any such foreign debt obligations, it may be
more difficult for the Fund to obtain or to enforce a judgment against the
issuers of such securities.
ILLIQUID SECURITIES
The Fund may hold up to 10% of its net assets in illiquid securities,
including securities with legal or contractual restrictions on resale
(restricted securities), securities that are not readily marketable in
securities markets either within or outside of the United States, privately
placed commercial paper and repurchase agreements which have a maturity of
longer than seven days. Restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and
privately placed commercial paper 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. Investing in Rule 144A securities could, however, have the
effect of increasing the level of Fund illiquidity to the extent that qualified
institutional buyers become, for a limited time, uninterested in purchasing
these securities. Repurchase agreements subject to demand are deemed to have a
maturity equal to the applicable notice period.
OTHER CONSIDERATIONS
Although the Fund provides the advantage of diversification, there is
still an inherent market risk due to the nature of the investment. If interest
rates decline, then yield to shareholders will also decline. If there are
unusually heavy redemption requests because of changes in interest rates or for
any other reason, the Fund may have to sell a portion of its investment
portfolio at a time when it may be disadvantageous to do so. The Fund believes
that its borrowing provision for abnormally heavy redemption requests would help
to mitigate any adverse effects and would make the sale of its portfolio
securities unlikely. When a shareholder redeems shares, it is possible that the
redemption proceeds will be less than the amount invested.
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.
- --------------------------------------------------------------------------------
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 year ended December 31, 1996, the total expenses of the Fund's
Class A and Class Z shares as a percentage of average net assets were .713% and
.588% (annualized), respectively. See "Financial Highlights."
MANAGER
PRUDENTIAL MUTUAL FUND MANAGEMENT LLC (PMF OR THE MANAGER), GATEWAY CENTER
THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS THE MANAGER OF THE
FUND AND IS COMPENSATED FOR ITS SERVICES AT AN ANNUAL RATE
10
<PAGE>
OF .50 OF 1% OF THE FUND'S AVERAGE DAILY NET ASSETS UP TO $50 MILLION AND .30 OF
1% OF THE FUND'S AVERAGE DAILY NET ASSETS IN EXCESS OF $50 MILLION. PMF is
organized as a New York limited liability company. It is the successor to
Prudential Mutual Fund Management, Inc., which transferred its assets to PMF in
September 1996. For the fiscal year ended December 31, 1996, the Fund paid a
management fee of .301% of the Fund's average net assets. See "Manager" in the
Statement of Additional Information.
As of January 31, 1997, PMF served as the manager to 40 open-end
investment companies, constituting all of the Prudential Mutual Funds, and as
manager or administrator to 22 closed-end investment companies with aggregate
assets of approximately $55.8 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, DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, THE INVESTMENT
ADVISER OR THE SUBADVISER), 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 PI's performance of such services.
PMF and PI are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.
DISTRIBUTOR
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 FUND. IT IS
AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL.
UNDER A DISTRIBUTION AND SERVICE PLAN (THE PLAN) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND A DISTRIBUTION AGREEMENT (THE
DISTRIBUTION AGREEMENT), PRUDENTIAL SECURITIES (THE DISTRIBUTOR) INCURS THE
EXPENSES OF DISTRIBUTING CLASS A SHARES OF THE FUND. Prudential Securities also
incurs the expenses of distributing the Fund's Class Z shares under the
Distribution Agreement, none of which are reimbursed by or paid for by the Fund.
These expenses include account servicing fees paid to, or on account of,
financial advisers of Prudential Securities and representatives of Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, 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 the Class A shares of the Fund, including
lease, utility, communications and sales promotion expenses.
UNDER THE PLAN, THE FUND REIMBURSES THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED EXPENSES WITH RESPECT TO CLASS A SHARES OF THE FUND AT AN
ANNUAL RATE OF UP TO .125 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE FUND'S
CLASS A SHARES. Account servicing fees are paid based on the average balance of
Fund shares held in accounts of customers of financial advisers. The entire
distribution fee may be used to pay account servicing fees. For the fiscal year
ended December 31, 1996, the Fund paid a distribution fee equal on an annual
basis to .125 of 1% of the average daily net assets of the Fund's Class A
shares. The Fund records all payments made under the Plan as expenses in the
calculation of its net investment income.
The Plan provides that it shall continue in effect from year to year
provided that each such continuance is approved annually by a majority vote of
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 Plan or in any agreement related to the Plan.
The Directors are provided with and review quarterly reports of expenditures
under the Plan.
11
<PAGE>
In addition to distribution and service fees paid by the Class A shares of
the Fund under the Plan, the Manager (or one of its affiliates) may make
payments out of its own resources to dealers (including Prudential Securities)
and other persons which distribute shares of the Fund (including Class Z
shares). Such payments may be calculated by reference to the net asset value of
shares sold by such persons or otherwise.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner, who joined the settlement on January 18, 1994) and the National
Association of Securities Dealers, Inc. (the NASD) to resolve allegations that
from 1980 through 1990 PSI sold certain limited partnership interests in
violation of securities laws to persons for whom such securities were not
suitable and misrepresented the safety, potential returns and liquidity of these
investments. Without admitting or denying the allegations asserted against it,
PSI consented to the entry of an SEC Administrative Order which stated that
PSI's conduct violated the federal securities laws, directed PSI to cease and
desist from violating the federal securities laws, pay civil penalties, and
adopt certain remedial measures to address the violations.
Pursuant to the terms of the SEC settlement, PSI agreed to the imposition
of a $10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages by purchasers of the partnership interests. PSI has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. PSI's
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. PSI consented to a censure and to the
payment of a $5,000,000 fine in settling the NASD action.
In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.
For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by calling 1-800-225-1852.
The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets, which are held by State Street Bank and Trust Company, an
independent custodian, are separate and distinct from PSI.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker for the Fund, provided that the
commissions, fees or other remuneration it receives are fair and reasonable. See
"Portfolio Transactions" 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 LLC (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.
12
<PAGE>
- --------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------
THE NET ASSET VALUE PER SHARE, OR NAV, OF THE FUND'S SHARES IS DETERMINED
BY SUBTRACTING ITS LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE
REMAINDER BY THE NUMBER OF OUTSTANDING SHARES. THE BOARD OF DIRECTORS HAS FIXED
THE SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NAV TO BE AS OF 4:30
P.M., NEW YORK TIME, IMMEDIATELY AFTER THE DECLARATION OF DIVIDENDS.
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 Fund shares have been received or days on which changes in the value
of the Fund's portfolio securities do not materially 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.
The Fund determines the value of its portfolio securities by the amortized
cost method. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium regardless of impact of fluctuating interest rates on the market value
of the instrument. While this method provides certainty in valuation, it may
result in periods during which the value of a security in the Fund's portfolio
as determined by amortized cost, is higher or lower than the price the Fund
would receive if it sold such security. During these periods, the yield to a
shareholder may differ somewhat from that which could be obtained from a similar
fund which marks its portfolio securities to market each day. For example,
during periods of declining interest rates, if the use of the amortized cost
method resulted in a lower value of the Fund's portfolio on a given day, a
prospective investor in the Fund would be able to obtain a somewhat higher yield
and existing shareholders would receive correspondingly less income. The
converse would apply during periods of rising interest rates. The Board of
Directors has established procedures designed to stabilize, to the extent
reasonably possible, the NAV of the shares of the Fund at $1.00 per share. See
"Net Asset Value" in the Statement of Additional Information.
- --------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------
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 OF 1986, AS AMENDED
(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 SHAREHOLDERS.
TAXATION OF SHAREHOLDERS
All dividends out of net investment income, together with distributions of
net short-term gains (i.e., the excess of net short-term capital gains over net
long-term capital losses), will be taxable as ordinary income to the
shareholders whether or not reinvested. The Fund does not expect to realize
long-term capital gains or losses. In general, tax-exempt shareholders will not
be required to pay taxes on amounts distributed to them.
The Internal Revenue Code imposes a 4% nondeductible excise tax to the
extent the Fund does not meet certain minimum distribution requirements by the
end of each calendar year. For this purpose, dividends declared in October,
November or December and paid in the following January will be treated as having
been paid by the Fund and received by shareholders in such prior year. Under
this rule, a shareholder may be taxed in one year on dividends or distributions
actually received in January of the following year.
13
<PAGE>
The Fund has obtained an opinion of counsel to the effect that the
exchange of Class A shares for Class Z shares does not constitute a taxable
event for federal 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. See "Taxes" in the
Statement of Additional Information.
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 income and redemption
proceeds on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. However, dividends of net
investment income and short-term capital gains paid 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
All of the Fund's net income is declared as dividends daily to the
shareholders of record at the time of such declaration. Unless otherwise
requested by the shareholder, such dividends are automatically invested monthly
in additional Fund shares at net asset value. Shareholders may receive cash
payments from the Fund equal to the dividends earned during the month by
completing the appropriate section on the application form or by notifying PMFS
at least five business days prior to the payable date. Cash distributions are
paid by check within five business days after the dividend payment date. In the
event that all of a shareholder's shares are redeemed on a date other than the
monthly dividend payment date, the proceeds of such redemption will equal the
net asset value of the shares redeemed plus the amount of all dividends declared
through the date of redemption. BECAUSE DECLARED DIVIDENDS REMAIN INVESTED BY
THE FUND UNTIL THE DIVIDEND PAYMENT DATE OF EACH MONTH IN THE SAME MANNER AS
FUNDS INVESTED IN SHARES, THE FOREGOING PROCEDURE RESULTS IN INCOME TO
SHAREHOLDERS IN SUBSTANTIALLY THE SAME AMOUNTS AS IF DIVIDENDS WERE REINVESTED
IN SHARES ON A DAILY BASIS.
The Fund's net income for dividend purposes is determined immediately
prior to the calculation of net asset value at 4:30 P.M., New York time. Thus, a
shareholder begins to earn dividends on the first business day after his or her
order is placed with the Fund, as described under "Shareholder Guide--How to Buy
Shares of the Fund," and continues to earn dividends through the day on which
his or her shares are redeemed. In the case of certain redemptions, however,
Prudential Securities clients will be entitled to dividends declared on the date
of redemption. See "Shareholder Guide--How to Sell Your Shares--Redemption of
Shares Purchased through Prudential Securities." Net income of the Fund consists
of interest accrued and discount earned less the estimated expenses of the Fund
and all realized gains and losses on the portfolio securities of the Fund. Net
income earned on Saturdays, Sundays and holidays is accrued in calculating the
dividend on the previous business day. Accordingly, a shareholder who redeems
his or her shares effective as of 4:30 P.M., New York time, on a Friday earns a
dividend which reflects the income earned by the Fund on the following Saturday
and Sunday. On the other hand, an investor whose purchase order is effective as
of 4:30 P.M., New York time, on a Friday does not begin earning dividends until
the following business day.
14
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES
THE FUND WAS INCORPORATED IN MARYLAND ON DECEMBER 22, 1975. The Fund is
authorized to offer 15 billion shares of common stock, $.001 par value per
share, currently divided into two classes of shares, designated Class A
(including shares outstanding prior to March 1, 1996) and Class Z shares,
consisting of 13 billion and 2 billion authorized shares, respectively. Each
class represents an interest in the same assets of the Fund and is identical in
all respects except that (i) Class A shares are subject to distribution and/or
service fees, (ii) Class Z shares are not subject to any distribution and/or
service fees, (iii) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (iv) each
class has a different exchange privilege and (v) Class Z shares are offered
exclusively for sale to a limited group of investors. 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 Board of Directors may increase or decrease the
number of authorized shares without approval by 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."
THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD ANNUAL 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
GENERAL INFORMATION
YOU MAY PURCHASE CLASS A SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES,
PRUSEC, OR DIRECTLY FROM THE FUND THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL
FUND SERVICES LLC (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES,
P.O. BOX 15020, NEW BRUNSWICK, NEW JERSEY 08906-5020. Participants in programs
sponsored by Prudential Retirement Services should contact their client
representative for more information about Class Z shares. Shareholders of the
Fund who are clients of Prudential Securities are subject to the procedures
under "Purchases through Prudential Securities" below.
15
<PAGE>
Except as otherwise provided below, the minimum initial investment for
Class A shares is $1,000 and the minimum subsequent investment is $100. There is
no minimum initial or subsequent investment requirement for investors who
qualify to purchase Class Z shares. All minimum investment requirements are
waived for certain retirement and employee savings plans and 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. For automatic purchases made through Prudential
Securities, the minimum initial investment requirement is $1,000 and there is no
minimum subsequent investment requirement.
Shares of the Fund are sold through the Transfer Agent, without a sales
charge, at the NAV next determined after receipt and acceptance by the Transfer
Agent of a purchase order and payment in proper form (i.e., a check or Federal
Funds wired to State Street Bank and Trust Company (State Street), the Fund's
custodian). See "How the Fund Values its Shares." When payment is received by
the Transfer Agent prior to 4:30 P.M., New York time, in proper form, a share
purchase order will be entered at the price determined as of 4:30 P.M., on that
day, and the shares will begin to earn dividends on the following business day.
See "Taxes, Dividends and Distributions." If your purchase is made through an
account at Prudential Securities or through Prusec or another dealer, your
dealer will forward a purchase order and payment to the Fund.
Investors who purchase their shares through a dealer other than Prudential
Securities or Prusec, which dealer has a clearing arrangement with respect to
shares of the Fund, may be able to participate in the automatic sweep feature
described below under "Purchases through Prudential Securities-Automatic
Investment (Autosweep)" and "How to Sell Your Shares--Redemptions of Shares
Purchased through Prudential Securities." For further information, contact your
dealer.
Application forms for Prusec and direct accounts with the Transfer Agent
(e.g., non-Prudential Securities accounts) can be obtained from PMFS 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.
Shareholders cannot utilize Expedited Redemption or Check Redemption or have a
Systematic Withdrawal Plan if they have been issued certificates.
The Fund reserves the right, in its discretion, to reject any purchase
order (including an exchange into the Fund) or to suspend or modify the
continuous offering of its shares. See "How to Sell Your Shares" below.
Transactions in Fund shares may be subject to postage and other charges
imposed by your dealer.
CLASS Z SHARES
Class Z shares are available for purchase by (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 deferred contribution assets;
(ii) participants in any fee-based program sponsored by Prudential Securities
(or one of its affiliates) which includes mutual funds as investment options and
for which the Fund is an available option; and (iii) investors who were, or had
executed a letter of intent to become, shareholders of any series of Prudential
Dryden Fund (Dryden Fund) on or before one or more series of Dryden Fund
reorganized or who on that date had investments in certain products for which
Dryden Fund provided 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.
16
<PAGE>
PURCHASES THROUGH PRUDENTIAL SECURITIES
AUTOMATIC INVESTMENT (AUTOSWEEP)
Prudential Securities has advised the Fund that it has automatic investment
procedures for Fund Class A investors (Autosweep) pursuant to which it will make
automatic investments of free credit cash balances (Eligible Credit Balances)
held in a client's brokerage account in Class A shares of the Fund, if the Fund
is your Primary Money Sweep Fund. You may designate the Fund (or certain other
Prudential money market funds) as your Primary Money Sweep Fund. If you do not
designate a Primary Money Sweep Fund, the Fund will be your Primary Money Sweep
Fund. Prudential Securities' clients who have a Primary Money Sweep Fund can
purchase shares of such fund only through the automatic investment procedures
described herein; no manual purchase orders will be accepted for such fund. A
Prudential Securities client has the option to change his or her Primary Money
Sweep Fund at any time by notifying his or her Prudential Securities financial
adviser. Under certain circumstances, you may elect not to have a money market
sweep feature for your account when you open your account.
For accounts other than IRAs and Benefit Plans, as defined below, shares
of the Fund will be purchased by Prudential Securities as follows: in the case
of Eligible Credit Balances of $1,000 or more resulting from the proceeds of a
securities sale, maturity of a bond or call and Eligible Credit Balances of
$10,000 or more resulting from a non-trade related credit (e.g., receipt of a
dividend or interest payment or a cash payment into the securities account),
orders to purchase shares will be placed on the business day after such Eligible
Credit Balances become available in your account. For Eligible Credit Balances
of $1.00 or more not otherwise described above, orders to purchase shares will
be placed monthly on the last business day of the month. For IRAs and Benefit
Plans having Eligible Credit Balances of $1.00 or more, orders to purchase
shares of the Fund will be placed by Prudential Securities (i) on the settlement
date of the securities sale, in the case of Eligible Credit Balances resulting
from the proceeds of a securities sale, and (ii) on the business day after
receipt by Prudential Securities of the non-trade related credit (including the
maturity of a bond or a call), in the case of Eligible Credit Balances resulting
from a non-trade related credit. Each time an order resulting from the
settlement of a securities sale is placed, any non-trade related credit in the
client's account will also be invested.
The following chart shows the frequency and amount of the sweep for
accounts other than IRAs and Benefit Plans.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DAILY MONTHLY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eligible Credit Balances resulting from the proceeds of a
securities sale, maturity of a bond or call $1,000 or more
- -------------------------------------------------------------------------------------------------------------
Eligible Credit Balances resulting from a non-trade related credit $10,000 or more
- -------------------------------------------------------------------------------------------------------------
Remaining Eligible Credit Balances $1.00 or more
- -------------------------------------------------------------------------------------------------------------
</TABLE>
All shares purchased pursuant to these automatic investment procedures will
be issued at the NAV computed on the business day the order is entered and will
begin earning dividends on the following business day. Purchases through
Autosweep are subject to the minimum initial investment requirement of $1,000,
which is waived for certain retirement and employee savings plans and custodial
accounts for the benefit of minors. Prudential Securities will have the use of,
and will retain the benefits of, Eligible Credit Balances in a client's
brokerage account until monies are delivered to the Fund. (Prudential Securities
delivers Federal Funds on the business day after settlement). Eligible Credit
Balances for purposes of Autosweep are measured as of the close of business on
the previous business day.
For the purposes of Autosweep, "Benefit Plans" include (i) employee
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 (ERISA) other than governmental plans as defined in Section
3(32) of ERISA and church plans as defined in Section 3(33) of ERISA, (ii)
pension, profit-sharing or other employee benefit plans qualified under Section
401 of the Internal Revenue Code and (iii) deferred compensation and annuity
plans under Section 457 or 403(b)(7) of the Internal Revenue Code. "IRAs" are
Individual Retirement Accounts as defined in Section 408(a) of the Internal
Revenue Code.
17
<PAGE>
MANUAL INVESTMENT
Prudential Securities will accept manual purchase orders for the Fund's
shares only for those clients (i) who are purchasing shares of the Fund if it is
not their Primary Money Sweep Fund or (ii) who do not have a money market sweep
feature in their account, as described above under "Automatic Investment
(Autosweep)."
Prudential Securities clients eligible to make manual purchases, as
described above, are subject to the minimum initial investment of $1,000 and the
minimum subsequent investment of $100 for Class A shares, except that all
minimum investment requirements are waived for certain retirement and employee
savings plans and custodial accounts for the benefit of minors. On the business
day after the purchase order is received, Prudential Securities will place the
order for shares of the Fund for settlement that day. Shares will be issued at
the NAV determined on that day and will begin earning dividends the next
business day, which is the second business day after receipt of the purchase
order by Prudential Securities. Prudential Securities will have the use of, and
will retain the benefits of, Eligible Credit Balances in the client's brokerage
account until monies are delivered to the Fund. (Prudential Securities delivers
Federal Funds on the business day after settlement).
PURCHASES THROUGH PRUSEC
You may purchase shares of the Fund by placing an order with your
Prusec representative accompanied by payment for the purchase price of such
shares and, in the case of a new account, a completed application form. You
should also submit an IRS Form W-9. The Prusec representative will then forward
these items to the Transfer Agent. See "Purchase by Mail" below.
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, dividend distribution election, amount being wired and
wiring bank. Instructions should then be given by you to your bank to transfer
funds by wire to State Street Bank and Trust Company (State Street), Boston,
Massachusetts, Custody and Shareholder Services Division, Attention: Prudential
MoneyMart Assets, Inc., specifying on the wire the account number assigned by
PMFS and your name and identifying the class in which you are eligible to invest
(Class A or Class Z shares).
If you arrange for receipt by State Street of Federal Funds prior to the
calculation of NAV (4:30 P.M., New York time), on a business day, you may
purchase shares of the Fund as of that day and receive dividends commencing on
the next business day. See "Net Asset Value" in the Statement of Additional
Information.
In making a subsequent purchase order by wire, you should wire State
Street directly and should be sure that the wire specifies Prudential MoneyMart
Assets, Inc. Class A or Class Z shares and your name and individual account
number. It is not necessary to call PMFS to make subsequent purchase orders
utilizing Federal Funds. The minimum amount which may be invested by wire is
$1,000.
PURCHASE BY MAIL
Purchase orders for which remittance is to be made by check or money order
may be submitted directly by mail to Prudential Mutual Fund Services LLC,
Attention: Investment Services, P.O. Box 15020, New Brunswick, New Jersey
08906-5020, together with payment of the purchase price of such shares and, in
the case of a new account, a completed application form. You should also submit
an IRS Form W-9. If PMFS receives an order to purchase shares of the Fund and
payment in proper form prior to 4:30 P.M., New York time, the purchase order
will be effective on that day and you will begin earning dividends on the
following business day. See "Taxes, Dividends and Distributions." Checks should
be made payable to Prudential MoneyMart Assets, Inc. and should indicate Class A
or Class Z shares. Certified
18
<PAGE>
checks are not necessary, but checks must be drawn on a bank located in the
United States. There are restrictions on the redemption of shares purchased by
check while the funds are being collected. See "How to Sell Your Shares" below.
THE PRUDENTIAL ADVANTAGE ACCOUNT PROGRAM
Class A shares of the Fund are offered to participants in the Prudential
Advantage Account Program (the Advantage Account Program), a financial services
program available to clients of Prusec. Investors participating in the Advantage
Account Program may select the Fund as their primary investment vehicle. Such
investors will have free credit cash balances of $1.00 or more in their
Securities Account (Available Cash) (a component of the Advantage Account
Program carried through Prudential Securities) automatically invested in Class A
shares of the Fund. Specifically, an order to purchase Class A shares of the
Fund is placed (i) in the case of Available Cash resulting from the proceeds of
securities sales, on the settlement date of the securities sale, and (ii) in the
case of Available Cash resulting from non-trade related credits (i.e., receipt
of dividends and interest payments, or a cash payment by the participant into
his or her Securities Account), on the business day after receipt by Prudential
Securities of the non-trade related credit.
All shares purchased pursuant to these automatic purchase procedures will
begin earning dividends on the business day after the order is placed.
Prudential Securities will arrange for investment in Class A shares of the Fund
at 4:30 P.M. on the day the order is placed and cause payment to be made in
Federal Funds for the shares prior to 4:30 P.M. on the next business day.
Prudential Securities will have the use of free credit cash balances until
delivery to the Fund.
Redemptions will be automatically effected by Prudential Securities to
satisfy debit balances in a Securities Account created by activity therein or
arising under the Advantage Account Program, such as those incurred by use of
the Visa(R) Account, including Visa purchases, cash advances and Visa Account
checks. Each Advantage Account Program Securities Account will be automatically
scanned for debits each business day as of the close of business on that day and
after application of any free credit cash balances in the account to such
debits, a sufficient number of shares of the Fund (if selected as the Primary
Fund) and, if necessary, shares of other Advantage Account Funds owned by the
Advantage Account Program participant which have not been selected as his or her
Primary Fund or shares of a participant's money market funds managed by PMF
which are not primary Advantage Account funds will be redeemed as of that
business day to satisfy any remaining debits in the Securities Account. Shares
may not be purchased until all debits, overdrafts and other requirements in the
Securities Account are satisfied.
Advantage Account Program charges and expenses are not reflected in the
table of Fund Expenses. See "Fund Expenses."
For information on participation in the Advantage Account Program,
investors should telephone (800) 235-7637 (toll-free).
For more information about shares of the Fund, 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.
HOW TO SELL YOUR SHARES
YOU CAN REDEEM YOUR SHARES AT ANY TIME FOR CASH AT THE NAV PER SHARE 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."
Shares for which a redemption request is received by PMFS prior to 4:30
P.M., New York time, are entitled to a dividend on the day on which the request
is received. By pre-authorizing Expedited Redemption, you may arrange to have
payment for redeemed shares made in Federal Funds wired to your bank, normally
on the next bank business day following the date of receipt of the redemption
instructions. Should you redeem all of your shares, you will receive the amount
of all dividends declared for the month-to-date on those shares. See "Taxes,
Dividends and Distributions."
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<PAGE>
If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent must
be submitted before such request will be accepted. All correspondence and
documents concerning redemptions should be sent to the Fund in care of its
Transfer Agent, Prudential Mutual Fund Services LLC, Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
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 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. In the case of redemptions from a benefit plan that participates in the
Prudential PruArray or Smartpath Program, if the proceeds of the redemption are
invested in another investment option of such plan, in the name of the record
holder and at the same address as reflected in the Transfer Agent's records, a
signature guarantee is not required.
NORMALLY, THE FUND MAKES PAYMENT ON THE NEXT BUSINESS DAY FOR ALL SHARES
REDEEMED, BUT IN ANY EVENT, PAYMENT WILL BE MADE WITHIN SEVEN DAYS AFTER RECEIPT
BY PMFS OF STOCK CERTIFICATES AND/OR OF A REDEMPTION REQUEST IN PROPER FORM.
However, the Fund may suspend the right of redemption or postpone the date of
payment (a) for any periods during which the New York Stock Exchange is closed
(other than for customary weekend or holiday closings), (b) for any periods when
trading in the markets which the Fund normally utilizes is closed or restricted
or an emergency exists as determined by the SEC so that disposal of the Fund's
investments or determination of its net asset value is not reasonably
practicable or (c) for such other periods as the SEC may permit for protection
of the Fund's shareholders.
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 CHECKS. THE FUND MAKES NO CHARGE FOR REDEMPTION.
REDEMPTION OF SHARES PURCHASED THROUGH PRUDENTIAL SECURITIES
Prudential Securities has advised the Fund that it has established
procedures pursuant to which shares of the Fund held by a Prudential Securities
client having a deficiency in his or her Prudential Securities account will be
redeemed automatically to the extent of that deficiency to the nearest highest
dollar. The amount of the redemption will be the lesser of (a) the total net
asset value of Fund shares held in the client's Prudential Securities account or
(b) the deficiency in the client's Prudential Securities account at the close of
business on the date such deficiency is due. Accordingly, a Prudential
Securities client who wishes to pay for a securities transaction or satisfy any
other debit balance in his or her account other than through such automatic
redemption procedure must do so prior to the day of settlement for such
securities transaction or the date the debit balance is incurred. In the case of
certain automatic redemptions, where Prudential Securities cannot anticipate
debits in the brokerage account (e.g., checks written against the account),
Prudential Securities clients will not be entitled to dividends declared on the
date of redemption; such dividends will be retained by Prudential Securities.
REDEMPTION OF SHARES PURCHASED THROUGH PMFS
If you purchase shares of the Fund through PMFS, you may use Check
Redemption, Expedited Redemption or Regular Redemption. Prudential Securities
clients for whom Prudential Securities has purchased shares may not use such
services.
REGULAR REDEMPTION. You may redeem your shares by sending a written
request, accompanied by duly endorsed stock certificates, if issued, to
Prudential Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box
15010,
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<PAGE>
New Brunswick, New Jersey 08906-5010. In this case, all stock certificates and
certain written requests for redemption must be endorsed by the shareholder with
signature guaranteed, as described above. Regular redemption is made by check
sent to the shareholder's address.
EXPEDITED REDEMPTION. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares made in Federal Funds wired to your
bank, normally on the next business day following redemption. In order to use
Expedited Redemption, you may so designate at the time the initial investment is
made or at a later date. Once an Expedited Redemption authorization form has
been completed, the signature on the authorization form guaranteed as set forth
above and the form returned to Prudential Mutual Fund Services LLC, Attention:
Account Maintenance, P.O. Box 15015, New Brunswick, New Jersey 08906-5015,
requests for redemption may be made by telegraph, letter or telephone. To
request Expedited Redemption by telephone, you should call PMFS at (800)
225-1852. Calls must be received by PMFS before 4:30 P.M., New York time, to
permit redemption as of such date. Requests by letter should be addressed to
Prudential Mutual Fund Services LLC, at the address set forth above.
A signature guarantee is not required under Expedited Redemption once the
authorization form is properly completed and returned. The Expedited Redemption
privilege may be used only to redeem shares in an amount of $200 or more, except
that, if an account for which Expedited Redemption is requested has an NAV of
less than $200, the entire account must be redeemed. The proceeds of redeemed
shares in the amount of $1,000 or more are transmitted by wire to your account
at a domestic commercial bank which is a member of the Federal Reserve System.
Proceeds of less than $1,000 are forwarded by check to your designated bank
account.
DURING PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS, EXPEDITED
REDEMPTION MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD REDEEM SHARES BY MAIL AS
DESCRIBED ABOVE.
CHECK REDEMPTION. At your request, State Street will establish a personal
checking account for you. Checks drawn on this account can be made payable to
the order of any person in any amount greater than $500. When such check is
presented to State Street for payment, State Street presents the check to the
Fund as authority to redeem a sufficient number of Class A shares of the Fund in
the shareholder's account to cover the amount of the check. If insufficient
shares are in the account, or if the purchase was made by check within 10
calendar days, the check will be returned marked "insufficient funds." Checks in
an amount less than $500 will not be honored. Shares for which certificates have
been issued cannot be redeemed by check. PMFS reserves the right to impose a
service charge to establish a checking account and order checks.
INVOLUNTARY REDEMPTION. Because of the relatively high cost of maintaining
an account, the Fund reserves the right to redeem, upon 60 days' written notice,
an account which is reduced by a shareholder to an NAV of $500 or less due to
redemption. You may avoid such redemption by increasing the NAV of your account
to an amount in excess of $500.
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 partially in cash, the Fund may pay the redemption price
in whole or in part by a distribution in kind of securities from the portfolio
of the Fund, in lieu of cash, in conformity with the applicable rules of 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 will incur brokerage 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 one percent of the net asset value of
the Fund during any 90-day period for any one shareholder.
90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 90 days after the
date of the redemption.You will receive pro rata credit for any contingent
deferred sales charge paid in connection with the redemption. You must notify
the Fund's Transfer Agent, either directly or through Prudential Securities or
Prusec, at the time the repurchase privilege is
21
<PAGE>
exercised, that you are entitled to credit for any contingent deferred sales
charge you previously paid. Exercise of the repurchase privilege may affect the
federal income tax treatment of any gain realized upon the redemption.
CLASS B AND CLASS C PURCHASE PRIVILEGE. You may direct that the proceeds
of a redemption of Fund shares be invested in Class B shares or Class C shares
of any Prudential Mutual Fund by calling your Prudential Securities financial
adviser or the Transfer Agent at (800) 225-1852. The transaction will be
effected on the basis of the relative NAV.
HOW TO EXCHANGE YOUR SHARES
AS A SHAREHOLDER OF THE FUND, YOU HAVE AN EXCHANGE PRIVILEGE (THE EXCHANGE
PRIVILEGE) WITH CERTAIN OTHER PRUDENTIAL MUTUAL FUNDS, INCLUDING ONE OR MORE
SPECIFIED MONEY MARKET FUNDS AND FUNDS SOLD WITH AN INITIAL SALES CHARGE,
SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS OF SUCH FUNDS. You may exchange
your Class A shares for Class A shares of the other Prudential Mutual Funds on
the basis of relative NAV, plus the applicable sales charge. No additional sales
charge is imposed in connection with subsequent exchanges. You may not exchange
your shares for Class B shares of the Prudential Mutual Funds, except that
shares acquired prior to January 22, 1990 subject to a contingent deferred sales
charge can be exchanged for Class B shares. See "How to Sell Your Shares--Class
B and Class C Purchase Privilege" above and "Shareholder Investment
Account--Exchange Privilege" in the Statement of Additional Information. An
exchange will be treated as a redemption and purchase for tax purposes. You may
not exchange your shares for Class C shares of the Prudential Mutual Funds.
IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE THE TELEPHONE
EXCHANGE PRIVILEGE ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE
TRANSFER AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may call
the Fund at (800) 225-1852 to execute a telephone exchange of shares 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 LLC, 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 LLC, AT THE ADDRESS NOTED ABOVE.
SPECIAL EXCHANGE PRIVILEGE. A special exchange privilege is available for
shareholders who qualify to purchase Class Z shares (see "How to Buy Shares of
the Fund--Class Z Shares" above). Under this exchange privilege, shareholders
who qualify to purchase Class Z shares will have their Class A shares exchanged
for Class Z shares on a quarterly basis. Eligibility for this exchange privilege
will be calculated on the business day prior to the date of the exchange.
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
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<PAGE>
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 PSI's 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 NAV.
The Fund reserves the right to reject any exchange order including
exchanges (and market timing transactions) which are of a size and/or frequency
engaged in by one or more accounts acting in concert or otherwise, that have or
may have an adverse effect on the ability of the Subadviser to manage the
portfolio. The determination that such exchanges or activity may have an adverse
effect and the determination to reject any exchange order shall be in the
discretion of the Manager and the Subadviser.
The Exchange Privilege is not a right and may be suspended, modified or
terminated on 60 days' notice to shareholders.
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:
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS. For your
convenience, all dividends and distributions are automatically reinvested in
full and fractional shares of the Fund at NAV. 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.
o AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make
regular purchases of shares of the Fund in amounts as little as $50 via an
automatic charge 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 representative or the
Transfer Agent directly.
o 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.
o SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available
for shareholders which provides for monthly or quarterly checks. For additional
information about the service, you may contact your Prudential Securities
financial adviser, Prusec representative or the Transfer Agent directly.
o MULTIPLE ACCOUNTS. Special procedures have been designed for banks and
other institutions that wish to open multiple accounts. An institution may open
a single master account by filing an application form with the Transfer Agent,
Attention: Customer Service, P.O. Box 15005, New Brunswick, New Jersey 08906,
signed by personnel authorized to act for the institution. Individual
sub-accounts may be opened at the time the master account is opened by listing
them on the application form, or they may be added at a later date by written
advice or by filing forms supplied by the Fund. Procedures are available to
identify sub-accounts by name and number within the master account name. The
investment minimums set forth above are applicable to the aggregate amounts
invested by a group and not to the amount credited to each sub-account.
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<PAGE>
o PURCHASE BY HOLDERS OF PRUDENTIAL SECURITIES UNIT TRUSTS. Holders of
Prudential Securities sponsored Unit Trusts may elect to have monthly
distributions paid by such Unit Trusts reinvested in Class A shares of the Fund
without compliance with the investment minimums described under "How to Buy
Shares of the Fund."
o 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 Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
o SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, 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.
24
<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 representative or telephone the Fund at
(800) 225-1852 for a free prospectus. Read the prospectus carefully before you
invest or send money.
- --------------------------------------------------------------------------------
TAXABLE BOND FUNDS
- --------------------------------------------------------------------------------
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
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
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
- --------------------------------------------------------------------------------
GLOBAL FUNDS
- --------------------------------------------------------------------------------
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
Global Utility Fund, Inc.
The Global Government Plus Fund, Inc.
The Global Total Return Fund, Inc.
- --------------------------------------------------------------------------------
EQUITY FUNDS
- --------------------------------------------------------------------------------
Prudential Allocation Fund
Balanced Portfolio
Strategy Portfolio
Prudential Distressed Securities Fund, Inc.
Prudential Dryden Fund
Prudential Active Balanced Fund
Prudential Stock Index Fund
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Jennison Series Fund, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small Companies Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
o Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
o Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
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
o Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
o 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
PAGE
----
FUND HIGHLIGHTS ........................................................... 2
What are the Fund's Risk Factors and Special Characteristics ............ 2
FUND EXPENSES ............................................................. 4
FINANCIAL HIGHLIGHTS ...................................................... 5
CALCULATION OF YIELD ...................................................... 7
HOW THE FUND INVESTS ...................................................... 7
Investment Objective and Policies ....................................... 7
Other Investments and Policies .......................................... 9
Investment Restrictions ................................................. 10
HOW THE FUND IS MANAGED ................................................... 10
Manager ................................................................. 10
Distributor ............................................................. 11
Portfolio Transactions .................................................. 12
Custodian and Transfer and
Dividend Disbursing Agent ............................................. 12
HOW THE FUND VALUES ITS SHARES ............................................ 13
TAXES, DIVIDENDS AND DISTRIBUTIONS ........................................ 13
GENERAL INFORMATION ....................................................... 15
Description of Shares ................................................... 15
Additional Information .................................................. 15
SHAREHOLDER GUIDE ......................................................... 15
How to Buy Shares of the Fund ........................................... 15
How to Sell Your Shares ................................................. 19
How to Exchange Your Shares ............................................. 22
Shareholder Services .................................................... 23
PRUDENTIAL MUTUAL FUND FAMILY ............................................. A-1
================================================================================
MF 108A 430230J
- -----------------------------------
Class A: 74435H-10-2
CUSIP Nos.:
Class Z: 74435HG-20-1
- -----------------------------------
PRUDENTIAL
MONEYMART
ASSETS, INC.
P R O S P E C T U S
February 28, 1997
[Logo] PRUDENTIAL
Investments
<PAGE>
PRUDENTIAL
MONEYMART ASSETS, INC.
Statement of Additional Information
Dated February 28, 1997
Prudential MoneyMart Assets, Inc. (the Fund) is an open-end, diversified,
management investment company whose investment objective is maximum current
income consistent with stability of capital and maintenance of liquidity. The
Fund pursues this objective by investing primarily in a portfolio of short-term
money market instruments maturing within thirteen months of the date of
acquisition. There can be no assurance that the Fund's investment objective will
be achieved. See "Investment Objective and Policies." The Fund's address is
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and
its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated February 28, 1997, a copy
of which may be obtained from the Fund upon request at the address noted above.
TABLE OF CONTENTS
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
---- ----------
General Information and History B-2 15
Investment Objective and Policies B-2 7
Investment Restrictions B-3 10
Suitability for Investors B-4 --
Calculation of Yield B-5 7
Directors and Officers B-5 10
Manager B-8 10
Distributor B-10 11
Purchase and Redemption of Fund Shares B-11 15
Shareholder Investment Account B-13 23
Dividends B-15 14
Net Asset Value B-15 13
Portfolio Transactions B-15 12
Taxes B-16 13
Custodian, Transfer and Dividend Disbursing Agent
and Independent Accountants B-17 12
Financial Statements B-18 --
Independent Auditors' Report B-27 --
Appendix A--Description of Ratings A-1 --
Appendix B--Information Relating to The Prudential B-1 --
- --------------------------------------------------------------------------------
================================================================================
MF108B
<PAGE>
GENERAL INFORMATION AND HISTORY
Effective March 1, 1996, the Fund's name changed from "Prudential-Bache
MoneyMart Assets Inc." to "Prudential MoneyMart Assets, Inc."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is maximum current income consistent with
stability of capital and maintenance of liquidity. This objective is pursued by
investing primarily in a portfolio of money market instruments maturing in
thirteen months or less.
Floating Rate and Variable Rate Securities. The Fund may purchase floating
rate and variable rate securities. Investments in floating or variable rate
securities normally will involve securities which provide that the rate of
interest is set as a spread to a designated base rate, such as rates on Treasury
bills, and, in some cases, that the purchaser can demand payment of the
obligation at specified intervals or after a specified notice period (in each
case a period of less than thirteen months) at par plus accrued interest, which
amount may be more or less than the amount paid for them. Variable rate
securities provide for a specified periodic adjustment in the interest rate,
while floating rate securities have an interest rate which changes whenever
there is a change in the designated base interest rate.
Puts. The Fund may purchase instruments of the types described in its
Prospectus under "How the Fund Invests--Investment Objective and Policies"
together with the right to resell the instruments at an agreed-upon price or
yield within a specified period prior to the maturity date of the instruments.
Such a right to resell is commonly known as a "put," and the aggregate price
which the Fund pays for instruments with puts may be higher than the price which
otherwise would be paid for the instruments. Consistent with the Fund's
investment objective and applicable rules issued by the Securities and Exchange
Commission (SEC) and subject to the supervision of the Board of Directors, the
purpose of this practice is to permit the Fund to be fully invested while
preserving the necessary liquidity to meet unusually large redemptions and to
purchase at a later date securities other than those subject to the put. Puts
may be exercised prior to the expiration date in order to fund obligations to
purchase other securities or to meet redemption requests. These obligations may
arise during periods in which proceeds from sales of Fund shares and from recent
sales of portfolio securities are insufficient to meet such obligations or when
the funds available are otherwise allocated for investment. In addition, puts
may be exercised prior to the expiration date in the event the Fund's investment
adviser revises its evaluation of the creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts prior to their
expiration date and in selecting which puts to exercise in such circumstances,
the Fund's investment adviser considers, among other things, the amount of cash
available to the Fund, the expiration dates of the available puts, any future
commitments for securities purchases, the yield, quality and maturity dates of
the underlying securities, alternative investment opportunities and the
desirability of retaining the underlying securities in the Fund's portfolio.
The Fund values instruments which are subject to puts at amortized cost;
no value is assigned to the put. The cost of the put, if any, is carried as an
unrealized loss from the time of purchase until it is exercised or expires.
Since the value of the put is dependent on the ability of the put writer
to meet its obligation to repurchase, the Fund's policy is to enter into put
transactions only with such brokers, dealers or financial institutions which
present minimal credit risks. There is a credit risk associated with the
purchase of puts in that the broker, dealer or financial institution might
default on its obligation to repurchase an underlying security. In the event
such a default should occur, the Fund is unable to predict whether all or any
portion of any loss sustained could subsequently be recovered from the broker,
dealer or financial institution.
The Fund will invest no more than 5% of its total assets in securities
issued by or subject to puts from the same institution. For purposes of this
limitation, unconditional puts or guarantees with respect to a security will not
be deemed to be issued by the institution providing the guarantee or put if the
value of all securities held by the Fund and issued or guaranteed by the issuer
providing the guarantee or put are limited to 10% of the Fund's total assets.
Repurchase Agreements. The Fund participates in a joint repurchase account
with other investment companies managed by Prudential Mutual Fund Management LLC
pursuant to an order of the SEC. On a daily basis, any uninvested cash balances
of the Fund may be aggregated with those of such investment companies and
invested in one or more repurchase agreements. Each fund participates in the
income earned or accrued in the joint account based on the percentage of its
investment. In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian or designated
subcustodians under triparty repurchase agreements, as the case may be, take
possession of the underlying collateral securities, the value of which equals or
exceeds the resale price of the agreement. 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.
Illiquid Securities. The Fund may not hold more than 10% of its net assets
in illiquid securities, including securities that are illiquid by virtue of the
absence of a readily available market or legal or contractual restrictions on
resale and repurchase agree-
B-2
<PAGE>
ments which have a maturity of longer than seven days. Historically, illiquid
securities have included securities subject to contractual or legal restrictions
on resale because they have not been registered under the Securities Act of
1933, as amended (Securities Act), securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the Securities Act are
referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days. A
mutual fund might also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Rule 144A of the Securities Act allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. The investment adviser anticipates that the market for
certain restricted securities such as institutional commercial paper and foreign
securities will expand further as a result of this new regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (i) it
must be rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations (NRSRO), or if only one
NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable
quality in the view of the investment adviser; and (ii) it must not be "traded
flat" (i.e., without accrued interest) or in default as to principal or
interest. Repurchase agreements subject to demand are deemed to have a maturity
equal to the notice period.
INVESTMENT RESTRICTIONS
The Fund invests primarily in money market instruments maturing in
thirteen months or less. In connection with its investment objective and
policies as set forth in the Prospectus, the Fund has adopted the following
investment restrictions, none of which may be changed without the approval of
the holders of a majority of the Fund's outstanding voting securities. A
"majority of the Fund's outstanding voting securities," when used in this
Statement of Additional Information, means the lesser of (i) 67% of the voting
shares represented at a meeting at which more than 50% of the outstanding voting
shares are present in person or represented by proxy or (ii) more than 50% of
the outstanding voting shares.
The Fund may not engage in any of the practices described in paragraphs
1-13 below:
1. Purchase common stock or other voting securities, preferred stock,
warrants or other equity securities.
2. Purchase any securities (other than obligations of the U.S. Government,
its agencies and instrumentalities) if as a result 25% or more of the value of
the Fund's total assets (determined at the time of investment) would be invested
in the securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to money market instruments of domestic banks, U.S. branches of foreign
banks that are subject to the same regulations as U.S. banks and foreign
branches of domestic banks (provided that the domestic bank is unconditionally
liable in the event of the failure of the foreign branch to make payment on its
instruments for any reason).
3. Purchase the securities of any one issuer, other than the U.S.
Government or its agencies and instrumentalities, if more than 5% of the value
of the Fund's total assets would be invested in securities of such issuer.
B-3
<PAGE>
4. Make cash loans except through the purchase of debt obligations and the
entry into repurchase agreements permitted under "Investment Objective and
Policies." The Fund may also engage in the practice of lending its securities
only against fully comparable collateral. See paragraph 13 below.
5. Borrow money, except from banks for temporary or emergency purposes and
then only in amounts up to 10% of the value of the Fund's net assets. This
borrowing provision is included solely to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests, if
they should occur, or to permit the Fund to obtain short-term credits necessary
for the settlement of transactions, and is not for investment purposes. Interest
paid on borrowings is not available for investment by the Fund. Secured
temporary 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. The SEC has issued a release requiring, in
effect, that the Fund maintain, in a segregated account with State Street Bank
and Trust Company (State Street), liquid assets equal in value to the amount
owed.
6. Mortgage, pledge or hypothecate any assets, except in an amount up to
15% of the value of the Fund's net assets, but only to secure borrowings for
temporary or emergency purposes as described in paragraph 5 above.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests.
8. Act as an underwriter of securities.
9. Purchase securities on margin, except for the use of short-term credit
necessary for clearance of purchases or sales of portfolio securities, or make
short sales of securities or maintain a short position.
10. Purchase securities, other than obligations of the U.S. Government,
its agencies or instrumentalities, of any issuer having a record, together with
predecessors, of less than three years of continuous operations if, immediately
after such purchase, more than 5% of the Fund's total assets would be invested
in such securities.
11. Make investments for the purpose of exercising control or management.
12. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization.
13. The Fund may lend its portfolio securities if such loans are secured
continuously by collateral in cash maintained on a daily basis at an amount at
least equal at all times to the market value of the securities loaned. The Fund
must maintain the right to call such loans and to obtain the securities loaned
at any time on five days' notice. During the existence of a loan, the Fund
continues to receive the equivalent of the interest paid by the issuer on the
securities loaned and also has the right to receive the interest on investment
of the cash collateral in short-term money market instruments. If the management
of the Fund determines to make securities loans, the value of the securities
loaned will not exceed 10% of the value of the Fund's total assets.
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 action is taken, 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.
SUITABILITY FOR INVESTORS
The Fund is designed primarily to provide a convenient means of investing
short-term funds where the direct purchase of money market instruments may be
impractical, uneconomical or undesirable.
Money market instruments such as those to be purchased by the Fund are
generally available only in denominations of $100,000 or more. Frequently,
higher yields may be obtained by the purchase of instruments in blocks or
denominations of $1,000,000, $5,000,000 or more. As compared with direct
purchase, an investment in the Fund permits participation in such money market
instruments while affording the advantage of diversification and a high degree
of liquidity. Further, the Fund relieves the investor of most investment
decisions and bookkeeping problems associated with the direct purchase of money
market instruments, such as making numerous buy and sell decisions, scheduling
maturities, reinvesting income, providing for safekeeping and investing in round
lots.
B-4
<PAGE>
Although the Fund provides the advantage of diversification, there is
still an inherent market risk due to the nature of the investment. If interest
rates decline, then yield to shareholders will also decline. If there are
unusually heavy redemption requests because of changes in interest rates or for
any other reason, the Fund may have to sell a portion of its investment
portfolio at a time when it may be disadvantageous to do so. The Fund believes
that its borrowing provision for abnormally heavy redemption requests would help
to mitigate any adverse effects and would make the sale of its portfolio
securities unlikely. When a shareholder redeems shares, it is possible that the
redemption proceeds will be less than the amount invested.
The Fund has developed special procedures to assist banks and other
institutions choosing to establish multiple accounts. Banks should consult their
legal advisers regarding state and federal laws applicable to the purchase of
Fund shares for fiduciary accounts.
CALCULATION OF YIELD
The Fund will prepare a current quotation of yield from time to time. The
yield quoted will be the simple annualized yield for an identified seven
calendar day period. The yield calculation will be based on a hypothetical
account having a balance of exactly one share at the beginning of the seven-day
period. The base period return will be the change in the value of the
hypothetical account during the seven-day period, including dividends declared
on any shares purchased with dividends on the share but excluding any capital
changes. The yield will vary as interest rates and other conditions affecting
money market instruments change. Yield also depends on the quality, length of
maturity and type of instruments in the Fund's portfolio, and its operating
expenses. The Fund may also prepare an effective annual yield computed by
compounding the unannualized seven-day period return as follows: by adding 1 to
the unannualized seven-day period return, raising the sum to a power equal to
365 divided by 7, and subtracting 1 from the result.
The Fund's 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. Actual yields will depend upon not only changes in
interest rates generally during the period in which the investment in the Fund
is held, but also on any realized or unrealized gains and losses and changes in
the Fund's expenses.
DIRECTORS AND OFFICERS
Directors and officers of the Fund, together with information as to their
principal business occupations during the last five years, are shown below.
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) WITH FUND DURING PAST FIVE YEARS
- ------------------------- --------- ----------------------
Edward D. Beach (72) Director President and Director of BMC Fund,
Inc., a closed-end investment company;
prior thereto, Vice Chairman of
Broyhill Furniture Industries, Inc.;
Certified Public Accountant; Secretary
and Treasurer of Broyhill Family
Foundation, Inc.; Chairman of the
Board ofTrustees of Mars Hill College;
President, Treasurer and Director
of First Financial Fund, Inc. and The
High Yield Plus Fund, Inc.; Director
of The High Yield Income Fund, Inc.
Stephen C. Eyre (73) Director Executive Director of The John A.
Hartford Foundation, Inc. (charitable
foundation) (since May 1985); Director
of Faircom, Inc.; Trustee Emeritus of
Pace University.
Delayne Dedrick Gold (58) Director Marketing and Management Consultant;
Director of The High Yield Income
Fund, Inc.
* Robert F. Gunia (50) Director Comptroller, Prudential Investments
(since May 1996); Senior Vice
President (since March 1987) of
Prudential Securities Incorporated
(Prudential Securities); Executive
Vice President and Treasurerof PMF,
and formerly Chief Administrative
Officer (July 1990-September 1996),
Director (January 1989-September
1996), Executive Vice President,
Treasurer and Chief Financial Officer
(June 1987-September 1996) of PMF;
Vice President and Director of
The Asia Pacific Fund, Inc. (since May
1989); Director of The High Yield
Income Fund, Inc.
B-5
<PAGE>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) WITH FUND DURING PAST FIVE YEARS
- ------------------------- --------- ----------------------
Don G. Hoff (61) Director Chairman and Chief Executive Officer of
Intertec, Inc. (investments) since
1980; Chairman and CEO of EHS, Inc.:
Director of Innovative Capital
Management, Inc. and The Greater China
Fund, Inc.; Chairman and Director of
The Asia Pacific Fund, Inc.
Robert E. LaBlanc (62) Director President of Robert E. LaBlanc
Associates, Inc. (telecommunications)
since 1981; formerly General Partner
at Salomon Brothers; formerly
Vice-Chairman of Continental Telecom;
Director of Storage Technology
Corporation, Titan Corporation and
Tribune Company; Trustee of Manhattan
College.
* Mendel A. Melzer (35) Director Chief Investment Officer (since
751 Broad Street September 1996), formerly Chief
Newark, NJ 07102 Financial Officer (November
1995-October 1996), of Prudential
Investments; formerly Senior Vice
President and Chief Financial Officer
of Prudential Preferred Financial
Services (April 1993-November 1995);
Managing Director of Prudential
Investment Advisors (April 1991-April
1993); Senior Vice President of
Prudential Capital Corporation (July
1989-April 1991); Chairman and
Director of Prudential Series Fund,
Inc; Director of The High Yield
IncomeFund, Inc.
* Richard A. Redeker (53) President Employee of Prudential Investments;
751 Broad Street and formerly President, Chief Executive
Newark, NJ 07102 Director Officer and Director (October
1993-September 1996) of PMF; formerly
Executive Vice President, Director and
Member of the Operating Committee
(1993-September 1996), Prudential
Securities; formerly Director (October
1993-September 1996) of Prudential
Securities Group, Inc.; formerly
Senior Executive Vice President and
Director of Kemper Financial Services,
Inc. (September 1978-September 1993).
Robin B. Smith (57) Director Chairman (since August 1996) and Chief
Executive Officer (since January
1988), formerly President (September
1981-August 1996) of Publishers
Clearing House; Director of BellSouth
Corporation, The Omnicom Group, Inc.,
Texaco Inc., Springs Industries Inc.
and Kmart Corporation.
Stephen Stoneburn (53) Director President and Chief Executive Officer of
Quadrant Media Corp. (a publishing
company) (since June 1996); formerly
President of Argus Intergrated Media,
Inc. (June 1995-June 1996); formerly
Senior Vice President and Managing
Director, Cowles Business Media
(January 1993-1995); prior thereto,
Senior Vice President (January
1991-1992) and Publishing Vice
President (May 1989-December 1990) of
Gralla Publications (a division of
United Newspapers, U.K.); formerly
Senior Vice President of Fairchild
Publications, Inc.
Nancy H. Teeters (66) Director Economist; formerly Vice President and
Chief Economist (March 1986-June 1990)
of Interational Business Machines
Corporation; formerly Member of the
Board of Governors of the Horace
Rackham School of Graduate Studies of
the University of Michigan; Director
of Inland Steel Corporation (since
July 1991) and First FinancialFund,
Inc.
B-6
<PAGE>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) WITH FUND DURING PAST FIVE YEARS
- ------------------------- --------- ----------------------
Susan C. Cote (42) Vice Executive Vice President and Chief
President Financial Officer of PMF (since May
1996); formerly Chief Operating
Officer and Managing Director of
Prudential Investments (March 1995-May
1996) and formerly Senior Vice
President-Fund Administration
(September 1983-February 1995) of PMF.
Thomas A. Early (42) Vice Executive Vice President, Secretary and
President General Counsel of PMF (since December
1996); Vice President and General
Counsel, Prudential Retirement
Services (since March 1994); formerly
Associate General Counsel and Chief
Financial Services Officer, Frank
Russell Company (1988-1994).
S. Jane Rose (51) Secretary Senior Vice President and Senior Counsel
of PMF; Senior Vice President and
Senior Counsel of Prudential
Securities (since July 1992); formerly
Vice President and Associate General
Counsel of Prudential Securities.
Ellyn C. Vogin (36) Assistant Vice President and Associate General
Secretary Counsel of Prudential Securities and
PMF (since March 1995); prior thereto,
associated with the law firm of
Fulbright & Jaworski LLP.
Grace C. Torres (38) Treasurer First Vice President (since March 1994)
and of PMF; First Vice President (since
Principal March 1994) of Prudential Securities;
Financial Vice President of Bankers Trust (July
and 1989-March 1994).
Accounting
Officer
Stephen M. Ungerman (44) Assistant First Vice President (since February
Treasurer 1993) of PMF; Tax Director of
Prudential Investments and the Private
Asset Group of The Prudential
Insurance Company of America
(Prudential) (since March 1996); prior
thereto, Senior Tax Manager of Price
Waterhouse LLP (1981-January 1993).
- ----------
(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Mutual Fund Management LLC, Gateway Center Three, 100 Mulberry
Street, Newark, New Jersey 07102-4077.
* "Interested" Director, as defined in the Investment Company Act of 1940,
as amended (Investment Company Act), by reason of his affiliation with
Prudential, Prudential Securities or PMF.
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.
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 Board of Directors has adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Messrs. Beach
and Eyre are scheduled to retire on December 31, 1999 and 1998, respectively.
Directors may receive their Directors' 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 fees in installments which accrue interest
at a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or, pursuant to 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 Directors'
fees, together with interest thereon, is a general obligation of the Fund.
B-7
<PAGE>
Each Director who is not an affiliated person of PMF or The Prudential
Investment Corporation currently receives $7,000 as an annual Director's fee,
plus expenses.
The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended December 31, 1996 to the Directors who are not
affiliated with the Manager and the aggregate compensation paid to such
Directors for service on the Fund's Board and the Boards of any other investment
companies managed by Prudential Mutual Fund Management LLC (Fund Complex) for
the calendar year ended December 31, 1996. In October 1996, shareholders elected
a new Board of Directors. Below is listed all Directors who have served the Fund
during its most recent fiscal year, as well as the new Directors who took office
after the shareholder meeting in October.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND EXPENSES RETIREMENT TO DIRECTORS (2)
----------------- --------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
Edward D. Beach--Director -- None N/A $166,000(21/39)*
Stephen C. Eyre--Director -- None N/A $ 34,250(4/5)*
Delayne D. Gold--Director $12,000 None N/A $175,308(21/42)*
Robert F. Gunia (1)--Director -- None N/A --
Don G. Hoff--Director -- None N/A $ 50,042(5/7)*
Harry A. Jacobs, Jr. (1)--Former Director -- None N/A $ 34,542(4/4)*
Robert F. LaBlanc--Director -- None N/A --
Mendel A. Melzer (1)--Director -- None N/A --
Sidney M. Spielvogel--Former Director $12,000 None N/A $ 12,000(1/1)*
Thomas A. Owens, Jr.--Former Director $12,000 None N/A $ 86,333(9/11)*
Richard A. Redeker (1)--Director -- None N/A --
Robin B. Smith--Director -- None N/A $109,294(11/20)*
Stephen Stoneburn--Director -- None N/A $ 30,375(4/6)*
Nancy H. Teeters--Director $12,000 None N/A $103,583(11/28)*
Robert H. Wellington--Former Director $12,000 None N/A $ 24,375(2/2)*
</TABLE>
- ----------
* Indicates number of funds/portfolios in Fund Complex (including the Fund)
to which aggregate compensation relates.
(1) Robert F. Gunia, Mendel A. Melzer and Richard A. Redeker, who are
interested Directors, do not receive compensation from the Fund or any fund
in the Fund Complex. Harry A. Jacobs, Jr., a former interested Director,
also did not receive compensation from the Fund or any fund in the Fund
Complex.
(2) Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1996, including amounts deferred at the
election of Directors under the funds' Deferred Compensation Plans.
Including accrued interest, total deferred compensation amounted to $109,
294 for Robin B. Smith. Currently, Ms. Smith has agreed to defer some of
her fees at the T-bill rate and other fees at the Fund rate.
As of February 14, 1997, the Directors and officers of the Fund, as a
group, beneficially owned less than one percent of the outstanding shares of
Common Stock of the Fund.
As of February 14, 1997, Prudential Securities held, solely of record on
behalf of other persons, 7,114,467,161 Class A shares of the Fund's Common
Stock, representing approximately 95% of the Class A shares then outstanding. 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 LLC (PMF or
the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. PMF serves as manager to all of the other investment companies that,
together with the Fund, comprise the Prudential Mutual Funds. See "How the Fund
is Managed--Manager" in the Prospectus. As of January 31, 1997, PMF managed
and/or administered open-end and closed-end management investment companies with
assets of approximately $55.8 billion. According to the Investment Company
Institute, as of December 31, 1996, the Prudential Mutual Funds were the 15th
largest family of mutual funds in the United States.
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<PAGE>
PMF is a subsidiary of Prudential Securities Incorporated and The
Prudential Insurance Company of America (Prudential). PMF has one wholly-owned
subsidiary: Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent).
PMFS serves as the transfer agent for the Prudential Mutual Funds and, in
addition, provides customer service, recordkeeping and management and
administration services to qualified plans.
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 and other assets. 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 (the Custodian), and
PMFS, 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 a management agreement (the
Management Agreement) with the Fund, a fee at an annual rate of .50 of 1% of the
Fund's average daily net assets up to $50 million and .30 of 1% of the Fund's
average daily net assets in excess of $50 million. 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 the Manager, 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 shares of the Fund are then
qualified for offer and sale, the Manager will reduce its fee by the amount of
such excess. Expenses in excess of the total compensation payable to PMF will be
paid by PMF. Any such reductions of payments are subject to readjustment during
the year. No such reductions were required during the fiscal year ended December
31, 1996. Currently, the Fund believes that there are no such expense
limitations.
In connection with its management of the corporate affairs of the Fund,
PMF bears the following expenses:
(a) the salaries and expenses of all personnel of the Fund and the
Manager, except the fees and expenses of Directors who are not affiliated
persons of the Manager or the Fund's investment adviser;
(b) all expenses incurred by the Manager or by the Fund in
connection with managing the ordinary course of the Fund's business, other
than those assumed by the Fund, as described below; and
(c) the costs and expenses payable to The Prudential Investment
Corporation, doing business as Prudential Investments (PI), pursuant to
the subadvisory agreement between PMF and PI (the Subadvisory Agreement).
Under the terms of the Management Agreement, the Fund is responsible for
the payment of the following expenses, including (a) the fees payable to the
Manager, (b) the fees and expenses of Directors who are not affiliated with PMF
or the Fund's investment adviser, (c) the fees and certain expenses of the
Fund's Custodian and Transfer and Dividend Disbursing Agent, including the cost
of providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the fees and charges of the Fund's legal counsel and independent accountants,(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
association of which the Fund is 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 SEC and registering the Fund
as a broker or dealer 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, (l) litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business, and (m) distribution expenses.
The Management Agreement also 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
a breach of fiduciary duty with respect to the receipt of compensation for
services or 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 provides that it will continue in
effect for a period of more than two years from the date of execution only so
long as such continuance is specifically approved at least annually in
accordance with the requirements of the Investment Company Act.
For the fiscal years ended December 31, 1996, 1995 and 1994, PMF received
management fees of $22,378,655, $20,840,442 and $21,320,747, respectively.
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<PAGE>
PMF has entered into the Subadvisory Agreement with PI, a wholly-owned
subsidiary of Prudential. The Subadvisory Agreement provides that PI furnish
investment advisory services in connection with the management of the Fund. In
connection therewith, PI is 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 PI's performance of such
services. PI is reimbursed by PMF for the reasonable costs and expenses
incurred by PI in furnishing those services.
The Subadviser maintains a corporate credit unit which provides credit
analysis and research on taxable fixed-income securities including money market
instruments. The portfolio manager consults routinely with the credit unit in
managing the Fund's portfolio. The credit unit staff, including 7 credit
analysts, reviews on an ongoing basis commercial paper issuers, commercial
banks, non-bank financial institutions and issuers of other taxable fixed-income
obligations. Credit analysts have broad access to research and financial
reports, data retrieval services and industry analysts. They maintain
relationships with the management of corporate issuers and from time to time
visit companies in whose securities the Fund may invest.
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 PI upon not less than 30 days' or more than 60
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 by the Board of Directors at least
annually in accordance with the requirements of the Investment Company Act.
DISTRIBUTOR
Prudential Securities Incorporated (Prudential Securities or PSI), One
Seaport Plaza, New York, New York 10292, acts as the distributor of the Fund's
Class A shares. Prior to January 2, 1996, Prudential Mutual Fund Distributors,
Inc. (PMFD), acted as distributor of the Fund's Class A shares. Prudential
Securities also serves as the distributor of the Fund's 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. See "How the Fund is Managed--Distributor" in the Prospectus.
Prudential Securities is engaged in the securities underwriting and
securities and commodities brokerage business and is a member of the New York
Stock Exchange, other major securities and commodities exchanges and the NASD.
Prudential Securities is also engaged in the investment advisory business.
Prudential Securities is a wholly-owned subsidiary of Prudential Securities
Group Inc., which is an indirect, wholly-owned subsidiary of Prudential. The
services it provides to the Fund are discussed in the Fund's Prospectus. See
"How the Fund is Managed--Distributor."
PLAN OF DISTRIBUTION
See "How the Fund is Managed--Distributor" in the Prospectus.
Under the Fund's Plan of Distribution and the Distribution Agreement for
the Class A shares, the Fund pays PSI, as Distributor, a distribution fee of up
to 0.125% of the average daily net assets of the Class A shares of the Fund,
computed daily and payable monthly, to reimburse PSI for distribution expenses.
For the fiscal year ended December 31, 1996, PSI incurred distribution
expenses in the aggregate of $9,157,529, all of which was recovered through the
distribution fee paid by the Class A shares of the Fund.
It is estimated that of this amount, 0.02% ($1,580) was spent on printing
and mailing of prospectuses to other than current shareholders and 99.98%
($9,155,949) on the aggregate of (i) account servicing fee credits to Prudential
Securities branch offices for payments of account servicing fees to account
executives (88.60% or $8,113,586) and (ii) an allocation of overhead and other
branch office distribution-related expenses (11.38% or $1,042,363). The term
"overhead and other branch office distribution-related expenses" represents (a)
the expenses of operating branch offices of Prudential Securities and Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, 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) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other incidental expenses relating to
branch promotion of Fund sales. No interest or carrying charges are included as
part of the Fund's distribution expenses.
The Plan continues 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 of the Directors who are not interested persons of the Fund
and who have no direct or
B-10
<PAGE>
indirect financial interest in the Plan or in any agreement relating to the Plan
(the Rule 12b-1 Directors), cast in person at a meeting called for the purpose
of voting on such continuance. The Plan may 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 Class A voting securities of the
Fund on not more than 30 days' written notice to any other party to the Plan.
The Plan may not be amended to increase materially the amounts to be spent by
the Fund thereunder without shareholder approval, and all material amendments
are required to be approved by the Board of Directors in the manner described
above. The Plan will automatically terminate in the event of its assignment.
Pursuant to the Plan, the Directors will review at least quarterly a
written report of the distribution expenses incurred on behalf of the Fund by
the Distributor. The report includes an itemization of the distribution expenses
and the purpose of such expenditures. In addition, as long as the Plan remains
in effect, the selection and nomination of Directors shall be committed to the
Rule 12b-1 Directors.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
PSI to the extent permitted by applicable law against certain liabilities under
the Securities Act of 1933, as amended.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators in 51 jurisdictions and the NASD to resolve
allegations that PSI sold interests in more than 700 limited partnerships (and a
limited number of other types of securities) from January 1, 1980 through
December 31, 1990, in violation of securities laws to persons for whom such
securities were not suitable in light of the individuals' financial condition or
investment objectives. It was also alleged that the safety, potential returns
and liquidity of the investments had been misrepresented. The limited
partnerships principally involved real estate, oil and gas producing properties
and aircraft leasing ventures. The SEC Order (i) included findings that PSI's
conduct violated the federal securities laws and that an order issued by the SEC
in 1986 requiring PSI to adopt, implement and maintain certain supervisory
procedures had not been complied with; (ii) directed PSI to cease and desist
from violating the federal securities laws and imposed a $10 million civil
penalty; and (iii) required PSI to adopt certain remedial measures including the
establishment of a Compliance Committee of its Board of Directors. Pursuant to
the terms of the SEC settlement, PSI established a settlement fund in the amount
of $330,000,000 and procedures, overseen by a court approved Claims
Administrator, to resolve legitimate claims for compensatory damages by
purchasers of the partnership interests. PSI has agreed to provide additional
funds, if necessary, for that purpose. PSI's settlement with the state
securities regulators included an agreement to pay a penalty of $500,000 per
jurisdiction. PSI consented to a censure and to the payment of a $5,000,000 fine
in settling the NASD action. In settling the above referenced matters, PSI
neither admitted nor denied the allegations asserted against it.
On January 18, 1994, PSI agreed to the entry of a Final Consent Order and
a Parallel Consent Order by the Texas Securities Commissioner. The firm also
entered into a related agreement with the Texas Securities Commissioner. The
allegations were that the firm had engaged in improper sales practices and other
improper conduct resulting in pecuniary losses and other harm to investors
residing in Texas with respect to purchases and sales of limited partnership
interests during the period of January 1, 1980 through December 31, 1990.
Without admitting or denying the allegations, PSI consented to a reprimand,
agreed to cease and desist from future violations, and to provide voluntary
donations to the State of Texas in the aggregate amount of $1,500,000. The firm
agreed to suspend the creation of new customer accounts, the general
solicitation of new accounts, and the offer for sale of securities in or from
PSI's North Dallas office to new customers during a period of twenty consecutive
business days, and agreed that its other Texas offices would be subject to the
same restrictions for a period of five consecutive business days.PSI also agreed
to institute training programs for its securities salesmen in Texas.
On October 27, 1994, Prudential Securities Group, Inc. and PSI entered
into agreements with the United States Attorney deferring prosecution (provided
PSI complies with the terms of the agreement for three years) for any alleged
criminal activity related to the sale of certain limited partnership programs
from 1983 to 1990. In connection with these agreements, PSI agreed to add the
sum of $330,000,000 to the Fund established by the SEC and executed a
stipulation providing for a reversion of such funds to the United States Postal
Inspection Service. PSI further agreed to obtain a mutually acceptable outside
director to sit on the Board of Directors of PSG and the Compliance Committee of
PSI. The new director serves as an independent "ombudsman" whom PSI employees
can call anonymously with complaints about ethics and compliance. Prudential
Securities reports any allegations or instances of criminal conduct and material
improprieties to the new director. The new director submits compliance reports
which identify all such allegations or instances of criminal conduct and
material improprieties every three months and will continue to do so for a
three-year period.
PURCHASE AND REDEMPTION OF FUND SHARES
PURCHASE OF SHARES
The Fund reserves the right to reject any initial or subsequent purchase
order (including an exchange) and the right to limit investments in the Fund
solely to existing or past shareholders of the Fund.
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<PAGE>
REOPENING AN ACCOUNT
Subject to the minimum investment restrictions, an investor may reopen an
account, without filing a new application form, at any time during the calendar
year the account is closed, provided that the information on the old form is
still applicable.
REDEMPTION OF SHARES
Investors who purchase Class A shares directly from Prudential Mutual Fund
Services LLC (PMFS or the Transfer Agent) may use the following procedures:
CHECK REDEMPTION. At a shareholder's request, State Street Bank and Trust
Company (State Street) will establish a personal checking account for the
shareholder. Checks drawn on this account can be made payable to the order of
any person in any amount equal to or greater than $500. The payee of the check
may cash or deposit it like any other check drawn on a bank. When such a check
is presented to State Street for payment, State Street presents the check to the
Fund as authority to redeem a sufficient number of shares in a shareholder's
account in the Fund to cover the amount of the check. This enables the
shareholder to continue earning daily dividends until the check is cleared.
Canceled checks are returned to the shareholder by State Street.
Shareholders are subject to State Street's rules and regulations governing
checking accounts, including the right of State Street not to honor checks in
amounts exceeding the value of the shareholder's account at the time the check
is presented for payment.
Shares for which certificates have been issued are not available for
redemption to cover checks. A shareholder should be certain that adequate shares
for which certificates have not been issued are in his or her account to cover
the amount of the check. See "Shareholder Guide--How to Sell Your Shares" in the
Prospectus. Since the dollar value of an account is constantly changing, it is
not possible for a shareholder to determine in advance the total value of his or
her account so as to write a check for the redemption of the entire account.
The Fund reserves the right to assess a service charge, payable to State
Street, to establish a checking account and to order checks. State Street, PMFS
and the Fund have reserved the right to modify this checking account privilege
or to place a charge for each check presented for payment for any individual
account or for all accounts in the future.
The Fund, PMFS or State Street may terminate Check Redemption at any time
upon 30 days' notice to participating shareholders. To receive further
information, contact Prudential Mutual Fund Services LLC, Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010, or telephone
(800) 225-1852 (toll-free). Check redemption is not available to investors for
whom Prudential Securities has purchased shares.
EXPEDITED REDEMPTION. In order to use Expedited Redemption, a shareholder
may so designate at the time the initial application form is filed or at a later
date. Once the Expedited Redemption authorization form has been completed, the
signature(s) on the authorization form guaranteed as set forth below and the
form returned to PMFS, requests for redemption may be made by telegraph, letter
or telephone. A signature guarantee is not required under Expedited Redemption
once the authorization form is properly completed and returned. The Expedited
Redemption privilege may be used only to redeem shares in an amount of $200 or
more, except that, if an account for which Expedited Redemption is requested has
a net asset value of less than $200, the entire account must be redeemed. The
proceeds of redeemed shares in the amount of $1,000 or more are transmitted by
wire to the shareholder's account at a domestic commercial bank which is a
member of the Federal Reserve System. Proceeds of less than $1,000 are forwarded
by check to the shareholder's designated bank account. See "Shareholder
Guide--How to Sell Your Shares" in the Prospectus.
To request Expedited Redemption by telephone, a shareholder should call
PMFS at (800) 225-1852. Calls must be received by PMFS before 4:30 P.M., New
York time, in order for the redemption to be effective on that day. Requests by
letter should be addressed to Prudential Mutual Fund Services LLC, Attention:
Account Maintenance, P.O. Box 15015, New Brunswick, New Jersey 08906-5015.
In order to change the name of the commercial bank or account designated
to receive redemption proceeds, it is necessary to execute a new Expedited
Redemption authorization form and submit it to PMFS at the address set forth
above. Each signature must be guaranteed by an "eligible guarantor institution,"
which 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. Guarantees must be signed by
an authorized signatory of the eligible guarantor institution, and "Signature
Guaranteed" should appear with the signature. For clients of Pruco Securities
Corporation (Prusec), signature guarantees may be obtained from the agency or
office manager of most Prudential Insurance and Financial Services or Preferred
Services offices. PMFS may request further documentation from corporations,
executors, administrators, trustees or guardians.
REGULAR REDEMPTION. Shareholders may redeem their shares by sending to
Prudential Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box
15010, New Brunswick, New Jersey 08906-5010, a written request, accompanied by
duly endorsed
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<PAGE>
stock certificates, if issued. In this case, all stock certificates and all
written requests for redemption must be endorsed by the shareholder with the
signature guaranteed, as described above. PMFS may request further documentation
from corporations, executors, administrators, trustees or guardians. Regular
redemption is made by check mailed to the shareholder's address.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of shares of the Fund, a Shareholder Investment
Account is established for each investor under which a record of the shares held
is maintained 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 such account.
PROCEDURE FOR MULTIPLE ACCOUNTS
Special procedures have been designed for banks and other institutions
that wish to open multiple accounts. An institution may open a single master
account by filing an Application and Order Form with PMFS, signed by personnel
authorized to act for the institution. Individual sub-accounts may be opened at
the time the master account is opened by listing them, or they may be added at a
later date by written advice or by filing forms supplied by PMFS. Procedures are
available to identify sub-accounts by name and number within the master account
name. The investment minimums described in the Prospectus under "Shareholder
Guide--How to Buy Shares of the Fund" are applicable to the aggregate amounts
invested by a group, and not to the amount credited to each sub-account.
PMFS provides each institution with a written confirmation for each
transaction in a sub-account and, on a monthly basis, with a statement which
sets forth for each master account its share balance and income earned for the
month. In addition, each institution receives a statement for each individual
account setting forth transactions in the sub-account for the year-to-date, the
total number of shares owned as of the dividend payment date and the dividends
paid for the current month, as well as for the year-to-date. For further
information on the sub-accounting system and procedures, contact PMFS.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders the privilege of exchanging
their shares 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. Class A 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 and any applicable sales charge. 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.
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 the Prudential Mutual Funds and shares of the money market
funds specified below.
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 Tax-Free Money Fund, Inc.
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<PAGE>
Shareholders of the Fund may not exchange their shares for Class B or
Class C shares of the Prudential Mutual Funds or shares of Prudential Special
Money Market Fund, Inc., except that shares acquired prior to January 22, 1990
subject to a contingent deferred sales charge can be exchanged for Class B
shares.
CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
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.
AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP)
Under ASAP, an investor may arrange to have a fixed amount automatically
invested in Class A 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. Stock certificates
are not issued to ASAP participants.
Further details about this program and an application form are available
from the Transfer Agent, Prudential Securitiesor Prusec.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan is available for holders of Class A shares
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.
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.
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 be recognized for
federal income tax purposes. 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-deferred 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 are available from Prudential Securities 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.
B-14
<PAGE>
TAX-DEFERRED COMPOUNDING(1)
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
---------- ------- ---
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
- ----------
(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.
DIVIDENDS
The Fund's net income is declared as dividends daily and is automatically
reinvested monthly in additional shares of the Fund unless the shareholder
elects in writing not less than five full business days prior to the payable
date to receive such distribution in cash. The Fund endeavors to maintain its
net asset value at $1.00 per share. As a result of a significant expense or
realized loss, it is possible that the Fund's net asset value may fall below
$1.00 per share. Should the Fund incur or anticipate any unusual or unexpected
significant expense or loss which would disproportionately affect the Fund's
income for a particular period, the Board of Directors at that time would
consider whether to adhere to the present dividend policy described in the
Prospectus or to revise it in light of the then prevailing circumstances in
order to ameliorate to the extent possible the disproportionate effect of such
expense or loss on then existing shareholders. Such expenses or losses may
nevertheless result in a shareholder's receiving no dividends for the period
during which he or she held shares of the Fund and in his or her receiving a
price per share upon redemption lower than that which he or she paid.
Dividends derived from investment income received by the Fund on portfolio
securities, together with distributions of any net short-term capital gains, are
taxable to the shareholders as ordinary income. Distributions of net long-term
capital gains are taxed to the shareholders at capital gains rates regardless of
the length of their holding period of Fund shares. However, the Fund's portfolio
generally will be managed in such a way as not to realize any net long-term
capital gains. Dividends and distributions are taxable to shareholders even if
reinvested in additional shares.
NET ASSET VALUE
The Fund uses the amortized cost method of valuation to determine the
value of its portfolio securities. In that regard, the Fund's Board of Directors
has determined to maintain a dollar-weighted average portfolio maturity of 90
days or less, to purchase only instruments having remaining maturities of
thirteen months or less, and to invest only in securities determined by the
Manager or the Subadviser, under the direction of the Board of Directors, to be
of minimal credit risk and of eligible quality. Subject to the Fund's compliance
with the conditions of applicable rules promulgated by the SEC relating to the
amortized cost method of valuation, the remaining maturity of an instrument held
by the Fund that is subject to a put is deemed to be the period remaining until
the principal amount can be recovered through demand or, in the case of a
variable rate instrument, the next interest reset date, if longer. The value
assigned to the put is zero. The Board of Directors also has established
procedures designed to stabilize, to the extent reasonably possible, the Fund's
price per share as computed for the purpose of sales and redemptions at $1.00.
Such procedures will include review of the Fund's portfolio holdings by the
Board, at such intervals as deemed appropriate, to determine whether the Fund's
net asset value calculated by using available market quotations deviates from
$1.00 per share based on amortized cost. The extent of any deviation will be
examined by the Board, and if such deviation exceeds 1 @2 of 1%, the Board will
promptly consider what action, if any, will be initiated. In the event the Board
of Directors determines that a deviation exists which may result in material
dilution or other unfair results to investors or existing shareholders, the
Board will take such corrective action as it regards necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize gains
or losses, the shortening of average portfolio maturity, the withholding of
dividends or the establishment of net asset value per share by using available
market quotations.
PORTFOLIO TRANSACTIONS
The Manager is responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions and
the negotiation of brokerage commissions, if any. For purposes of this section
the term "Manager" includes the Subadviser. The Fund does not normally incur any
brokerage commission expense on such transactions. In the market for
B-15
<PAGE>
money market instruments, 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.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable under the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Fund
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Manager may consider research and investment
services provided by brokers or dealers 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
furnishing such services may be selected for the execution of transactions of
such other accounts, whose aggregate assets are far larger than those of the
Fund, and the services furnished by such brokers may be used by the Manager in
providing investment management for the Fund. While such services are useful and
important in supplementing its own research and facilities, the Manager believes
that the value of such services is not determinable and does not significantly
reduce expenses. The Fund does not reduce the fee it pays to the Manager by any
amount that may be attributed to the value of such services. The Fund will not
effect any securities transactions with or through Prudential Securities as
broker or dealer. The Fund paid no brokerage commissions for the fiscal years
ended December 31, 1996, 1995 and 1994.
TAXES
FEDERAL
The Fund has elected to qualify, and intends to remain qualified, as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the Internal Revenue Code). This relieves the Fund (but not
its shareholders) from paying federal income tax on income which is distributed
to shareholders and permits net capital gains of the Fund (i.e., the excess of
net long-term capital gains over net short-term capital losses) to be treated as
long-term capital gains of the shareholders, regardless of how long shareholders
have held their shares in the Fund.
Qualification of the Fund as a regulated investment company requires,
among other things, that (a) at least 90% of the Fund's annual gross income
(without reduction for losses from the sale or other disposition of securities)
be derived from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or options thereon or
foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such securities or currencies; (b) the Fund derives less than 30%
of its gross income from gains (without reduction for losses) from the sale or
other disposition of securities, options thereon, futures contracts, options
thereon, forward contracts and foreign currencies held for less than three
months (except for foreign currencies directly related to the Fund's business of
investing in securities); (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
its assets is represented by cash, U.S. Government securities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the market value of the assets of the Fund 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 U.S. Government
securities) and (d) the Fund distribute to its shareholders at least 90% of its
net investment income and net short-term gains (i.e., the excess of net
short-term capital gains over net long-term capital losses) in each year.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. Other gains or losses on the sale of securities will be
short-term capital gains or losses. In addition, debt securities acquired by the
Fund may be subject to original issue discount and market discount rules.
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements,
the Fund will be subject to a non-deductible 4% excise tax on the undistributed
amount. The Fund intends to distribute its income and capital gains in the
manner necessary to avoid imposition of the 4% excise tax. For purposes of this
excise tax, income on which the Fund pays income tax is treated as distributed.
B-16
<PAGE>
Distributions of net investment income and net short-term gains will be
taxable to the shareholder at ordinary income rates regardless of whether the
shareholder receives such distributions in additional shares or cash.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), if any, are taxable as long-term
capital gains regardless of how long the investor has held his or her shares.
However, if a shareholder holds shares in the Fund for not more than six months,
then any loss recognized on the sale of such shares will be treated as long-term
capital loss to the extent of any distribution on the shares which was treated
as long-term capital gain. Because none of the Fund's net income is anticipated
to arise from dividends on common or preferred stock, none of its distributions
to shareholders will be eligible for the dividends received deduction for
corporations under the Internal Revenue Code. Shareholders will be notified
annually by the Fund as to the federal tax status of distributions made by the
Fund.
Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any such loss, however, although
otherwise treated as a short-term capital loss, will be treated as long-term
capital loss to the extent of any net long-term capital gain distributions
received by the shareholder, if the shares have been held for six monthsor less.
A shareholder may realize a gain or loss on the redemption of his or her
shares depending upon the net asset value when redeemed. The Fund, however,
intends to maintain a constant net asset value.
In general, tax-exempt shareholders will not be required to pay taxes on
amounts distributed to them. If such shareholders incurred debt in order to
acquire or hold their shares in the Fund, amounts distributed to them may be
subject to the unrelated business income tax.
STATE AND LOCAL
Under the laws of certain states, distributions of net income may be
taxable to shareholders as income even though a portion of such distributions
may be derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from state income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.
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.
Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08818, serves as Transfer and Dividend Disbursing Agent and in those
capacities maintains certain books and records for the Fund. PMFS 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 expense, including but not limited to postage, stationery,
printing, allocable communications expenses and other costs. For the fiscal year
ended December 31, 1996, the Fund incurred fees of approximately $16,867,000 for
such services.
Deloitte & Touche LLP, Two World Financial Center, New York, New York
10281, served as the Fund's independent public accountants for the fiscal year
ended December 31, 1996 and, in that capacity, audited the Fund's annual
financial statements. Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York 10036, currently serves as the Fund's independent public
accountants and, in that capacity, will audit the Fund's financial
statements for the fiscal year ending December 31, 1997.
B-17
<PAGE>
PORTFOLIO OF INVESTMENTS AS OF
DECEMBER 31, 1996 PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
- --------------------------------------------------------------------------------
BANK NOTES--5.4%
American Express Centurion Bank+
$14,000 5.53%, 1/9/97 $ 13,998,922
10,000 5.60%, 1/13/97 10,000,014
28,000 5.58%, 1/14/97 27,999,021
26,000 5.58%, 1/15/97 25,998,518
20,000 5.60%, 1/21/97 19,999,181
Bank One Columbus+
460 5.58%, 1/2/97 459,756
FCC National Bank
46,000 5.77%, 4/15/97 45,992,463
First Bank National Association+
25,000 5.52%, 1/15/97 24,985,961
Keybank National Association+
1,700 5.58%, 1/2/97 1,699,401
Morgan Guaranty Trust Co.+
21,000 5.375%, 2/14/97 20,986,704
PNC Bank N.A.D
13,250 5.56%, 1/21/97 13,248,593
Seattle First National Bank
195,000 5.80%, 5/9/97 194,960,733
--------------
400,329,267
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - EURODOLLAR--6.6%
Abbey National Treasury Services
PLC
192,000 5.41%, 1/30/97 192,003,717
24,000 5.36%, 2/12/97 23,998,635
100,000 5.38%, 2/14/97 100,000,819
62,000 5.42%, 5/27/97 61,989,220
Banco Bilbao Vizcaya S.A.
13,000 5.41%, 3/5/97 13,000,224
Banque Nationale De Paris
25,000 5.40%, 1/22/97 25,000,049
Bayerische Hypotheken und
Weschel Bank
15,000 5.36%, 2/12/97 14,999,147
National Bank of Canada
8,000 5.42%, 3/10/97 8,000,286
National Westminster Bank PLC
35,000 5.48%, 4/8/97 35,003,195
Westdeutshe Landesbank
Girozentrale
4,000 5.58%, 4/2/97 4,001,248
Westpac Banking Corp.
$16,000 5.38%, 2/7/97 15,999,293
--------------
493,995,833
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEE--22.8%
Bank of Montreal
130,000 5.39%, 1/22/97 130,000,000
Bank of Nova Scotia
10,000 5.39%, 3/4/97 10,000,000
Banque Nationale De Paris
219,000 5.38%, 2/18/97 219,000,000
15,000 5.44%, 3/17/97 14,999,692
111,000 5.58%, 4/2/97 110,969,737
Barclays Bank PLC
25,000 5.37%, 2/3/97 25,000,000
57,000 5.37%, 2/5/97 57,000,000
Bayerische Hypotheken und
Wechsel Bank
9,000 5.375%, 2/18/97 9,000,050
54,000 5.39%, 2/28/97 54,000,000
39,000 5.39%, 3/3/97 38,999,895
Bayerische Landesbank Girozentrale
83,417 5.37%, 2/3/97 83,416,121
Canadian Imperial Bank of Commerce
90,000 5.41%, 1/31/97 90,000,000
Deutsche Bank
80,000 5.53%, 4/2/97 79,939,042
100,000 5.80%, 5/13/97 100,000,000
Landesbank Hessen-Thuringen
Girozentrale
110,000 5.70%, 4/29/97 109,951,055
National Westminster Bank PLC
28,158 5.50%, 1/6/97 28,157,343
164,000 5.39%, 2/14/97 163,999,840
National Bank of Canada
42,235 5.44%, 3/10/97 42,235,000
Societe Generale North America,
Inc.
335,000 5.37%, 2/20/97 335,000,000
1,000 5.78%, 4/11/97 999,824
--------------
1,702,667,599
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-18
<PAGE>
PORTFOLIO OF INVESTMENTS AS OF
DECEMBER 31, 1996 PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER--44.8%
Abbey National North America Corp.
$5,000 5.33%, 4/8/97 $ 4,928,193
Aetna Life & Casualty Co.
29,000 5.42%, 3/17/97 28,672,542
American Brands, Inc.
10,000 5.34%, 2/12/97 9,937,700
7,000 5.34%, 3/12/97 6,927,317
American Express Credit Corp.
19,000 5.31%, 3/3/97 18,829,048
American General Finance Corp.
25,000 5.40%, 1/13/97 24,955,000
Aristar, Inc.
13,000 5.37%, 1/17/97 12,968,973
5,885 5.40%, 1/28/97 5,861,166
Associates Corp. of North America
75,000 5.32%, 1/31/97 74,667,500
73,401 5.35%, 3/26/97 72,484,711
100,000 5.35%, 3/31/97 98,677,361
Bank of Montreal
250,000 5.42%, 1/8/97 249,736,431
Bank of Nova Scotia
200,000 5.32%, 3/4/97 198,167,556
Barton Capital Corp.
5,000 5.37%, 1/10/97 4,993,288
7,349 5.39%, 1/17/97 7,331,395
13,900 5.35%, 2/27/97 13,782,255
BHF Finance, Inc.
38,000 5.31%, 1/30/97 37,837,455
Bradford & Bingley Building
Society
50,000 5.37%, 2/12/97 49,690,833
29,000 5.31%, 2/21/97 28,781,848
Canadian Imperial Holding, Inc.
180,000 5.34%, 2/4/97 179,092,030
Caterpillar, Inc.
24,000 5.35%, 5/16/97 23,518,500
35,000 5.35%, 6/16/97 34,136,569
Cheltenham & Gloucester Building
Society
57,000 5.32%, 1/22/97 56,823,110
Ciba-Geigy Corp.
11,100 5.75%, 2/6/97 11,036,175
CIT Group Holdings, Inc.
$52,000 5.35%, 3/31/97 51,312,228
Coca-Cola Enterprises, Inc.
25,000 5.35%, 1/31/97 24,888,542
Corporate Receivables Corp.
8,000 5.35%, 2/13/97 7,948,878
27,000 5.40%, 2/20/97 26,797,500
Countrywide Home Loan, Inc.
20,000 5.35%, 1/21/97 19,940,556
CXC, Inc.
15,000 5.31%, 2/18/97 14,893,800
Duracell, Inc.
80,326 6.75%, 1/2/97 80,310,939
Enterprise Funding Corp.
10,000 5.48%, 1/10/97 9,986,300
18,234 5.47%, 1/16/97 18,192,442
9,264 5.35%, 1/28/97 9,226,828
15,722 5.34%, 2/18/97 15,610,059
5,000 5.34%, 2/24/97 4,959,950
6,219 5.34%, 3/6/97 6,159,961
15,448 5.34%, 3/18/97 15,273,850
Finova Capital Corp.
5,000 5.55%, 1/13/97 4,990,750
First Data Corp.
8,383 5.40%, 3/25/97 8,278,632
General Electric Capital Corp.
94,000 5.40%, 1/13/97 93,830,800
79,000 5.31%, 1/16/97 78,825,213
135,000 5.31%, 1/17/97 134,681,400
49,000 5.44%, 2/24/97 48,600,160
23,000 5.44%, 2/25/97 22,808,844
General Motors Acceptance Corp.
292,000 5.39%, 3/31/97 288,109,019
25,088 5.50%, 4/7/97 24,720,043
Golden Peanut Co.
4,000 5.33%, 2/18/97 3,971,573
GTE Corp.
15,110 5.50%, 1/14/97 15,079,990
37,000 5.50%, 1/21/97 36,886,944
Halifax Building Society
5,000 5.32%, 3/13/97 4,947,539
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-19
<PAGE>
PORTFOLIO OF INVESTMENTS AS OF
DECEMBER 31, 1996 PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER (CONT'D.)
Heller Financial Services, Inc.
$12,000 5.57%, 1/13/97 $ 11,977,720
17,000 5.57%, 1/14/97 16,965,806
36,000 5.75%, 1/16/97 35,913,750
21,000 5.80%, 1/21/97 20,932,333
ITT Hartford Group, Inc.
3,053 5.45%, 1/23/97 3,042,832
19,000 5.32%, 2/18/97 18,865,227
Johnson Controls, Inc.
62,000 5.39%, 1/24/97 61,786,496
Merrill Lynch & Co., Inc.
50,000 5.32%, 1/21/97 49,852,222
34,000 5.32%, 1/24/97 33,884,438
46,000 5.33%, 1/24/97 45,843,357
140,000 5.35%, 1/29/97 139,417,444
48,500 5.31%, 2/27/97 48,092,236
Mitsubishi International Corp.
24,000 5.45%, 1/15/97 23,949,133
10,000 5.35%, 3/4/97 9,907,861
Morgan Stanley Group, Inc.
114,000 5.32%, 1/29/97 113,528,293
Nationwide Building Society
50,000 5.31%, 2/19/97 49,638,625
6,000 5.38%, 2/26/97 5,949,833
NYNEX Corp.
36,000 5.71%, 1/13/97 35,931,480
19,000 5.41%, 2/13/97 18,877,223
PNC Funding Corp.
13,000 5.36%, 1/22/97 12,959,353
Preferred Receivables Funding
Corp.
20,000 5.45%, 1/14/97 19,960,639
33,950 5.32%, 2/3/97 33,784,437
7,350 5.32%, 2/6/97 7,310,898
31,000 5.37%, 3/20/97 30,639,315
Rank Xerox Capital (Europe) PLC
6,636 5.35%, 1/21/97 6,616,276
Sears Roebuck Acceptance Corp.
50,000 5.47%, 2/25/97 49,582,153
Triple A One Funding Corp.
44,000 5.67%, 1/27/97 43,819,820
12,276 5.41%, 2/13/97 12,196,673
8,982 5.40%, 2/14/97 8,922,719
Union Pacific Resources Group
$6,000 5.63%, 1/27/97 5,975,603
WCP Funding, Inc.
22,000 5.45%, 1/10/97 21,970,025
21,000 5.40%, 2/20/97 20,842,500
--------------
3,344,006,416
- --------------------------------------------------------------------------------
OTHER CORPORATE OBLIGATIONS--17.7%
Beneficial Corp.+
35,000 5.63%, 1/10/97 35,011,647
77,000 5.47%, 3/10/97 76,993,034
Capita Equipment Receivable Trust
192,304 5.60%, 10/15/97 192,304,304
Ford Motor Credit Corp.+
525 5.90%, 2/5/97 525,650
350 5.65%, 2/18/97 350,051
100 5.69%, 2/27/97 100,043
515 5.63%, 3/3/97 514,852
General Motors Acceptance Corp.+
2,140 5.71%, 1/2/97 2,139,848
650 7.40%, 1/14/97 650,355
29,000 5.52%, 2/3/97 28,999,676
15,000 5.52%, 2/21/97 14,999,865
16,000 5.65%, 3/3/97 16,008,619
350 5.74%, 3/18/97 350,080
Goldman, Sachs Group, L.P.+
370,700 5.63%, 2/19/97 370,700,000
Merrill Lynch & Co., Inc.+
53,000 5.53%, 1/2/97 52,988,425
Morgan Stanley Group, Inc.+
55,000 5.69%, 1/15/97 55,000,000
96,000 5.64%, 2/18/97 96,000,000
Nations Bank Auto Owner Trust
18,958 5.78%, 8/15/97 18,957,218
Nationsbank Corp.
6,000 7.50%, 2/15/97 6,012,322
Norwest Corp.
400 7.88%, 1/30/97 400,797
Sears Roebuck Acceptance Corp.
590 7.48%, 2/19/97 591,651
700 7.72%, 2/27/97 701,988
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-20
<PAGE>
PORTFOLIO OF INVESTMENTS AS OF
DECEMBER 31, 1996 PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
- --------------------------------------------------------------------------------
OTHER CORPORATE OBLIGATIONS (CONT'D.)
Short Term Repacked Asset Trust+
$100,000 6.01%, 1/15/97 $ 99,979,593
SMM Trust
252,000 5.61%, 1/8/97 251,999,548
--------------
1,322,279,566
- --------------------------------------------------------------------------------
TIME DEPOSIT - EURODOLLAR--0.6%
Canadian Imperial Holding, Inc.
42,088 6.75%, 1/2/97 42,088,000
- --------------------------------------------------------------------------------
U. S. GOVERNMENT AGENCY & INSTRUMENTALITY OBLIGATIONS -
NON-DISCOUNT--1.3%
Federal National Mortgage
Association
97,000 5.48%, 4/24/97 96,907,063
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS--99.2%
(amortized cost $7,402,273,744*) 7,402,273,744
Other assets in excess of
liabilities--0.8% 62,160,970
--------------
Net Assets--100% $7,464,434,714
==============
- ---------------
* The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
+ The maturity date presented for these instruments is the later of the next
date on which the security can be redeemed at par or the next date on which
the rate of interest is adjusted.
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of December 31, 1996 was as
follows:
Commercial Banks..................................... 50.5%
Security Brokers & Dealers........................... 13.5
Asset Backed Securities.............................. 8.9
Short-Term Business Credit........................... 7.9
Personal Credit Institutions......................... 5.4
Leasing.............................................. 5.0
Telephone & Communications........................... 1.4
Federal Credit Agencies.............................. 1.3
Miscellaneous Electric Equipment & Supplies.......... 1.1
Construction Machines & Equipments................... 0.8
Regulating Controls.................................. 0.8
Commodity Trading Firms.............................. 0.5
Accidental & Health Insurance........................ 0.4
Beverages............................................ 0.3
Fire & Marine Casualty Insurance..................... 0.3
Mortgage Banks....................................... 0.3
Tobacco.............................................. 0.2
Bank Holding Companies--Domestic..................... 0.1
Computer Rental & Leasing............................ 0.1
Crude Petroleum & Natural Gas........................ 0.1
Food Products........................................ 0.1
Pharmaceuticals...................................... 0.1
Photographic Equipment............................... 0.1
-----
99.2
Other assets in excess of liabilities................ 0.8
-----
100.0%
=====
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-21
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
ASSETS DECEMBER 31, 1996
--------------
Investments, at amortized cost which approximates
market value ............................................... $7,402,273,744
Cash ......................................................... 12,891,606
Receivable for Fund shares sold .............................. 239,852,499
Interest receivable .......................................... 45,598,971
Deferred expenses and other assets ........................... 198,258
--------------
Total assets .............................................. 7,700,815,078
--------------
LIABILITIES
Payable for Fund shares reacquired ........................... 229,455,085
Accrued expenses ............................................. 3,199,470
Management fee payable ....................................... 1,852,534
Dividends payable ............................................ 1,448,682
Distribution fee payable ..................................... 424,593
--------------
Total liabilities ......................................... 236,380,364
--------------
NET ASSETS ................................................... $7,464,434,714
==============
Net assets were comprised of:
Common Stock, at par ($.001 par value; 15 billion
shares authorized for issuance) ......................... $ 7,464,435
Paid-in capital in excess of par .......................... 7,456,970,279
--------------
Net assets, December 31, 1996 ................................ $7,464,434,714
==============
Class A:
Net asset value, offering price and redemption
price per share ($7,315,222,887 / 7,315,222,887
shares of common stock issued and outstanding) ............ $ 1.00
==============
Class Z:
Net asset value, offering price and redemption
price per share ($149,211,827 / 149,211,827 shares
of common stock issued and outstanding) ................... $ 1.00
==============
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-22
<PAGE>
PRUDENTIAL MONEYMART ASSETS, INC.
STATEMENT OF OPERATIONS
================================================================================
YEAR ENDED
NET INVESTMENT INCOME DECEMBER 31, 1996
-----------------
Income
Interest.............................. $ 411,058,692
-----------------
Expenses
Management fee........................ 22,378,655
Distribution fee--Class A............. 9,157,529
Transfer agent's fees and expenses.... 16,867,000
Reports to shareholders............... 3,314,000
Registration fees..................... 510,000
Custodian's fees and expenses......... 216,000
Insurance expenses.................... 135,000
Legal fees and expenses............... 83,000
Director's fees and expenses.......... 64,000
Audit fees and expenses............... 37,000
Miscellaneous......................... 55,921
-----------------
Total expenses..................... 52,818,105
-----------------
Net investment income.................... 358,240,587
NET REALIZED GAIN ON INVESTMENTS
Net realized gain on investment
transactions.......................... 390,335
-----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................ $ 358,630,922
=================
PRUDENTIAL MONEYMART ASSETS, INC.
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
INCREASE (DECREASE) YEAR ENDED DECEMBER 31,
IN NET ASSETS ------------------------------------
1996 1995
---------------- ----------------
Operations
Net investment income... $ 358,240,587 $ 371,855,796
Net realized gain on
investment
transactions......... 390,335 516,705
---------------- ----------------
Net increase in net
assets resulting from
operations........... 358,630,922 372,372,501
---------------- ----------------
Dividends and distributions
to shareholders (Note 1)
Class A.............. (353,704,755) (372,372,501)
Class Z.............. (4,926,167) --
---------------- ----------------
(358,630,922) (372,372,501)
---------------- ----------------
Fund share transactions
(Notes 4 & 5)
Proceeds from shares
sold................. 31,398,251,715 29,233,009,828
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions........ 344,952,119 354,506,489
Cost of shares
reacquired........... (31,500,427,083) (28,910,738,397)
---------------- ----------------
Net increase in net
assets from Fund
share transactions... 242,776,751 676,777,920
---------------- ----------------
Total increase............. 242,776,751 676,777,920
NET ASSETS
Beginning of year.......... 7,221,657,963 6,544,880,043
---------------- ----------------
End of year................ $ 7,464,434,714 $ 7,221,657,963
================ ================
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
Prudential MoneyMart Assets, Inc. (the "Fund"), is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund invests primarily in a portfolio of money market instruments
maturing in thirteen months or less whose ratings are within the two highest
rating categories by a nationally recognized statistical rating organization or,
if not rated, are of comparable quality. The ability of the issuers of the
securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant generally accepted accounting policies
followed by the Fund in the preparation of its financial statements.
Securities Valuations: Portfolio securities are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
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.
Securities Transactions and Net Investment Income: Security transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Interest income is recorded on the
accrual basis. The cost of portfolio securities for federal income tax purposes
is substantially the same as for financial reporting purposes. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
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.
Dividends and Distributions: All of the Fund's net investment income and net
realized gains or losses, if any, are declared as dividends daily to the
shareholders of record at the time of such declaration. Net investment income of
the Fund consists of interest accrued and discount earned less estimated
expenses applicable to the dividend period. Payment of dividends is made
monthly.
- --------------------------------------------------------------------------------
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Mutual Fund Management LLC
("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.
The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .50 of 1% of the Fund's average monthly net assets up to $50 million and
.30 of 1% of the Fund's average monthly net assets in excess of $50 million.
The Fund has a distribution agreement with Prudential Securities Incorporated
("PSI"), which acts as the distributor of the Class A and Class Z shares of
the Fund. The Fund reimburses PSI for distributing and servicing the Fund's
Class A shares pursuant to the plan of distribution at an annual rate of .125 of
1% of the average daily net assets of the Class A shares. The Class A
distribution fee is accrued daily and payable monthly. No distribution or
service fees are paid to PSI as distributor of the Class Z shares of the Fund.
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 LLC ("PMFS"), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the year ended December 31,
1996, the Fund incurred fees of approximately $15,392,300 for the services of
PMFS. As of December 31, 1996, approximately $1,284,400 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to non-affiliates.
- --------------------------------------------------------------------------------
B-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
- --------------------------------------------------------------------------------
NOTE 4. CAPITAL
The Fund currently offers Class A and Class Z shares. Effective March 1, 1996,
the Fund commenced offering Class Z shares. Class Z shares are not subject to
any sales charge and are offered exclusively for sale to a limited group of
investors.
The Fund has authorized 15 billion shares of common stock, $.001 par value per
share, divided into 13 billion authorized Class A shares and 2 billion
authorized Class Z shares.
Transactions in shares of common stock (at $1 per share) were as follows:
SHARES
AND
DOLLAR
CLASS A AMOUNT
- ------- ---------------
Year ended December 31, 1996:
Shares sold................................. 31,034,483,075
Shares issued in reinvestment of dividends
and distributions......................... 340,215,223
Shares reacquired........................... (31,281,133,374)
---------------
Net increase in shares outstanding.......... 93,564,924
===============
Year ended December 31, 1995:
Shares sold................................. 29,233,009,828
Shares issued in reinvestment of dividends
and distributions......................... 354,506,489
Shares reacquired........................... (28,910,738,397)
---------------
Net increase in shares outstanding.......... 676,777,920
===============
Class Z
- -------
March 1, 1996* through December 31, 1996:
Shares sold................................. 301,984,043
Shares issued due to merger (Note 5)........ 61,784,597
Shares issued in reinvestment of dividends
and distributions......................... 4,736,896
Shares reacquired........................... (219,293,709)
---------------
Net increase in shares outstanding.......... 149,211,827
===============
- ---------------
* Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
NOTE 5. ACQUISITION OF THE PRUDENTIAL INSTITUTIONAL FUND--MONEY MARKET FUND
On September 20, 1996, the Fund acquired all of the net assets of The Prudential
Institutional Fund--Money Market Fund ("Money Market Fund") in exchange for
Class Z shares of the Fund pursuant to a plan of reorganization approved by
Money Market Fund shareholders on September 6, 1996. The acquisition was
accomplished by a taxable exchange of 61,784,597 Class Z shares of the Fund
(valued at $61,784,597) for 61,784,597 shares of Money Market Fund outstanding
on September 20, 1996. This transaction did not create any adverse tax
consequences to the investors. The aggregate net assets of the Fund and Money
Market Fund immediately before the acquisition were $7,271,008,382 and
$61,784,597, respectively, thereby resulting in combined net assets of
$7,332,787,979 immediately after the reorganization.
- --------------------------------------------------------------------------------
B-25
<PAGE>
FINANCIAL HIGHLIGHTS PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net realized gains.............. .048 .054 .037 .027 .035
Dividends and distributions to shareholders............... (.048) (.054) (.037) (.027) (.035)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
TOTAL RETURN(a)........................................... 4.97% 5.51% 3.72% 2.70% 3.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................... $7,315,223 $7,221,658 $6,544,880 $7,318,633 $6,703,281
Average net assets (000).................................. $7,326,023 $6,914,520 $7,071,381 $7,742,989 $7,116,739
Ratios to average net assets:
Expenses, including distribution fee................... .71% .69% .71% .71% .66%
Expenses, excluding distribution fee................... .59% .56% .58% .58% .54%
Net investment income.................................. 4.83% 5.38% 3.65% 2.63% 3.43%
</TABLE>
Class Z
-------
March 1,
Through
December 31,
1996
------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 1.000
Net investment income and net realized gains................. .040
Dividends and distributions to shareholders.................. (.040)
------------
Net asset value, end of period............................... $ 1.000
============
TOTAL RETURN(a).............................................. 4.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $149,212
Average net assets (000)..................................... $121,135
Ratios to average net assets:
Expenses, including distribution fee...................... .59%(c)
Expenses, excluding distribution fee...................... .59%(c)
Net investment income..................................... 4.86%(c)
- ---------------
(a) 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 less than a full year are
not annualized.
(b) Commencement of offering of Class Z shares.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-26
<PAGE>
INDEPENDENT AUDITORS' REPORT PRUDENTIAL MONEYMART ASSETS, INC.
================================================================================
The Shareholders and Board of Directors
Prudential MoneyMart Assets, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Prudential MoneyMart Assets, Inc., as of
December 31, 1996, the related statements of operations for the year then ended
and of changes in 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. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential MoneyMart
Assets, Inc. as of December 31, 1996, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 1997
- --------------------------------------------------------------------------------
B-27
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
BOND RATINGS
Moody's Investors Service--Bonds which are rated Aaa are judged to be of
the best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than Aaa securities. Bonds
which are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Moody's
applies numerical modifiers "1", "2" and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier "1" indicates that the company ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the company ranks in the lower end of its generic
rating category.
Standard & Poor's Ratings Group--Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
Duff and Phelps Credit Rating Co.--The following summarizes the ratings
used by Duff & Phelps for long-term debt:
"AAA": Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
"AA+", "AA" or "AA-": High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A+", "A" or "A-": Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
COMMERCIAL PAPER RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Issuers rated "Prime-1" (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Issuers
rated "Prime-2" (or supporting institutions) have a strong ability for repayment
of senior short-term debt obligations. Issuers rated "Prime-3" (or supporting
institutions) have an acceptable ability for repayment of senior short-term
obligations.
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt considered short-term in the relevant market. The
designation A-1 indicates that the degree of safety regarding timely payment is
strong. A "+" designation is applied to those issues rated A-1 which possess
extremely strong safety characteristics. Capacity for timely payment on issues
with the designation A-2 is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1. Issues carrying the designation A-3
have adequate capacity for timely payment. They are however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
The following summarizes the ratings used by Duff & Phelps for short-term
debt, which apply to all obligations with maturities of under one year,
including commercial paper.
D-1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
A-1
<PAGE>
D-1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D-3: Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payments is expected.
A-2
<PAGE>
APPENDIX B
INFORMATION RELATING TO THE PRUDENTIAL
Set forth below is information relating to The Prudential Insurance
Company of America (Prudential) and its subsidiaries as well as information
relating to the Prudential Mutual Funds. See "How the Fund is Managed Manager"
in the Prospectus. The data will be used in sales materials relating to the
Prudential Mutual Funds. Unless otherwise indicated, the information is as of
December 31, 1995 and is subject to change thereafter. All information relies on
data provided by The Prudential Investment Corporation (PlC) or from other
sources believed by the Manager to be reliable. Such information has not been
verified by the Fund.
INFORMATION ABOUT PRUDENTIAL
The Manager and PlC are subsidiaries of Prudential, which is one of the
largest diversfied financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December
31,1995. Its primary business is to offer a full range of products and services
in three areas: insurance, investments and home ownership for individuals and
families; health care management and other benefit programs for employees of
companies and members of groups; and asset management for institutional clients
and their associates. Prudential (together with its subsidiaries) employs more
than 92,000 persons worldwide, and maintains a sales force of approximately
13,000 agents and 5,600 financial advisors. Prudential is a major issuer of
annuities, including variable annuities. Prudential seeks to develop innovative
products and services to meet consumer needs in each of its business areas.
Prudential uses the Rock of Gibraltar as its symbol. The Prudential rock is a
recognized brand name throughout the world.
INSURANCE. Prudential has been engaged in the insurance business since
1875. It insures or provides financial services to more than 50 million people
worldwide one of every five people in the United States. Long one of the largest
issuers of individual life insurance, the Prudential has 19 million life
insurance policies in force today with a face value of $1 trillion. Prudential
has the largest capital base ($11.4 billion) of any life insurance company in
the United States. The Prudential provides auto insurance for more than 1.7
million cars and insures more than 1.4 million homes.
MONEY MANAGEMENT. The Prudential is one of the largest pension fund
managers in the country, providing pension services to 1 in 3 Fortune 500 firms.
It manages $36 billion of individual retirement plan assets, such as 401(k)
plans. In July 1996, Institutional Investor ranked Prudential the fifth largest
institutional money manager of the 300 largest money management organizations in
the United States as of December 31,1995. As of December 31,1995, Prudential had
more than $314 billion in assets under management. Prudential Investments, a
business group of Prudential (of which Prudential Mutual Funds is a key part),
manages over $190 billion in assets of institutions and individuals.
REAL ESTATE. The Prudential Real Estate Affiliates, the fourth largest
real estate brokerage network in the United States, has more than 34,000 brokers
and agents and more than 1,100 offices in the United States.(2)
HEALTHCARE. Over two decades ago, the Prudential introduced the first
federally funded, for profit HMO in the country. Today, almost 5 million
Americans receive healthcare from a Prudential managed care membership.
FINANCIAL SERVICES. The Prudential Bank, a wholly owned subsidiary of the
Prudential, has nearly $3 billion in assets and serves nearly 1.5 million
customers across 50 states.
INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS
Prudential Mutual Fund Management is one of the seventeen largest mutual
fund companies in the country, with over 2.5 million shareholders invested in
more than 50 mutual fund portfolios and variable annuities with more than 3.7
million shareholder accounts.
The Prudential Mutual Funds have over 30 portfolio managers who manage
over $55 billion in mutual fund and variable annuity assets. Some of
Prudential's portfolio managers have over 20 years of experience managing
investment portfolios.
- ----------
(1) Prudential Investments, a business group of PIC, serves as the Subadviser
to substantially all of the Prudential Mutual Funds. Wellington Management
Company serves as the subadviser to Global Utility Fund, Inc., Nicholas
Applegate Capital Management as the subadviser to Nicholas Applegate Fund,
Inc., Jennison Associates Capital Corp. as the subadviser to Prudential
Jennison Series Fund, Inc. and Prudential Active Balanced Fund, a
portfolio of Prudential Dryden Fund and Mercator Asset Management L.P. as
the subadviser to International Stock Series a portfolio of Prudential
World Fund, Inc. and BlackRock FinancIal Management Inc. as subadvlser to
The BlackRock Government Income Trust. There are multiple subadvisers for
The Target Portfolio Trust.
(2) As of December 31, 1994.
B-1
<PAGE>
From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, indivldual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
The Wall Street Journal, The New York Times, Barron's and USA Today.
EQUITY FUNDS. Forbes magazine listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28,1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. Forbes considers, among other criteria, the total return of a mutual fund
in both bull and bear markets as well as a fund's risk profile. Prudential
Equity Fund is managed with a "value" investment style by PlC. In 1995,
Prudential Securities introduced Prudential Jennison Growth Fund, a growth style
equity fund managed by Jennison Associates Capital Corp., a premier
institutional equity manager and a subsidiary of Prudential.
HIGH YIELD FUNDS. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor the 167
issues held in the Prudential High Yield Fund (currently the largest fund of its
kind in the country) along with 100 or so other high yield bonds, which may be
considered for purchase.(3) Non investment grade bonds, also known as junk bonds
or high yield bonds, are subject to a greater risk of loss of principal and
interest including default risk than higher rated bonds. Prudential high yield
portfolio managers and analysts meet face to face with almost every bond issuer
in the High Yield Fund's portfolio annually, and have additional telephone
contact throughout the year.
Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.
Prudential's portfolio managers and analysts receive research services
from almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers from Pulp and Paper Forecaster to Women's Wear
Daily to keep them informed of the industries they follow.
Prudential Mutual Funds' traders scan over 100 computer monitors to
collect detailed information on which to trade. From natural gas prices in the
Rocky Mountains to the results of local municipal elections, a Prudential
portfolio manager or trader is able to monitor it if it's important to a
Prudential Mutual Fund.
Prudential Mutual Funds trade approximately $31 billion in U.S. and
foreign government securities a year. PlC seeks information from government
policy makers. In 1995, Prudential's portfolio managers met with several senior
U.S. and foreign government officials, on issues ranging from economic
conditions in foreign countries to the viability of index linked securities in
the United States.
Prudential Mutual Funds' portfolio managers and analysts met with over
1,200 companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.
Prudential Mutual Funds' global equity managers conducted many of their
visits overseas, often holding private meetings with a company in a foreign
language (our global equity managers speak 7 different languages, including
Mandarin Chinese).
TRADING DATA.(4) On an average day, Prudential Mutual Funds' U.S. and
foreign equity trading desks traded $77 million in securities representing over
3.8 million shares with nearly 200 different firms. Prudential Mutual Funds'
bond trading desks traded $157 million in government and corporate bonds on an
average day. That represents more in daily trading than most bond funds tracked
by Lipper even have in assets.(5) Prudential Mutual Funds' money market desk
traded $3.2 billion in money market securities on an average day, or over $800
billion a year. They made a trade every 3 minutes of every trading day. In 1994,
the Prudential Mutual Funds effected more than 40,000 trades in money market
securities and held on average $20 billion of money market securities.(6)
- ----------
(3) As of December 31,1995. The number of bonds and the size of the Fund are
subject to change.
(4) Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PlC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non U.S. accounts
managed by Prudential Mutual Fund InvestmentManagement, a division of PlC,
for the year ended December 31, 1995.
(5) Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, IntermedIate
U.S. Government, Short Investment Grade Debt, Intermediate Investment
Grade Debt, General U.S. Treasury, General U.S. Government and Mortgage
funds.
(6) As of December 31, 1994.
B-2
<PAGE>
Based on complex wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services LLC, the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll free number. On an
annual basis, that represents approximately 1.8 million telephone calls
answered.
INFORMATION ABOUT PRUDENTIAL SECURITIES
Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 5,600 financial advisors. It offers to its
clIents a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1995, assets held by Prudential Securities for its
clients approximated $168 billion. During 1994, over 28,000 new customer
accounts were opened each month at PSI.(7)
Prudential Securities has a two year Financial Advisor training program
plus advanced education programs, including Prudential Securities "university,"
which provides advanced education in a wide array of investment areas.
Prudential Securities is the only Wall Street firm to have its own in house
Certified Financial Planner (CFP) program. In the December 1995 issue of
Registered Rep, an industry publication, Prudential Securities' Financial
Advisor training programs received a grade of A- (compared to an industry
average of B+).
In 1995, Prudential Securities' equity research team ranked 8th in
Institutional Investor magazine's 1995 "All Amerlca Research Team" survey. Five
Prudential Securities' analysts were ranked as first team finishers.(8)
In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprletary tools for use by financial advisors, Including the
Financial Architect, a state of the art asset allocation software program which
helps Financial Advisors to evaluate a client's objectives and overall financial
plan, and a comprehensive mutual fund information and analysis system that
compares different mutual funds.
For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
adviser or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.
- ----------
(7) As of December 31, 1994.
(8) On an annual basis, Institutional Investor magazine surveys more than 700
institutlonal money managers, chief investment officers and research
directors, asking them to evaluate analysts In 76 industry sectors. Scores
are produced by taking the number of votes awarded to an individual
analyst and weighing them based on the size of the voting institution. In
total, the magazine sends its survey to approximately 2,000 institutions
and a group of European and Asian institutions.
B-3
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
(1) Financial Statements included in the Prospectus constituting
Part A of this Post-Effective Amendment to the Registration
Statement:
Financial Highlights.
(2) Financial Statements included in the Statement of Additional
Information constituting Part B of this Post-Effective
Amendment to the Registration Statement:
Portfolio of Investments as of December 31, 1996.
Statement of Assets and Liabilities as of December 31,
1996.
Statement of Operations for the Year Ended December 31,
1996.
Statement of Changes in Net Assets for the Years Ended
December 31, 1996 and 1995.
Notes to Financial Statements
Financial Highlights
Independent Auditors' Report
(b) EXHIBITS:
1. Articles of Restatement of Articles of Incorporation.*
2. By-Laws.*
4. (a) Form of stock certificate.*
(b) Instruments defining rights of shareholders incorporated
by reference to Exhibits 1 and 2.
5. (a) Management Agreement between the Registrant and
Prudential Mutual Fund Management.*
(b) Subadvisory Agreement between Prudential Mutual Fund
Management and The Prudential Investment Corporation.*
6. Distribution Agreement.*
8. Custodian Contract with State Street Bank and Trust Company.*
9. Transfer Agency and Service Agreement.*
10. Opinion of Gardner, Carton & Douglas.*
11. Consent of Independent Accountants.*
15. Distribution Agreement.*
17. Financial Data Schedules filed for electronic purposes as
Exhibit 27.*
18. Rule 18f-3 Plan, incorporated by reference to Exhibit No. 18
to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed via EDGAR on October 31, 1995
(File No. 2-55301).
- ----------
*Filed herewith.
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<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of February 14, 1997, there were 1,092,046 Class A and 3,855 Class Z
record holders of common stock, $.001 par value per share.
ITEM 27. INDEMNIFICATION.
As permitted by Sections 17(h) and 17(i) of the Investment Company Act of
1940 ("Investment Company Act") and pursuant to Article X of the Registrant's
By-Laws (Exhibit 2 to the Registration Statement) and Section 2-418 of the
Maryland General Corporation Law, officers, directors, employees and agents of
the Registrant may be indemnified against certain liabilities in connection with
the Registrant except liabilities arising from misfeasance, bad faith, gross
negligence or reckless disregard in the conduct of their respective duties. As
permitted by Section 17(i) of the Investment Company Act, pursuant to Section 9
of the Distribution Agreements (Exhibit 6 to the Registration Statement),
Prudential Securities Incorporated, as Distributor of the Fund, may be
indemnified against certain liabilities it may incur. Such Article X of the
By-Laws and Section 9 of the Distribution Agreement are hereby incorporated by
reference in their entirety.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant and the principal underwriter pursuant to
the foregoing provisions or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Securities 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
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person or the principal underwriter 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 Securities Act and will be governed by
the final adjudication of such issue.
Section 8 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) limits the liability of Prudential Mutual Fund Management LLC ("PMF")
to losses resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act) or losses resulting from willful misfeasance, bad faith
or gross negligence in the performance of its duties or from reckless disregard
by PMF of its obligations and duties under the Management Agreement. Section 4
of the Subadvisory Agreement (Exhibit 5(b) to the Registration Statement) limits
the liability of The Prudential Investment Corporation ("PIC") to losses
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or from reckless disregard by PIC of its obligations
and duties under the Subadvisory Agreement.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws in a manner consistent with Release No. 11330 of the
Commission under the Investment Company Act so long as the interpretation of
Sections 17(h) and 17(i) of such Act remain in effect and are consistently
applied.
The Registrant maintains an insurance policy insuring its officers and
directors against certain 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 conflict of interest,
intentional non-compliance with statutes or regulations or dishonesty,
fraudulent or criminal acts or omissions. The insurance policy also insures the
Registrant against the costs of indemnification payments to officers and
directors under certain circumstances.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Prudential Mutual Fund Management LLC.
See "Manager" in the Statement of Additional Information.
The business and other connections of PMF directors and officers are
listed in Schedules A and D of Form ADV of PMF as currently on file with the
Commission, the text of which is hereby incorporated by reference (File No.
801-31104).
The business and other connections of the directors and officers of PMF
are set forth below. Except as otherwise indicated, the address of each person
is Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102.
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<PAGE>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
Brian Storms Officer-in Charge, Officer-in-Charge,
President, Chief Executive President, Chief
Officer and Chief Operating Executive Officer and
Officer Chief Operating Officer;
PMF
Robert F. Gunia Executive Vice President Comptroller, Prudential
and Treasurer Investments; Senior Vice
President of Prudential
Securities Incorporated
(Prudential Securities);
Executive Vice President
and Treasurer of PMF
Thomas A. Early Executive Vice President, Executive Vice President,
Secretary and General Counsel Secretary and General
Counsel of PMF; Vice
President and General
Counsel, Prudential
Retirement Services
Susan C. Cote Executive Vice President Executive Vice President
and Chief Financial and Chief Financial
Officer Officer of PMF
Neil A. McGuinness Executive Vice President Executive Vice President,
PMF
Robert J. Sullivan Executive Vice President Executive Vice President,
PMF
(b) The Prudential Investment Corporation (PIC).
See "How the Fund is Managed--Manager" 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 PIC's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07102.
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
E. Michael Caulfield Chairman of the Board, Chief Executive Officer of
President and Chief Prudential Investments
Executive Officer and
Director
Jonathan M. Greene Senior Vice President and President--Investment
Director Management of Prudential
Investments
John R. Strangfeld Vice President and Director President of Private Asset
Management Group of
Prudential
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Prudential Securities Incorporated.
Prudential Securities Incorporated is distributor for Command Government
Fund, Command Money Fund, Command Tax-Free Fund, Prudential Institutional
Liquidity Portfolio, Inc., Prudential MoneyMart Assets, Inc., Prudential Special
Money Market Fund, Inc., Prudential Tax-Free Money Fund, Inc., Prudential
Allocation Fund, Prudential California Municipal Fund, Prudential Distressed
Securities Fund, Inc., Prudential Diversified Bond Fund, Inc., Prudential Dryden
Fund, Prudential Emerging Growth Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential Europe Growth Fund, Inc., Prudential
Global Genesis Fund, Inc., Prudential Global Limited Maturity Fund, Inc.,
Prudential Government Income Fund, Inc., Prudential Government Securities Trust,
Prudential High Yield Fund, Inc., Prudential Intermediate Global Income Fund,
Inc., Prudential Jennison Series Fund, Inc., Prudential Mortgage Income Fund,
Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential National Municipals Fund, Inc.,
Prudential Natural Resources Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Small Companies Fund, Inc., Prudential Structured Maturity Fund,
Inc., Prudential Utility Fund, Inc., Prudential World Fund, Inc., Global Utility
Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity
Fund), The BlackRock Government Income Trust, The Global Government Plus Fund,
Inc. and The Global Total Return Fund, Inc.
C-3
<PAGE>
Prudential Securities is also a depositor for the following unit
investment trusts:
Corporate Investment Trust Fund
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(b) Information concerning officers and directors of Prudential Securities
Incorporated is set forth below.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME(1) UNDERWRITER REGISTRANT
- ----------------------- ------------------------------------- -------------
Robert Golden ......... Executive Vice President and Director None
One New York Plaza
New York, NY 10292
Alan D. Hogan ......... Executive Vice President, Chief None
Administrative Officer and Director
George A. Murray ...... Executive Vice President and Director None
Leland B. Paton ....... Executive Vice President and Director None
One New York Plaza
New York, NY 10292
Martin Pfinsgraff ..... Executive Vice President, Chief None
Financial Officer and Director
Vincent T. Pica, II ... Executive Vice President and Director None
One New York Plaza
New York, NY 10292
Hardwick Simmons ...... Chief Executive Officer, President None
and Director
Lee B. Spencer, Jr. ... Executive Vice President, Secretary, None
General Counsel and Director
- ----------
(1) The address of each person named is One Seaport Plaza, New York, NY 10292
unless otherwise indicated.
(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 07102, the Registrant, Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102, and Prudential
Mutual Fund Services LLC, Raritan Plaza One, Edison, New Jersey 08837. Documents
required by Rules 31a-1(b)(5), (6), (7), (9), (10) and (11) and 31a-1(f) will be
kept at Two 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 LLC.
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
Not applicable.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and 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 Newark, and State of New Jersey, on the 25th day of February, 1997.
PRUDENTIAL MONEYMART ASSETS, INC.
/s/ Richard A. Redeker
------------------------------------
(RICHARD A. REDEKER, 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Edward D. Beach Director February 25, 1997
---------------------------
EDWARD D. BEACH
/s/ Stephen C. Eyre Director February 25, 1997
---------------------------
STEPHEN C. EYRE
/s/ Delayne D. Gold Director February 25, 1997
---------------------------
DELAYNE D. GOLD
/s/ Robert F. Gunia Director February 25, 1997
---------------------------
ROBERT F. GUNIA
/s/ Don G. Hoff Director February 25, 1997
---------------------------
DON G. HOFF
/s/ Robert E. LaBlanc Director February 25, 1997
---------------------------
ROBERT E. LABLANC
/s/ Mendel A. Melzer Director February 25, 1997
---------------------------
MENDEL A. MELZER
/s/ Richard A. Redeker Director February 25, 1997
---------------------------
RICHARD A. REDEKER
/s/ Robin B. Smith Director February 25, 1997
---------------------------
ROBIN B. SMITH
/s/ Stephen Stoneburn Director February 25, 1997
---------------------------
STEPHEN STONEBURN
/s/ Nancy H. Teeters Director February 25, 1997
---------------------------
NANCY H. TEETERS
/s/ Grace C. Torres Treasurer, February 25, 1997
--------------------------- Principal
GRACE C. TORRES Financial and
Accounting Officer
<PAGE>
EXHIBIT INDEX
1. Articles of Restatement of Articles of Incorporation.*
2. By-Laws.*
4. (a) Form of stock certificate.*
(b) Instruments defining rights of shareholders incorporated by
reference to Exhibits 1 and 2.
5. (a) Management Agreement between the Registrant and Prudential Mutual Fund
Management.*
(b) Subadvisory Agreement between Prudential Mutual Fund Management and
The Prudential Investment Corporation.*
6. Distribution Agreement.*
8. Custodian Contract with State Street Bank and Trust Company.*
9. Transfer Agency and Service Agreement.*
10. Opinion of Gardner, Carton & Douglas.*
11. Consent of Independent Accountants.*
15. Distribution Agreement.*
17. Financial Data Schedules filed for electronic purposes as Exhibit 27.*
18. Rule 18f-3 Plan, incorporated by reference to Exhibit No. 18 to
Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A
filed via EDGAR on October 31, 1995 (File No. 2-55301).
- ----------
*Filed herewith.
ARTICLES OF RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
PRUDENTIAL MONEYMART ASSETS, INC.
PRUDENTIAL MONEYMART ASSETS, INC. (formerly Prudential-Bache MoneyMart
Assets Inc.), a Maryland corporation having its principal offices in the city of
Baltimore, Maryland and Newark, New Jersey (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby restated in its entirety to read
as follows:
FIRST: The name of the Corporation is Prudential MoneyMart Assets, Inc.
SECOND: The Corporation is formed for the following purposes:
1. To conduct, operate and carry on the business of an investment
company.
2. To purchase or otherwise acquire, invest and reinvest, or
otherwise place the funds of the Corporation, in, own, hold, sell,
or otherwise dispose of securities or any interests therein.
3. To exercise any and all rights, powers or privileges with
reference to such business or incident to ownership or interest in
respect of such funds or securities owned by it or in which it has
any interest.
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<PAGE>
4. To do any and all acts and things and to exercise any
further powers as may seem necessary, appropriate or desirable for
the accomplishment of the foregoing objects or purposes.
The foregoing provisions of this Article SECOND shall be construed both as
purposes and powers and each as an independent purpose and power. The foregoing
enumeration of specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the Corporation, and the
purposes and powers herein specified shall be in no wise limited or restricted
by reference to, or inference from, the terms of any provision of this or any
other Article of these Articles of Incorporation; provided, that the Corporation
shall not conduct any business, promote any purpose, or exercise any power or
privilege within or without the State of Maryland which, under the laws thereof,
the Corporation may not lawfully conduct, promote, or exercise.
THIRD: The post-office address of the principal office of the Corporation
within the State of Maryland is c/o CT Corporation System, 32 South Street,
Baltimore, Maryland 21202.
The name and the post-office address of the resident agent of the
Corporation within the State of Maryland are the CT Corporation System, 32 South
Street, Baltimore, Maryland 21202. The said resident agent is incorporated under
the laws of the State of Maryland.
FOURTH:
A. The total number of shares of stock which the Corporation has authority
to issue is 15,000,000,000 shares of capital stock, of the par value of
one-hundredth of one cent ($.001) per
-2-
<PAGE>
share, having an aggregate par value of $15,000,000, to be divided into two
classes, consisting of 13,000,000,000 Class A shares and 2,000,000,000 Class Z
shares. The Board of Directors of the Corporation is authorized, from time to
time, to classify or reclassify, as the case may be, any unissued shares of
stock of the Corporation.
The Class Z Common Stock shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation, and other rights
with the Class A Common Stock of the Corporation; provided, however, that
notwithstanding anything in the Charter of the Corporation to the contrary:
(1) Expenses related solely to a particular Class of Common Stock
(including, without limitation, distribution expenses under a Rule 12b-1
plan and administrative expenses under an administration or service
agreement, plan or other arrangement, however, designated) shall be borne
by that Class, shall be appropriately reflected (in the manner determined
by the Board of Directors) in the net asset value, dividends, distribution
and liquidation rights of the shares of that Class, and shall be described
in the prospectus or statement of additional information for such Class as
and to the extent required by the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder. As of the date hereof,
the Class Z shares shall not be subject to any Rule 12b-1 distribution
fees.
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<PAGE>
(2) As to any matter with respect to which a separate vote of any
Class is required by the Investment Company Act (including, without
limitation, approval of any Rule 12b-1 plan, agreement or other
arrangement referred to in subsection (1) above), such requirement as to a
separate vote by that Class shall apply in lieu of any voting requirements
established by the Maryland General Corporation Law. As to any matter
which does not affect the interest of the Class Z Common Stock, only the
holders of shares of the affected Class or Classes shall be entitled to
vote.
B. Each share of the capital stock of the Corporation shall be subject to
the following provisions:
1. Each holder of the capital stock of the Corporation, upon
written request in proper form to the Corporation accompanied, in
the case of shares for which certificates have been issued, 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 the shares of capital stock
standing in the name of such holder on the books of the Corporation,
at a redemption price equal to the net asset value of such shares
determined as hereinafter set forth and as fixed by resolution of
the Board of Directors of the Corporation from time to time.
-4-
<PAGE>
2. In addition, (a) the Board of Directors is hereby empowered to
authorize the purchase by the Corporation, either directly or
through an agent, of shares of the capital stock of the Corporation
(upon such terms and conditions and for such consideration as the
Board of Directors shall deem advisable) out of funds legally
available therefor at prices not in excess of their net asset value,
determined by the net asset value used in the calculation of the
retail offering price of shares of the Corporation, at the time such
shares are purchased, and to take all other steps deemed necessary
or advisable in connection therewith, if and as fixed by the
resolution of the Board of Directors of the Corporation from time to
time and (b) the Board of Directors is hereby empowered to authorize
the Corporation to require the redemption of all or any part of the
outstanding shares upon such terms and conditions as the Board of
Directors shall deem advisable, out of funds legally available
therefor, at net asset value determined as hereinafter set forth and
to take all other steps deemed necessary or advisable in connection
therewith, if and as fixed by the resolution of the Board of
Directors of the Corporation from time to time.
3. Notwithstanding paragraph B(1) of this Article FOURTH, the
Board of Directors of the Corporation may suspend the right of the
holders of the capital stock
-5-
<PAGE>
of the Corporation to require the Corporation to redeem shares of
such capital stock or may suspend any voluntary purchases of such
capital stock:
(a)for any period (i) during which the New York Stock Exchange
is closed other than the customary week-end and holiday closings, or
(ii) during which trading on the New York Stock Exchange is
restricted;
(b) 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 (i) disposal by the Corporation
of securities owned by it is not reasonably practicable, or (ii) it
is not reasonably practicable for the Corporation fairly to
determine the value of its net assets; or
(c) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the Corporation.
4. 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 shareowner, in the sense used in the General
Corporation Law, at the redemption price for any such shares,
determined in the manner set out in these Articles of Incorporation
or in any
-6-
<PAGE>
amendment thereto. In the absence of any specification as to the
purposes for which shares of the capital stock of the Corporation
are redeemed or repurchased by it, 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 and the
number of the authorized shares of the capital stock of the
Corporation shall not be reduced by the number of any shares
redeemed or repurchased by it.
5. The net asset value of each share of capital stock of the
Corporation with respect to which redemption is requested by a
shareowner pursuant to the provisions of paragraph B.1 of Article
FOURTH of these Articles of Incorporation or is requested by the
Corporation pursuant to B.2(b) of said Article FOURTH shall be
determined as of the close of business on the first full business
day on which the New York Stock Exchange is open next succeeding the
date on which such capital stock is surrendered by the shareowner or
such other time or times as may be established by the Board of
Directors in its absolute discretion, in accordance with any
provision of the Investment Company Act of 1940, any rule or
regulation thereunder, or any rule or regulation made or adopted by
any securities association registration under the Securities
Exchange Act of 1934; provided that if the Board of Directors so
determines, in determining net asset value for such purposes there
may be deducted
-7-
<PAGE>
from the market value of all securities listed or traded in on any
exchange brokerage charges, stamp taxes and odd-lot premiums
substantially at the rates that would be applicable if such
securities were then being sold.
6. The Corporation may issue and sell its shares in such amounts,
on such terms and conditions, for such purposes and for such
consideration now or hereafter permitted by the laws of Maryland, by
these Articles of Incorporation and by the Investment Company Act of
1940 as its Board of Directors may determine; provided, however,
that, except upon conversion of outstanding convertible securities
or in connection with a merger, consolidation, acquisition of
substantially all of the assets of another corporation or other
organization, the consideration per share to be received by the
Corporation upon the sale of any shares of its capital stock shall
not be less than the net asset value per share of such capital stock
outstanding at the time as of which the computation of such net
asset value shall be made. The net asset value of each share of the
capital stock of the Corporation for the purpose of the issue of
such capital stock shall be determined either as of the close of
business on the last business day on which the New York Stock
Exchange was open next preceding the date on which a subscription to
such stock was accepted by the Corporation, or in accordance with
any provision of the Investment Company Act of 1940, any rule or
-8-
<PAGE>
regulation thereunder, or any rule or regulation made or adopted by
any securities association registered under the Securities Exchange
Act of 1934.
7. Payment of the redemption price of capital stock of the
Corporation with respect to which redemption is requested by a
shareowner pursuant to the provisions of paragraph B.1. of Article
FOURTH of these Articles of Incorporation or redemption is requested
by the Corporation pursuant to paragraph B.2(b) of said Article
FOURTH, as the case may be, shall, subject to paragraph B.3. of said
Article FOURTH, be made by the Corporation within seven days after
receipt of the shareowner's request for redemption by the
Corporation or after the deposit of the request for redemption by
the Corporation, as the case may be. Any such payment may be made in
whole or in part, in portfolio securities, or in cash, as the Board
of Directors shall deem advisable, and no shareowner shall have the
right, other than as determined by the Board of Directors, to have
his shares redeemed in portfolio securities.
C. "Net asset value" of any shares of the Corporation outstanding
(exclusive of treasury stock) shall be determined as required by the Investment
Company Act of 1940 and pursuant to valuation methods determined by Directors
which are not prohibited by such Act.
-9-
<PAGE>
D. The Corporation may issue fractional shares of its capital stock, which
shall be entitled to the same proportionate rights as whole shares of their
class, provided, however, that the Corporation shall not be required to issue
share certificates for such fractional shares.
E. Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of the holders of a designated proportion
greater than a majority of the shares or votes entitled to be cast, such action
shall be effective and valid if taken or authorized by the affirmative vote of
the holders of a majority of the total number of shares outstanding and entitled
to vote thereon pursuant to the provisions of these Articles of Incorporation.
F. No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation of any class 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 capital stock of the Corporation acquired by it after the issue thereof, or
otherwise) other than such right, if any, as the Board of Directors, in its
discretion, may determine.
G. All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of these Articles of Incorporation.
-10-
<PAGE>
FIFTH: 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 shareowners:
A. 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:
1. To make, alter, amend or repeal from time to time By-Laws
of the Corporation except as such power may otherwise be limited in
the By-Laws.
2. To authorize the purchase of shares of the Corporation in
the open market or otherwise and to authorize the redemption of
shares of the Corporation, at prices not in excess of their net
asset value, provided 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.
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<PAGE>
3. To determine, as provided herein, or if provision is not
made herein, in accordance with generally accepted accounting
principles, what constitutes annual or other net profits, total
assets and the net asset value of the shares of the Corporation;
from time to time to fix and vary the amount to be reserved as
working capital; to set apart out of any surplus of the Corporation
such reserves in such amounts and for such proper purposes as it
shall determine and to abolish any such reserves or any part
thereof.
4. To distribute dividends from funds legally available
therefor in such amounts, if any, and in such manner and to the
shareowners of record as of such date, as the Board of Directors may
determine.
5. To determine in their discretion the manner and purposes of
the allocation of brokerage commissions to be paid by the
Corporation and the selection of the brokers and dealers that shall
receive or share directly or indirectly in any such commissions and
the basis of such receiving or sharing therein, including, but not
limited to, sales of shares of the Corporation and any other
corporations having the same investment adviser and statistical and
other information and wire and other services provided to the
Corporation or the administrator.
B. A director or officer of the Corporation shall not be liable to the
Corporation or its shareowners for monetary damages for breach of fiduciary duty
as a director or officer, except to the
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<PAGE>
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 the
foregoing sentence shall adversely affect any right or protection of a director
or officer that exists at the time of such amendment, modification or repeal.
C. Except as required by law, the holders of shares 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.
SIXTH: The Board of Directors shall have power insofar as permitted by law
to make, alter, amend, and repeal the By-Laws of the Corporation. The
Corporation reserves the right to amend, alter, change, add to or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by statute, and all rights and powers conferred by these
Articles of Incorporation on stockholders, directors and officers are granted
subject to this reservation.
SEVENTH: The number of directors of the Corporation shall be increased or
decreased pursuant to the By-Laws of the Corporation. The number of directors
shall never be less than the number prescribed by the General Corporation Law.
EIGHTH: As used in these Articles of Incorporation, the term "shareowner"
shall mean "stockholder" as the latter term is used in the General Corporation
Law.
------------------------------
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<PAGE>
SECOND: The provisions set forth in these Articles of Restatement
constitute all of the provisions of the Charter of the Corporation as currently
in effect. These Articles do not amend the Charter of the Corporation.
THIRD: The restatement of the Charter of the Corporation has been approved
by the affirmative vote of a majority of the Directors of the Corporation at a
meeting duly called and held on February 21, 1997. The Corporation has eleven
Directors, Edward D. Beach, Stephen C. Eyre, Delayne D. Gold, Robert F. Gunia,
Don G. Hoff, Robert E. LaBlanc, Mendel A. Melzer, Richard A. Redeker, Robin B.
Smith, Stephen Stoneburn, and Nancy H. Teeters, currently in office.
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<PAGE>
IN WITNESS WHEREOF, the Articles of Restatement have been executed on
behalf of Prudential MoneyMart Assets, Inc. this 24th day of February, 1997.
PRUDENTIAL MONEYMART ASSETS, INC.
By: /s/ Richard A. Redeker
---------------------------------
Richard A. Redeker
President
Attest
[Seal]
By: /s/ Ellyn C. Vogin
- --------------------------------
Ellyn C. Vogin
Assistant Secretary
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<PAGE>
The undersigned, President of Prudential MoneyMart Assets, Inc., who
executed on behalf of said Corporation the foregoing Articles of Restatement, of
which this certificate is made a part, hereby acknowledges that these Articles
of Restatement are the act of the Corporation and affirms that to the best of
his knowledge, information and belief all matters and facts set forth therein
relating to the authorization and approval of the Articles of Restatement are
true in all material respects and that this statement is made under the
penalties of perjury.
/s/ Richard A. Redeker
------------------------------
Richard A. Redeker
President
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PRUDENTIAL MONEYMART ASSETS,INC.
By-Laws
ARTICLE I.
Stockholders
Section 1. Place of Meeting. All meetings of the stockholders shall be
held at the principal office of the Corporation in the State of Maryland or at
such other place within the United States as may from time to time be designated
by the Board of Directors and stated in the notice of such meeting.
Section 2. Annual Meetings. The annual meeting of the stockholders of the
Corporation shall be held on a date and at such hour as may from time to time be
designated by the Board of Directors and stated in the notice of such meeting,
within the month ending four months after the end of the Corporation's fiscal
year, for the transaction of such business as may properly be brought before the
meeting; provided, however, that an annual meeting shall not be required to be
held in any year in which the election of directors is not required to be acted
on by stockholders under the Investment Company Act of 1940.
Section 3. Meetings. Meetings of the stockholders for any purpose or
purposes, including for purposes of voting on the removal of one or more
Directors, may be called by the Chairman of the Board, the President or a
majority of the Board of Directors, and shall be called by the Secretary upon
receipt of the request in writing signed by stockholders holding not less than
10% of the common stock issued and outstanding and entitled to vote thereat.
<PAGE>
Such request shall state the purpose or purposes of the proposed meeting. The
Secretary shall inform such stockholders of the reasonably estimated costs of
preparing and mailing such notice of meeting and upon payment to the Corporation
of such costs, the Secretary shall give notice stating the purpose or purposes
of the meeting as required in this Article and by-law to all stockholders
entitled to notice of such meeting. No meeting need be called upon the request
of the holders of shares entitled to cast less than a majority of all votes
entitled to be cast at such meeting to consider any matter which is
substantially the same as a matter voted upon at any meeting of stockholders
held during the preceding twelve months.
Section 4. Notice of Meetings of Stockholders. Not less than ten days' and
not more than ninety days' written or printed notice of every meeting of
stockholders, stating the time and place thereof and the general nature of the
business proposed to be transacted thereat, shall be given to each stockholder
entitled to vote thereat by leaving the same with such stockholder or at such
stockholder's residence or usual place of business or by mailing it, postage
prepaid, and addressed to such stockholder at such stockholder's address as it
appears upon the books of the Corporation. If mailed, notice shall be deemed to
be given when deposited in the United States mail addressed to the stockholder
as aforesaid.
No notice of the time, place or purpose of any meeting of stockholders
need be given to any stockholder who attends in person
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<PAGE>
or by proxy or to any stockholder who, in writing executed and filed with the
records of the meeting, either before or after the holding thereof, waives such
notice.
Section 5. Record Dates. The Board of Directors may fix, in advance, a
date not exceeding ninety days preceding the date of any meeting of
stockholders, any dividend payment date or any date for the allotment of rights,
as a record date for the determination of the stockholders entitled to notice of
and to vote at such meeting or entitled to receive such dividends or rights, as
the case may be; and only stockholders of record on such date shall be entitled
to notice of and to vote at such meeting or to receive such dividends or rights,
as the case may be. In the case of a meeting of stockholders, such date shall
not be less than ten days prior to the date fixed for such meeting.
Section 6. Quorum, Adjournment of Meetings. The presence in person or by
proxy of the holders of record of a majority of the shares of the common stock
of the Corporation issued and outstanding and entitled to vote thereat shall
constitute a quorum at all meetings of the stockholders except as otherwise
provided in the Articles of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the holders of a
majority of the stock present in person or by proxy shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until stockholders owning the requisite amount of stock entitled to
vote at such meeting shall be present, provided that, if the date on which the
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<PAGE>
meeting held is more than 120 days after the original record date, notice the
time of date of such adjourned meeting shall be given. At such adjourned meeting
at which stockholders owning the requisite amount of stock entitled to vote
thereat shall be represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 7. Voting and Inspectors. At all meetings, stockholders of record
entitled to vote thereat shall have one vote for each share of common stock
standing in his name on the books of the Corporation (and such stockholders of
record holding fractional shares, if any, shall have proportionate voting
rights) on the date for the determination of stockholders entitled to vote at
such meeting, either in person or by proxy appointed by instrument in writing
subscribed by such stockholder or his duly authorized attorney.
All elections shall be had and all questions decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of directors, the Chairman of the meeting may, and upon
the request of the holders of ten percent (10%) of the stock entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of
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<PAGE>
the result of the vote taken. No candidate for the office of director shall be
appointed such inspector.
Section 8. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if he or
she is not present, by the President, or if he or she is not present, by a
Vice-President, or if none of them is present, by a Chairman to be elected at
the meeting. The Secretary of the Corporation, if present, shall act as a
Secretary of such meetings, or if he or she is not present, an Assistant
Secretary shall so act; if neither the Secretary nor the Assistant Secretary is
present, then the meeting shall elect its Secretary.
Section 9. Concerning Validity of Proxies, Ballots, etc. At every meeting
of the stockholders, all proxies shall be received and taken in charge of and
all ballots shall be received and canvassed by the Secretary of the meeting, who
shall decide all questions concerning the qualification of voters, the validity
of the proxies and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the Chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
ARTICLE II.
Board of Directors
Section 1. Number and Tenure of Office. The business and affairs of the
Corporation shall be conducted and managed by a Board of Directors of not less
than three nor more than twelve directors, as may be determined from time to
time by vote of a
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<PAGE>
majority of the directors then in office, provided that if there is no stock
outstanding the number of directors may be less than three but not less than
one. Directors need not be stockholders.
Section 2. Vacancies. In case of any vacancy in the Board of Directors
through death, resignation or other cause, other than an increase in the number
of directors, a majority of the remaining directors, although a majority is less
than a quorum, by an affirmative vote, may elect a successor to hold office
until the next meeting of stockholders or until his successor is chosen and
qualifies.
Section 3. Increase or Decrease in Number of Directors. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of directors and may elect directors to fill the vacancies created by any
such increase in the number of directors until the next meeting of stockholders
or until their successors are duly chosen and qualified. The Board of Directors,
by the vote of a majority of the entire Board, may likewise decrease the number
of directors to a number not less than three.
Section 4. Place of Meeting. The directors may hold their meetings, have
one or more offices, and keep the books of the Corporation, outside the State of
Maryland, at any office or offices of the Corporation or at any other place as
they may from time to time by resolution determine, or in the case of meetings,
as they may from time to time by resolution determine or as shall be specified
or fixed in the respective notices or waivers of notice thereof.
6
<PAGE>
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and on such notice as the directors may from time to
time determine.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be held from time to time upon call of the Chairman of the Board, the
President, the Secretary or two or more of the directors, by oral or telegraphic
or written notice duly served on or sent or mailed to each director not less
than one day before such meeting. No notice need be given to any director who
attends in person or to any director who, in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives such
notice. Such notice or waiver of notice need not state the purpose or purposes
of such meeting.
Section 7. Quorum. One-third of the directors then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the directors present at any meeting at which there
is a quorum shall be the act of the directors, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation or by these
By-Laws.
Section 8. Executive Committee. The Board of Directors may, by the
affirmative vote of a majority of the whole Board, appoint from the directors an
Executive Committee to consist of such number
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<PAGE>
of directors (not less than three) as the Board may from time to time determine.
The Chairman of the Committee shall be elected by the Board of Directors. The
Board of Directors by such affirmative vote shall have power at any time to
change the members of such Committee and may fill vacancies in the Committee by
election from the directors. When the Board of Directors is not in session, to
the extent permitted by law, the Executive Committee shall have and may exercise
any or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation. The Executive Committee may fix its own
rules of procedure, and may meet when and as provided by such rules or by
resolution of the Board of Directors, but in every case the presence of a
majority shall be necessary to constitute a quorum. During the absence of a
member of the Executive Committee, the remaining members may appoint a member of
the Board of Directors to act in his place.
Section 9. Other Committees. The Board of Directors, by the affirmative
vote of a majority of the whole Board, may appoint from the directors other
committees which shall in each case consist of such number of directors (not
less than two) and shall have and may exercise such powers as the Board may
determine in the resolution appointing them. A majority of all the members of
any such committee may determine its action and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to change the members and powers of any
such committee, to fill vacancies and to discharge any such committee.
8
<PAGE>
Section 10. Telephone Meetings. Members of the Board of Directors or a
committee of the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting unless
otherwise provided by the Investment Company Act of 1940.
Section 11. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board or such
committee, unless otherwise provided by the Investment Company Act of 1940.
Section 12. Compensation of Directors. No director shall receive any
stated salary or fees from the Corporation for his services as such if such
director is, other than by reason of being such director, an interested person
(as such term is defined by the Investment Company Act of 1940) of the
Corporation or of its investment adviser, administrator or principal
underwriter. Except as provided in the preceding sentence, directors shall be
entitled to receive such compensation from the Corporation for their services as
may from time to time be voted by the Board of Directors.
9
<PAGE>
Section 13. Removal of Directors. No director shall continue to hold
office after the holders of record of not less than two-thirds of the
Corporation's outstanding common stock of all series have declared that that
director be removed from office either by declaration in writing filed with the
Corporation's secretary or by votes cast in person or by proxy at a meeting
called for the purpose. The directors shall promptly call a meeting of
stockholders for the purpose of voting upon the question of removal of any
director or directors when requested in writing to do so by the record holders
of not less than 10 percent of the Corporation's outstanding common stock of all
series.
ARTICLE III.
Officers
Section 1. Executive Officers. The executive officers of the Corporation
shall be chosen by the Board of Directors. These may include a Chairman of the
Board of Directors (who shall be a director) and shall include a President, one
or more Vice-Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer. The Board of Directors or the Executive
Committee may also in its discretion appoint Assistant Secretaries, Assistant
Treasurers and other officers, agents and employees, who shall have such
authority and perform such duties as the Board or the Executive Committee may
determine. The Board of Directors may fill any vacancy which may occur in any
office. Any two offices, except those of President and Vice-President, may be
held by the same person, but no officer
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<PAGE>
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law or these By-Laws to be executed,
acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be one
year and until their respective successors are chosen and qualified. Any officer
may be removed from office at any time with or without cause by the vote of a
majority of the whole Board of Directors.
Section 3. Powers and Duties. The officers of the Corporation shall have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as may from time to time be conferred by the Board of
Directors or the Executive Committee.
ARTICLE IV.
Capital Stock
Section 1. Certificates for Shares. Stockholders of the Corporation shall
not be entitled to a certificate or certificates for the shares of stock of the
Corporation owned by him and the Corporation shall provide, or cause to be
provided, the information set forth in Section 2-211 of the General Corporation
Law.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by
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<PAGE>
proper instruments of assignment and transfer, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require; in the case of shares not represented by certificates, the same or
similar requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the Corporation, containing
the names and addresses of the stockholders and the number of shares held by
them respectively, shall be kept at the principal office of the Corporation or,
if the Corporation employs a Transfer Agent, at the office of the Transfer Agent
of the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors
or the Executive Committee may determine the conditions upon which a new
certificate of stock of the Corporation of any class may be issued in place of a
certificate which is alleged to have been lost, stolen or destroyed; and may, in
its discretion, require the owner of such certificate or such owner's legal
representative to give bond, with sufficient surety, to the Corporation and each
Transfer Agent, if any, to indemnify it and each such Transfer Agent against any
and all loss or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost, stolen or destroyed.
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<PAGE>
ARTICLE V.
Corporate Seal
The Board of Directors may provide for a suitable corporate seal, in such
form and bearing such inscriptions as it may determine.
ARTICLE VI.
Fiscal Year
The fiscal year of the Corporation shall be fixed by the Board of
Directors.
ARTICLE VII.
Indemnification
Directors, officers, employees and agents of the Corporation shall not be
liable to the Corporation, any stockholder, officer, director, employee or other
person for any action or failure to act except for willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office. The Corporation shall indemnify directors, officers,
employees and agents of the Corporation against judgments, fines, settlements
and expenses to the fullest extent authorized and in the manner permitted by
applicable federal and state law. The Corporation may purchase insurance to
protect itself and its directors, officers, employees and agents against
judgments, fines, settlements and expenses to the fullest extent authorized and
in the manner permitted by applicable federal and state law. Nothing contained
in this Article VII shall be construed to indemnify directors, officers,
employees and agents of the Corporation
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<PAGE>
against, nor to permit the Corporation to purchase insurance that purports to
protect against, any liability to the Corporation or any stockholder, officer,
director, employee, agent or other person to whom he or she 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 or her office.
ARTICLE VIII.
Amendment of By-Laws
The By-Laws of the Corporation may be altered, amended, added to or
repealed by majority vote of the entire Board of Directors.
14
This is to certify that _____________ is the owner of _________ fully-paid and
non-assessable shares of the par value of $.001 each of the common stock of
Prudential MoneyMart Assets, Inc., hereafter called the "Corporation",
transferable on the books of the Corporation by the owner in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are issued and shall be held
subject to the Charter and By-Laws of the Corporation and all amendments
thereof, copies of which are at the office of the Corporation, to all of which
the holder, by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in
its name by its proper officers and to be sealed with the Corporate Seal.
PRUDENTIAL-BACHE MONEYMART ASSETS INC.
Management Agreement
Agreement, made this 2nd day of May, 1988 between Prudential-Bache
MoneyMart Assets Inc., a Maryland corporation (the "Fund"), and Prudential
Mutual Fund Management, Inc., a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain the Manager to render or
contract to obtain as hereinafter provided investment advisory services to the
Fund and the Fund also desires to avail itself of the facilities available to
the Manager with respect to the administration of its day to day corporate
affairs, and the Manager is willing to render such investment advisory and
administrative services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of the
Fund and administrator of its corporate affairs for the period and on the terms
set forth in this Agreement. The Manager accepts such appointment and agrees to
render the services herein described, for the compensation herein provided. The
Manager is authorized to enter into an agreement, dated the date hereof, with
The Prudential Investment Corporation ("PIC") pursuant to which PIC shall
furnish to the Fund the investment advisory services in connection with the
management of the Fund. Such agreement in the form attached as Exhibit A is
hereinafter referred to as the "Subadivsory Agreement". The Manager
<PAGE>
will continue to have responsibility for all investment advisory services
furnished pursuant to the Subadvisory Agreement.
2. Subject to the supervision of the Board of Directors of the Fund,
the Manager shall administer the Fund's corporate affairs and, in connection
therewith, shall furnish the Fund with office facilities and with clerical,
bookkeeping and recordkeeping services at such office facilities and, subject to
Section 1 hereof and the Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention and disposition thereof, in accordance with
the Fund's investment objectives, policies and restrictions as stated in the
Prospectus (hereinafter defined) and subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's investments
and determine from time to time what investments or securities will be
purchased, retained, sold or loaned by the Fund, and what portion of the
assets will be invested or held uninvested as cash.
(b) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus (hereinafter defined) of the Fund
and with the instructions and directions of the Board of Directors of the
Fund and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations.
(c) The Manager shall determine the securities
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<PAGE>
to be purchased or sold by the Fund and will place orders pursuant to its
determinations with or through such persons, brokers or dealers (including
but not limited to Prudential-Bache Securities Inc.) in conformity with the
policy with respect to brokerage as set forth in the Fund's Registration
Statement and Prospectus (hereinafter defined) or as the Board of Directors
may direct from time to time. In providing the Fund with investment
supervision, it is recognized that the Manager will give primary
consideration to securing the most favorable price and efficient execution.
Consistent with this policy, the Manager may consider the financial
responsibility, research and investment information and other services
provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Manager may
be a party. It is understood that Prudential-Bache Securities Inc. may be
used as principal broker for securities transactions but that no formula
has been adopted for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund that the
Manager have access to supplemental investment and market research and
security and economic analysis provided by brokers and that such brokers
may execute brokerage transactions at a higher cost to the Fund than may
result when allocating brokerage to other brokers
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<PAGE>
on the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to pay higher brokerage commissions
for the purchase and sale of securities for the Fund to brokers who
provide such research and analysis, subject to review by the Fund's Board
of Directors from time to time with respect to the extent and continuation
of this practice. It is understood that the services provided by such
brokers may be useful to the Manager in connection with its services to
other clients.
On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients
of the Manager or the Subadviser, the Manager, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so sold or purchased in order to obtain the
most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
the Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients.
(d) The Manager shall maintain all books and records with respect to
the Fund's portfolio transactions and shall render to the Fund's Board of
Directors such periodic and special
4
<PAGE>
reports as the Board may reasonably request.
(e) The Manager shall be responsible for the financial and
accounting records to be maintained by the Fund (including those being
maintained by the Fund's Custodian).
(f) The Manager shall provide the Fund's Custodian on each business
day with information relating to all transactions concerning the Fund's
assets.
(g) The investment management services of the Manager to the Fund
under this Agreement are not to be deemed exclusive, and the Manager shall
be free to render similar services to others.
3. The Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Articles of Incorporation of the Fund, as filed with the
Secretary of State of Maryland (such Articles of Incorporation, as in
effect on the date hereof and as amended from time to time, are herein
called the "Articles of Incorporation");
(b) By-Laws of the Fund (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Fund
authorizing the appointment of the Manager and approving the form of this
agreement;
(d) Registration Statement under the 1940 Act and the
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Securities Act of 1933, as amended, on Form N-1A (the "Registration
Statement"), as filed with the Securities and Exchange Commission (the
"Commission") relating to the Fund and shares of the Fund's Common Stock
and all amendments thereto;
(e) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Fund (such Prospectus and Statement of
Additional Information, as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus").
4. The Manager shall authorize and permit any of its directors,
officers and employees who may be elected as directors or officers of the Fund
to serve in the capacities in which they are elected. All services to be
furnished by the Manager under this Agreement may be furnished through the
medium of any such directors, officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to
be maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund and it will
surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records as are required to be maintained by the Manager
pursuant to Paragraph 2 hereof.
6
<PAGE>
6. During the term of this Agreement, the Manager shall pay the
following expenses:
(i) the salaries and expenses of all personnel of the Fund and the
Manager except the fees and expenses of directors who are not affiliated
persons of the Manager or the Fund's investment adviser,
(ii) all expenses incurred by the Manager or by the Fund in
connection with managing the ordinary course of the Fund's business other
than those assumed by the Fund herein, and
(iii) the costs and expenses payable to PIC pursuant to the
Subadvisory Agreement. The Fund assumes and will pay the expenses
described below:
(a) the fees and expenses incurred by the Fund in connection with
the management of the investment and reinvestment of the Fund's assets,
(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 expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii)
preparing and maintaining the general accounting records of the Fund and
the providing of any such records to the Manager useful to the Manager in
connection with the Manager's responsibility for the accounting records of
the Fund pursuant to Section 31 of the 1940 Act and the rules promulgated
thereunder, (iii) the pricing of the shares of the
7
<PAGE>
Fund, including the cost of any pricing service or services which may be
retained pursuant to the authorization of the Board of Directors of the
Fund, and (iv) for both mail and wire orders, the cashiering function in
connection with the issuance and redemption of the Fund's securities,
(d) the fees and expenses of the Fund's Transfer and Dividend
Disbursing Agent, which may be the Custodian, that relate to the
maintenance of each shareholder account,
(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes chargeable
to the Fund in connection with its securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of stock certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of the Fund,
(j) the cost of fidelity, directors and officers and errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and
Exchange Commission, registering the Fund as a broker or dealer and
qualifying its shares under state
8
<PAGE>
securities laws, including the preparation and printing of the Fund's
registration statements, prospectuses and statements of additional
information for filing under federal and state securities laws for such
purposes,
(l) allocable communications expenses with respect to investor
services and all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing reports to shareholders in the amount
necessary for distribution to the shareholders,
(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Plan of
Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
7. In the event the expenses of the Fund for any fiscal year
(including the fees payable to the Manager 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) exceed the lowest applicable annual expense limitation
established and enforced pursuant to the statute or regulations of any
jurisdictions in which shares of the Fund are then qualified for offer and sale,
the compensation due the Manager will be reduced by the amount of such excess,
or, if such reduction exceeds the compensation payable to the Manager, the
Manager will pay to
9
<PAGE>
the Fund the amount of such reduction which exceeds the amount of such
compensation.
8. For the services provided and the expenses assumed pursuant to
this Agreement, the Fund will pay to the Manager as full compensation therefor a
fee at an annual rate of .50 of 1% of the Fund's average daily net assets up to
$50 million and .30 of 1% of the Fund's average daily net assets in excess of
$50 million. This fee will be computed daily and will be paid to the Manager
monthly. Any reduction in the fee payable and any payment by the Manager to the
Fund pursuant to paragraph 7 shall be made monthly. Any such reductions or
payments are subject to readjustment during the year.
For a period commencing on the effective date of this Agreement and
ending on the earlier of the 10th day of the month following the date of
termination of this Agreement or February 10, 1992, the monthly fee paid to the
manager, as set forth above, shall be reduced in accordance with the following
formula:
Average Daily Net Asset
Annual Rate of Reduction Value in Preceding Month
- ------------------------- ------------------------
$75,000 $500,000,000 and over
$112,500 $750,000,000 and over
$150,000 $1,000,000,000 and over
$187,500 $1,250,000,000 and over
$225,000 $1,500,000,000 and over
$300,000 $1,750,000,000 and over
The reduction from the period of the effective date of this
Agreement to the end of the month in which such effective date occurs shall be
prorated according to the proportion which such
10
<PAGE>
period bears to the full monthly period, and upon any termination of this
Agreement before the end of any month, such reduction for the period from the
end of the month ending prior to such termination shall be prorated according to
the proportion which such period bears to the full monthly period.
9. The Manager shall not be liable for any error of judgment or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
10. This Agreement shall continue in effect for a period of more
than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Fund at any time, without the payment of any penalty, by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager at any time, without the
payment of any penalty, on not more than 60 days' nor less than 30 days' written
notice to the other party. This Agreement shall terminate automatically in the
11
<PAGE>
event of its assignment (as defined in the 1940 Act).
11. Nothing in this Agreement shall limit or restrict the right of
any director, officer or employee of the Manager who may also be a director,
officer or employee of the Fund to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of the Manager to engage in any other business or to render services of
any kind to any other corporation, firm, individual or association.
12. Except as otherwise provided herein or authorized by the Board
of Directors of the Fund from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
13. During the term of this Agreement, the Fund agrees to furnish
the Manager at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature, or other material prepared for distribution
to shareholders of the Fund or the public, which refer in any way to the
Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt thereof. In the event of termination of
this Agreement, the Fund will continue to furnish to the Manager copies of any
of the above mentioned materials which refer in any way to the Manager. Sales
literature may be furnished
12
<PAGE>
to the Manager hereunder by first-class or overnight mail, facsimile
transmission equipment or hand delivery. The Fund shall furnish or otherwise
make available to the Manager such other information relating to the business
affairs of the Fund as the Manager at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
14. This Agreement may be amended by mutual consent, but the consent
of the Fund must be obtained in conformity with the requirements of the 1940
Act.
15. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at One Seaport Plaza, New
York, N.Y. 10292, Attention: Secretary; or (2) to the Fund at One Seaport Plaza,
New York, N.Y. 10292, Attention: President.
16. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
17. The Fund may use the name "Prudential-Bache Moneymart Assets,
Inc." or any name including the word "Prudential" or "Bache" only for so long as
this Agreement or any extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to the Manager's business as Manager or any extension, renewal or amendment
thereof remain in effect. At such time as such an agreement shall no longer be
in effect, the Fund will (to the extent that it lawfully can) cease to use such
a name or any other name indicating that it
13
<PAGE>
is advised by, managed by or otherwise connected with the Manager, or any
organization which shall have so succeeded to such businesses. In no event shall
the Fund use the name "Prudential-Bache MoneyMart Assets, Inc." or any name
including the word "Prudential" or "Bache" if the Manager's function is
transferred or assigned to a company of which The Prudential Insurance Company
of America does not have control.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
PRUDENTIAL-BACHE MONEYMART ASSETS, INC.
By /s/ Lawrence C. McQuade
------------------------------------
President
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By /s/ Michael J. Downey
------------------------------------
President
14
PRUDENTIAL-BACHE MONEYMART ASSETS INC.
Subadvisory Agreement
Agreement made as of this 2nd day of May, 1988 between Prudential Mutual
Fund Management Inc., a Delaware Corporation ("PMF" or the "Manager"), and The
Prudential Investment Corporation, a New Jersey Corporation (the "Subadviser").
WHEREAS, the Manager has entered into a Management Agreement, dated May 2,
1988(the "Management Agreement"), with Prudential-Bache MoneyMart Assets Inc.
(the "Fund"), a Maryland corporation and a diversified open-end management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act"), pursuant to which PMF will act as Manager of the Fund.
WHEREAS, PMF desires to retain the Subadviser to provide investment
advisory services to the Fund in connection with the management of the Fund and
the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Board of
Directors of the Fund, the Subadviser shall manage the investment
operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention and disposition thereof, in accordance
with the Fund's investment objectives, policies and restrictions as stated
in the Prospectus, (such Prospectus and Statement of Additional
Information as currently in effect and as amended or supplemented from
time to time, being herein called the "Prospectus"), and subject to the
following understandings:
(i) The Subadviser shall provide supervision of the Fund's
investments and determine from time to time what investments and
securities will be purchased, retained, sold or loaned by the Fund,
and what portion of the assets will be invested or held uninvested
as cash.
(ii) In the performance of its duties and obligations under
this Agreement, the Subadviser shall act in conformity with the
Articles of Incorporation, By-Laws and Prospectus of the Fund and
with the instructions and directions of the Manager and of the Board
of Directors of the Fund and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986 and
all other applicable federal and state laws and regulations.
<PAGE>
(iii) The Subadviser shall determine the securities to be
purchased or sold by the Fund and will place orders with or through
such persons, brokers or dealers (including but not limited to
Prudential-Bache Securities Inc.) to carry out the policy with
respect to brokerage as set forth in the Fund's Registration
Statement and Prospectus or as the Board of Directors may direct
from time to time. In providing the Fund with investment
supervision, it is recognized that the Subadviser will give primary
consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Subadviser may
consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who
may effect or be a party to any such transaction or other
transactions to which the Subadviser's other clients may be a party.
It is understood that Prudential-Bache Securities Inc. may be used
as principal broker for securities transactions but that no formula
has been adopted for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Subadviser have access to supplemental investment and
market research and security and economic analysis provided by
brokers who may execute brokerage transactions at a higher cost to
the Fund than may result when allocating brokerage to other brokers
on the basis of seeking the most favorable price and efficient
execution. Therefore, the Subadviser is authorized to place orders
for the purchase and sale of securities for the Fund with such
brokers subject to review by the Fund's Board of Directors from time
to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Subadviser in connection with the
Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other
clients of the Subadviser, the Subadviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such
other clients.
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<PAGE>
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act and shall render to the Fund's
Board of Directors such periodic and special reports as the Board
may reasonably request.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions
concerning the Fund's assets and shall provide the Manager with such
information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as directors or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Fund's books and records required to be
maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and
records of the Fund required by Rule 31a-1 under the 1940 Act. The
Subadviser agrees that all records which it maintains for the Fund are the
property of the Fund and the Subadviser will surrender promptly to the
Fund any of such records upon the Fund's request, provided however that
the Subadviser may retain a copy of such records. The Subadviser further
agrees to preserve for the periods prescribed by Rule 31a-2 of the
Commission under the 1940 Act any such records as are required to be
maintained by it pursuant to paragraph 1(a) hereof.
2. The Manager shall continue to have responsibility for all services to
be provided to the Fund pursuant to the Management Agreement and shall
oversee and review the Subadviser's performance of its duties under this
Agreement.
3. The Manager shall reimburse the Subadviser for reasonable costs and
expenses incurred by the Subadviser determined in a manner acceptable to
the Manager in furnishing the services described in paragraph 1 hereof.
3
<PAGE>
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its
obligations and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may
be terminated by the Fund at any time, without the payment of any penalty,
by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, or
by the Manager or the Subadviser at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice
to the other party. This Agreement shall terminate automatically in the
event of its assignment (as defined in the 1940 Act) or upon the
termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers, or employees who may also be a
director, officer or employee of the Fund to engage in any other business
or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or a dissimilar
nature, nor limit or restrict the Subadviser's right to engage in any
other business or to render services of any kind to any other corporation,
firm, individual or association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to stockholders, sales literature or other material prepared for
distribution to stockholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature
may be furnished to the Subadviser hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery.
4
<PAGE>
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
BY /s/ Michael J. Downey
--------------------------------------
President
THE PRUDENTIAL INVESTMENT CORPORATION
BY /s/ John Brookmeyer, Jr.
--------------------------------------
5
PRUDENTIAL MONEYMART ASSETS, INC.
Distribution Agreement
Agreement made as of May 9, 1996, between Prudential MoneyMart Assets,
Inc., 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
shares for sale continuously;
WHEREAS, the shares of the Fund may be divided into classes and/or
series (all such shares being referred to herein as Shares) and the Fund
currently is authorized to offer Class A and Class Z shares;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business of
selling shares of registered investment companies either directly or through
other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the Fund's Shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its shares; and
WHEREAS, upon approval by the holders of the respective classes and/or
series of shares of the Fund it is contemplated that the Fund will adopt a plan
(or plans) of distribution pursuant to Rule 12b-1 under the Investment Company
Act with respect to certain of its classes and/or series of Shares (the Plans)
authorizing payments by the Fund to the Distributor with respect to the
distribution of such classes and/or series of Shares and the maintenance of
related shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Shares of the Fund to sell Shares to the public on behalf
of the Fund and the Distributor hereby accepts such appointment and agrees to
act hereunder. The
<PAGE>
Fund hereby agrees during the term of this Agreement to sell Shares of the Fund
through the Distributor on the terms and conditions set forth below.
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Fund to act
as principal underwriter and distributor of the Fund's Shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Shares of
the Fund shall not apply to Shares of the Fund issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to Class A shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions or
through the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to Shares issued by the Fund
pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus 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 Shares
needed, but not more than the Shares needed (except for clerical errors in
transmission) to fill unconditional orders for Shares placed with the
Distributor by investors or registered and qualified securities dealers and
other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the Fund
and delivered by the Distributor or selected dealers, as described in Section
6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of any
2
<PAGE>
or all classes and/or series of 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 any or all classes and/or series of its 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 Shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such Shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
4.1 Any of the outstanding Shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with its 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 Shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
on or before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to a contingent
deferred sales charge, any applicable contingent deferred sales charge shall be
paid to the Distributor, and the balance shall be paid to or for the account of
the redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus; and (ii) in the case of all other Shares, proceeds shall be
paid to or for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of any class and/or series of Shares or payment may be
suspended at times when the New York Stock Exchange is closed for other than
customary weekends and holidays, when
3
<PAGE>
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, so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of Shares as provided
herein, the Fund agrees to sell its Shares so long as it has Shares of the
respective class and/or series available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, and this shall
include one certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized 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 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 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 Shares in any
state from the terms set forth in its Registration Statement, to qualify as a
foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its
Shares. Any such qualification may be withheld, terminated or withdrawn by the
Fund at any time in its discretion. As provided in Section 9 hereof, the expense
of qualification and maintenance of qualification shall be borne by
4
<PAGE>
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.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. Sales of the Shares shall be on the terms described in the Prospectus.
The Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as set forth in
the Prospectus.
6.2 In selling the Shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of the National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Shares, provided that the Fund shall
approve the forms of such agreements. Within the United States, the Distributor
shall offer and sell Shares only to such selected dealers as are members in good
standing of the NASD. Shares sold to selected dealers shall be for resale by
such dealers only at the offering price determined as set forth in the
Prospectus.
Section 7. Payments to the Distributor
7.1 With respect to classes and/or series of shares which impose a
front-end sales charge,the Distributor shall receive and may retain any portion
of any front-end sales charge which is imposed on sales 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 applicable Plans.
5
<PAGE>
7.2 With respect to classes and/or series of Shares which impose a
contingent deferred sales charge, the Distributor shall receive and may retain
any contingent deferred sales charge which is imposed on such sales as set forth
in the Prospectus, subject to the limitations of 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 any Plan.
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as reimbursement for services
under any Plans adopted by the Fund and this Agreement a distribution and
service fee with respect to the Fund's classes and/or series of Shares as
described in each of the Fund's respective Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions and account
servicing fees with respect to the relevant class and/or series of Shares to be
paid by the Distributor to account executives of the Distributor and to
broker-dealers 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.
Section 9. Allocation of Expenses
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Shares (except for those costs and expenses borne by the
Distributor pursuant to a Plan and subject to the requirements of Rule 12b-1
under the investment Company Act), including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required Registration Statements and/or Prospectuses under the Investment
Company Act or the Securities Act, and all amendments and supplements thereto,
and preparing and mailing annual and periodic reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of qualification of
the Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Fund as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the 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
6
<PAGE>
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan 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 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, trustee 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 or trustees who
are neither "interested persons" of the Fund as defined in Section 2(a)(19) of
the Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors or trustees 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 trustees, 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 Shares.
7
<PAGE>
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 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 applicable class and/or
series 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 applicable class and/or
series of the Fund, or by the Distributor, on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its
assignment.
11.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting
8
<PAGE>
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 applicable class
and/or series of the Fund, and (b) by the vote of a majority of the Independent
Directors cast in person at a meeting called for the purpose of voting on such
amendment.
Section 13. Separate Agreement as to Classes and/or Series
The amendment or termination of this Agreement with respect to any class
and/or series shall not result in the amendment or termination of this Agreement
with respect to any other class and/or series unless explicitly so provided.
Section 14. Governing Law
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New 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 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: /s/ Robert F. Gunia
------------------------------
Robert F. Gunia
Senior Vice President
Prudential MoneyMart Assets, Inc
By: /s/ Richard A. Redeker
------------------------------
Richard A. Redeker
President
9
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES INDICATED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held By It................ -1-
2. Duties to the Custodian with Respect to Property of the Fund held
by the Custodian in the United States................................ -2-
2.1 Holding Securities.......................................... -2-
2.2 Delivery of Securities...................................... -2-
2.3 Registration of Securities.................................. -6-
2.4 Bank Accounts............................................... -7-
2.5 Availability of Federal Funds............................... -7-
2.6 Collection of Income........................................ -8-
2.7 Payment of Fund Monies...................................... -8-
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased................................................... -11-
2.9 Appointment of Agents....................................... -11-
2.10 Deposit of Securities in Securities Systems................. -11-
2.10A Fund Assets Held in the Custodian's Direct Paper System..... -13-
2.11 Segregated Account.......................................... -14-
2.12 Ownership Certificates for Tax Purposes..................... -15-
2.13 Proxies..................................................... -16-
2.14 Communications Relating to Fund Portfolio Securities........ -16-
2.15 Reports to Fund by Independent Public Accountants........... -16-
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United
States............................................................... -17-
3.1 Appointment of Foreign Sub-Custodians....................... -17-
3.2 Assets to be Held........................................... -17-
3.3 Foreign Securities Depositories............................. -18-
3.4 Segregation of Securities................................... -18-
3.5 Agreements with Foreign Banking Institutions................ -18-
3.6 Access of Independent Accountants of the Fund............... -19-
3.7 Reports by Custodian........................................ -19-
3.8 Transactions in Foreign Custody Account .................... -19-
3.9 Liability of Foreign Sub-Custodians......................... -20-
3.10 Liability of Custodian...................................... -21-
3.11 Reimbursements for Advances................................. -21-
3.12 Monitoring Responsibilities................................. -22-
3.13 Branches of U.S. Banks...................................... -22-
4. Payments for Repurchases or Redemptions and Sales of Shares of the
Fund................................................................. -23-
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<PAGE>
5. Proper Instructions.................................................. -24-
6. Actions Permitted Without Express Authority.......................... -24-
7. Evidence of Authority................................................ -25-
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net
Income............................................................... -26-
9. Records.............................................................. -26-
10. Opinion of Fund's Independent Accountant............................. -27-
11. Compensation of Custodian............................................ -27-
12. Responsibility of Custodian.......................................... -27-
13. Effective Period, Termination and Amendment.......................... -29-
14. Successor Custodian.................................................. -30-
15. Interpretive and Additional Provisions............................... -32-
16. Massachusetts Law to Apply........................................... -32-
17. Prior Contracts...................................................... -32-
18. The Parties.......................................................... -32-
19. Limitation of Liability.............................................. -33-
-ii-
<PAGE>
CUSTODIAN CONTRACT
This Contract between State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian", and each Fund listed on Appendix A which evidences its agreement to
be bound hereby by executing a copy of this Contract (each such Fund
individually hereinafter referred to as the "Fund").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation/ Declaration of Trust. The Fund agrees to deliver to the Custodian
all securities and cash owned by it, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Fund from time to time, and the cash consideration received by it
for such new or treasury shares of capital stock, ("Shares") of the Fund as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of the Fund held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Directors/ Trustees of the Fund, and provided
<PAGE>
that the Custodian shall have the same responsibility or liability to the Fund
on account of any actions or omissions of any sub-custodian so employed as any
such sub-custodian has to the Custodian, provided that the Custodian agreement
with any such domestic sub-custodian shall impose on such sub-custodian
responsibilities and liabilities similar in nature and scope to those imposed by
this Agreement with respect to the functions to be performed by such
sub-custodian. The Custodian may employ as sub-custodians for the Fund's
securities and other assets the foreign banking institutions and foreign
securities depositories designated in Schedule "A" hereto but only in accordance
with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to be held by it in
the United States, including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in a clearing
agency which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively referred to
herein as "Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper System of the
Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book-entry
system account ("Direct Paper System") only upon receipt
-2-
<PAGE>
of Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street
-3-
<PAGE>
delivery" custom; provided that in any such case, the Custodian
shall have no responsibility or liability for any loss arising
from the delivery of such securities prior to receiving payment
for such securities except as may arise from the Custodian's own
negligence or willful misconduct;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be
-4-
<PAGE>
held liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
(11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
(12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional
-5-
<PAGE>
information ("prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15) For any other proper business purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors/Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to be
a proper business purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund, unless the
Fund has authorized in writing the appointment of a nominee to be used in common
with other registered investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent appointed pursuant to
Section 2.9 or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best efforts to
timely collect income due the Fund on such securities and to notify the Fund on
a best efforts basis of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
-6-
<PAGE>
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund, subject only
to draft or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund, other than
cash maintained by the Fund in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust companies as
it may in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a custodian under
the Investment Company Act of 1940 and that each such bank or trust company and
the funds to be deposited with each such bank or trust company shall be approved
by vote of a majority of the Board of Directors/Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the
Fund and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian in the amount of
checks received in payment for Shares of the Fund which are deposited into the
Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered securities held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other payments with respect to
bearer
-7-
<PAGE>
securities if, on the date of payment by the issuer, such securities are held by
the Custodian or its agent thereof and shall credit such income, as collected,
to the Fund's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due and shall
collect interest when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
(1) Upon the purchase of securities held domestically, options,
futures contracts or options on futures contracts for the
account of the Fund but only (a) against the delivery of such
securities, or evidence of title to such options, futures
contracts or options on futures contracts, to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected
through a Securities
-8-
<PAGE>
System, in accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.10A; (d) in the case of repurchase agreements entered
into between the Fund and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected prior
to receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined in
Article 5;
(2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 4 hereof;
(4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
-9-
<PAGE>
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of Board of Directors/Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such
payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of securities for the account of the Fund is made by
the Custodian in advance of receipt of the securities purchased in the absence
of specific written instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out
-10-
<PAGE>
such of the provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not relieve
the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep domestic securities of the Fund in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
(2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
(3) The Custodian shall pay for domestic securities purchased for
the account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for
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the account of the Fund. The Custodian shall transfer domestic
securities sold for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers of domestic
securities for the account of the Fund shall identify the Fund,
be maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice
and shall furnish promptly to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
(4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason
of any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or
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from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System The
Custodian may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian subject to the following provisions:
(1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
(2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
(3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
(4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian
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shall transfer securities sold for the account of the Fund upon
the making of an entry on the records of the Custodian to
reflect such transfer and receipt of payment for the account of
the Fund;
(5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Direct Paper System for the account of the Fund; (6) The
Custodian shall provide the Fund with any report on its system
of internal accounting control as the Fund may reasonably
request from time to time;
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash, government securities or liquid,
high-grade debt obligations in connection with options purchased, sold or
written by the Fund or commodity futures contracts or options thereon
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<PAGE>
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors/Trustees or of the Executive
Committee signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection with
transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly deliver
to the Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund
all written information (including, without limitation, pendency of calls and
maturities of securities held domestically and expirations of rights in
connection therewith and notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from
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issuers of the securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the Fund shall
notify the Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants The Custodian
shall provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures contracts
and options on futures contracts, including securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
the United States
3.1 Appointment of Foreign Sub-Custodians The Fund hereby authorizes
and instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on Schedule
A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as
defined in Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Directors/Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time
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to time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment of any
one or more such sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5 hereof.
3.4 Segregation of Securities The Custodian shall identify on its books
as belonging to the Fund, the foreign securities of the Fund held by each
foreign sub-custodian. Each agreement pursuant to which the Custodian employs a
foreign banking institution shall require that such institution establish a
custody account for the Custodian on behalf of the Fund and physically segregate
in that account, securities and other assets of the Fund, and, in the event that
such institution deposits the Fund's securities in a foreign securities
depository, that it shall identify on its books as belonging to the Custodian,
as agent for the Fund, the securities so deposited.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set forth in
Exhibit 1 hereto and shall provide that:
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(a) the Fund's assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of the Fund's assets will be freely
transferable without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained identifying the assets
as belonging to the Fund; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be given
access to the books and records of the foreign banking institution relating to
its actions under its agreement with the Custodian; and (e) assets of the Fund
held by the foreign sub-custodian will be subject only to the instructions of
the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a foreign sub-custodian insofar as such
books and records relate to the performance of such foreign banking institution
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession of
such securities.
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<PAGE>
3.8 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section
3.8, the provision of Sections 2.2 and 2.7 of this Contract shall apply, in
their entirety to the foreign securities of the Fund held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the Fund and
delivery of securities maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the Custodian and
each Fund from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's performance of such
obligations. At the election of the Fund, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost, expense,
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liability or claim if and to the extent that the Fund has not been made whole
for any such loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts
or omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless of
whether assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank as contemplated by
paragraph 3.13 hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except such loss
as may result from (a) political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses (excluding
a bankruptcy or insolvency of State Street London Ltd. not caused by political
risk) due to Acts of God, nuclear incident or other losses under circumstances
where the Custodian and State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or wilful misconduct, any property at
any time held for the account of the Fund shall be security
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therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually
to the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will promptly inform the
Fund in the event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the subject
of an exemptive order from the Securities and Exchange Commission is notified by
such foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity will decline below $200 million (U.S. dollars or
the equivalent thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principles).
3.13 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the provisions
of Article 3 shall not apply where the custody of the Fund assets are maintained
in a foreign branch of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification
set forth in Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
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(b) Cash held for the Fund in the United Kingdom shall be maintained
in an interest bearing account established for the Fund with the Custodian's
London branch, which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation/Declaration of Trust and any
applicable votes of the Board of Directors/Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares who have delivered
to the Transfer Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares of the
Fund, the Custodian shall honor checks drawn on the Custodian by a holder of
Shares, which checks have been furnished by the Fund to the holder of Shares,
when presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time between the Fund and the
Custodian.
The Custodian shall receive from the distributor for the Fund's Shares
or from the Transfer Agent of the Fund and deposit into the Fund's account such
payments as are received for Shares of the Fund issued or sold from time to time
by the Fund. The Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the Fund.
5. Proper Instructions.
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Proper Instructions as used herein means a writing signed or initialled
by one or more person or persons as the officers of the Fund shall have from
time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. It is understood and agreed that the Board of
Directors/Directors/Trustees has authorized (i) Prudential Mutual Fund
Management, Inc., as Manager of the Fund, and (ii) The Prudential Investment
Corporation (or Prudential-Bache Securities Inc.), as Subadviser to the Fund, to
deliver proper instructions with respect to all matters for which proper
instructions are required by this Article 5. The Custodian may rely upon the
certificate of an officer of the Manager or Subadviser, as the case may be, with
respect to the person or persons authorized on behalf of the Manager and
Subadviser, respectively, to sign, initial or give proper instructions for the
purpose of this Article 5. Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices provided that
the Fund and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund:
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(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Directors/Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors/Trustees of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or of
any action by the Board of Directors/Trustees pursuant to the Articles of
Incorporation/Declaration of Trust as described in such vote, and such vote may
be considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
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8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors/Trustees of the Fund
to keep the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund or, if directed in writing to do so
by the Fund, shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall also calculate daily
the net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of the Fund shall be made at the time or
times described from time to time in the Fund's currently effective prospectus.
9. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund and for
such
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compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, Form N-2 (in the case
of a closed end Fund) and Form N-SAR or other periodic reports to the Securities
and Exchange Commission and with respect to any other requirements of such
Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken
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or omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Fund.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or wilful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the
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Fund fail to repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of the Fund assets to the extent necessary
to obtain reimbursement provided, however that, prior to disposing of Fund
assets hereunder, the Custodian shall give the Fund notice of its intention to
dispose of assets identifying such assets and the Fund shall have one business
day from receipt of such notice to notify the Custodian if the Fund wishes the
Custodian to dispose of Fund assets of equal value other than those identified
in such notice.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors/Trustees of the Fund has approved the
initial use of a particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Directors/Trustees has reviewed the use by the Fund of such Securities System,
as required in each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not act under Section 2.10A hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors/Trustees has approved the
initial use of the Direct Paper System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Board of Directors/Trustees
has reviewed the use by the Fund of the Direct Paper System; provided further,
however, that the Fund shall not amend or
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terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation/Declaration of
Trust, and further provided, that the Fund may at any time by action of its
Board of Directors/Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors/Trustees of the Fund, the Custodian shall, upon termination, deliver
to such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors/Trustees of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with such
vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors/Trustees shall have been
delivered to the Custodian on or before the date
-29-
<PAGE>
when such termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor custodian all of
the Fund's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors/Trustees to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other properties
and the provisions of this Contract relating to the duties and obligations of
the Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation/ Declaration of Trust of the
-30-
<PAGE>
Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
16. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
17. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
18. The Parties
All references herein to the "Fund" are to each of the Funds listed on
Appendix A individually, as if this Contract were between such individual Fund
and the Custodian. With respect to any Fund listed on Appendix A which is
organized as a Massachusetts Business Trust, references to Board of Directors
and Articles of Incorporation shall be deemed a reference to Board of
Directors/Trustees and Articles of Incorporation/Declaration of Trust
respectively and reference to shares of capital stock shall be deemed a
reference to shares of beneficial interest.
19. Limitation of Liability
Each Fund listed on Appendix A that is referenced as a Massachusetts
Business Trust is the designation of the Directors/Trustees under a Articles of
Incorporation/Declaration of Trust, dated (see Appendix A) and all persons
dealing with the Fund must look solely to the property of the Fund for the
enforcement of any claims against the Fund as neither the Directors/Trustees,
officers, agents or shareholders assume any personal liability for obligations
entered into on behalf of the Fund.
-31-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the dates set forth on Appendix A.
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ [ILLEGIBLE] By /s/ Al O'Neil
- ------------------------- --------------------------------
Assistant Secretary Vice President
EACH OF THE FUNDS LISTED ON APPENDIX A
ATTEST
By /s/ Robert F. Gunia
--------------------------------
/s/ S. Jane Rose Vice President
- -------------------------
Secretary
-32-
TRANSFER AGENCY AND SERVICE AGREEMENT
between
PRUDENTIAL-BACHE MONEYMART ASSETS, INC.
and
PRUDENTIAL MUTUAL FUND SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
Article 1 Terms of Appointment; Duties of the Agent..................... 1
Article 2 Fees and Expenses............................................. 5
Article 3 Representations and Warranties of the Agent................... 5
Article 4 Representations of Warranties of the Fund..................... 6
Article 5 Duty of Care and Indemnification.............................. 7
Article 6 Documents and Covenants of the Fund and the
Agent......................................................... 10
Article 7 Termination of Agreement...................................... 12
Article 8 Assignment.................................................... 12
Article 9 Affiliations.................................................. 13
Article 10 Amendment..................................................... 14
Article 11 Applicable Law................................................ 14
Article 12 Miscellaneous................................................. 14
Article 13 Merger of Agreement........................................... 15
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of January, 1988 by and between
PRUDENTIAL-BACHE MONEYMART ASSETS, INC., a Maryland corporation, having its
principal office and place of business at One Seaport Plaza, New York, New York
10292 (the "Fund"), and PRUDENTIAL MUTUAL FUND SERVICES, INC., a New Jersey
corporation, having its principal office and place of business at Raritan Plaza
I, Edison, New Jersey 08818 (the "Agent" or "PMFS").
WHEREAS, the Fund desires to appoint PMFS as its transfer agent,
dividend disbursing agent and shareholder servicing agent in connection with
certain other activities, and PMFS desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of PMFS
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints PMFS to act as, and PMFS agrees
to act as, the transfer agent for the authorized and issued shares of the common
stock of each series of the Fund, $.01 par value ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation,
open-account or similar plans provided to the shareholders of the Fund or any
series thereof ("Shareholders") and set out in the currently effective
prospectus and statement of additional
<PAGE>
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.02 PMFS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and PMFS, PMFS shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the Custodian
of the Fund authorized pursuant to the Articles of Incorporation of the Fund
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be paid over
in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on purchases
and/or redemptions of Shares of the Fund as such charges may be reflected in the
prospectus;
<PAGE>
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934 Act") a
record of the total number of Shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and outstanding. PMFS shall
also provide to the Fund on a regular basis the total number of Shares which are
authorized, issued and outstanding and shall notify the Fund in case any
proposed issue of Shares by the Fund would result in an overissue. In case any
issue of Shares would result in an overissue, PMFS shall refuse to issue such
Shares and shall not countersign and issue any certificates requested for such
Shares. When recording the issuance of Shares, PMFS shall have no obligation to
take cognizance of any Blue Sky laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), PMFS shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent and, as relevant, shareholder
servicing agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes
<PAGE>
on non-resident alien accounts, preparing and filing appropriate forms required
with respect to dividends and distributions by federal tax authorities for all
Shareholders, preparing and mailing confirmation forms and statements of account
to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account information and
(ii) provide a system which will enable the Fund to monitor the total number of
Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall (i) identify to PMFS in writing those
transactions and assets to be treated as exempt from Blue Sky reporting for each
State and (ii) verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The responsibility of PMFS for the Fund's registration status under the
Blue Sky or securities laws of any State or other jurisdiction is solely limited
to the initial establishment of transactions subject to Blue Sky compliance by
the Fund and the reporting of such transactions to the Fund as provided above
and as agreed from time to time by the Fund and PMFS.
PMFS may also provide such additional services and functions not
specifically described herein as may be mutually agreed between PMFS and the
Fund and set forth in Schedule B hereto.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Fund and PMFS.
<PAGE>
Article 2 Fees and Expenses
2.01 For performance by PMFS pursuant to this Agreement, the Fund
agrees to pay PMFS an annual maintenance fee for each Shareholder account and
certain transactional fees as set out in the fee schedule attached hereto as
Schedule A. Such fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and PMFS.
2.02 In addition to the fees paid under Section 2.01 above, the Fund
agrees to reimburse PMFS for out-of-pocket expenses or advances incurred by PMFS
for the items set out in Schedule A attached hereto. In addition, any other
expenses incurred by PMFS at the request or with the consent of the Fund will be
reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to PMFS by the Fund
upon request prior to the mailing date of such materials.
Article 3 Representations and Warranties of PMFS PMFS represents and warrants to
the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of New Jersey and it is duly qualified to carry on its
business in New Jersey.
3.02 It is and will remain registered with the U.S. Securities and
Exchange Commission (SEC) as a Transfer Agent
<PAGE>
pursuant to the requirements of Section 17A of the 1934 Act.
3.03 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to PMFS that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.05 A registration statement under the Securities Act of 1933 (the
1933 Act) is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
<PAGE>
Article 5 Duty of Care and Indemnification
5.01 PMFS shall not be responsible for, and the Fund shall indemnify
and hold PMFS harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of PMFS or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by PMFS or its agents or subcontractors of
information, records and documents which (i) are received by PMFS or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by PMFS or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities or Blue Sky laws of any
State or other jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other determination or
ruling by any
<PAGE>
federal agency or any State or other jurisdiction with respect to the offer or
sale of such Shares in such State or other jurisdiction.
5.02 PMFS shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by PMFS as a result of PMFS' lack of good faith, negligence
or willful misconduct.
5.03 At any time PMFS may apply to any officer of the Fund for
instructions, and may consult with legal counsel, with respect to any matter
arising in connection with the services to be performed by PMFS under this
Agreement, and PMFS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. PMFS, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to PMFS or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. PMFS, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to
<PAGE>
bear the proper manual or facsimile signature of the officers of the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Documents and Covenants of the Fund and PMFS
6.01 The Fund shall promptly furnish to PMFS the following:
<PAGE>
(a) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of PMFS and the execution and delivery of this
Agreement;
(b) A certified copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto;
(c) The current registration statements and any amendments and supplements
thereto filed with the SEC pursuant to the requirements of the 1933 Act and the
1940 Act;
(d) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary of the
Fund as to such approval;
(e) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan program or service offered or
to be offered by the Fund; and
(f) Such other certificates, documents or opinions as the Agent deems to
be appropriate or necessary for the proper performance of its duties.
6.02 PMFS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 PMFS shall prepare and keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the 1940 Act, and the Rules and Regulations
thereunder, PMFS agrees
<PAGE>
that all such records prepared or maintained by PMFS relating to the services to
be performed by PMFS hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the Rules and Regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.04 PMFS and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person
except as may be required by law or with the prior consent of PMFS and the Fund.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, PMFS will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. PMFS reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, PMFS reserves the right to
charge for any other reasonable fees and expenses associated with such
termination.
<PAGE>
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.03 PMFS may, in its sole discretion and without further consent by
the Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to: (i) Prudential-Bache Securities Inc. ("Prudential-Bache"), a
registered broker-dealer, (ii) The Prudential Insurance Company of America
("Prudential"), (iii) Pruco Securities Corporation, a registered broker-dealer,
(iv) any Prudential-Bache or Prudential subsidiary or affiliate duly registered
as a broker-dealer and/or a transfer agent pursuant to the 1934 Act or (vi) any
other Prudential-Bache or Prudential affiliate or subsidiary; provided, however,
that PMFS shall be as fully responsible to the Fund for the acts and omissions
of any agent or subcontractor as it is for its own acts and omissions.
Article 9 Affiliations
9.01 PMFS may now or hereafter, without the consent of or notice to
the Fund, function as Transfer Agent and/or Shareholder Servicing Agent for any
other investment company registered with the SEC under the 1940 Act, including
without
<PAGE>
limitation any investment company whose adviser, administrator, sponsor or
principal underwriter is or may become affiliated with Prudential Securities
and/or Prudential or any of its or their direct or indirect subsidiaries or
affiliates.
9.02 It is understood and agreed that the directors, officers,
employees, agents and Shareholders of the Fund, and the directors, officers,
employees, agents and shareholders of the Fund's investment adviser and/or
distributor, are or may be interested in the Agent as directors, officers,
employees, agents, shareholders or otherwise, and that the directors, officers,
employees, agents or shareholders of the Agent may be interested in the Fund as
directors, officers, employees, agents, Shareholders or otherwise, or in the
investment adviser and/or distributor as officers, directors, employees, agents,
shareholders or otherwise.
<PAGE>
Article 10 Amendment
10.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors of the Fund.
Article 11 Applicable Law
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New Jersey.
Article 12 Miscellaneous
12.01 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to PMFS an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to PMFS and the Fund issued by a
surety company satisfactory to PMFS, except that PMFS may accept an affidavit of
loss and indemnity agreement executed by the registered holder (or legal
representative) without surety in such form as PMFS deems appropriate
indemnifying PMFS and the Fund for the issuance of a replacement certificate, in
cases where the alleged loss is in the amount of $1000 or less.
12.02 In the event that any check or other order for payment of
money on the account of any Shareholder or new investor is returned unpaid for
any reason, PMFS will (a) give prompt notification to the Fund's distributor
("Distributor") of such non-payment; and (b) take such other action, including
imposition of a reasonable processing or handling fee, as PMFS may, in its
<PAGE>
sole discretion, deem appropriate or as the Fund and the Distributor may
instruct PMFS.
12.03 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to PMFS shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Prudential-Bache MoneyMart Assets, Inc.
One Seaport Plaza
New York, NY 10292
Attention: President
To PMFS:
Prudential Mutual Fund Services, Inc.
Raritan Plaza I
Edison, NJ 08818
Attention: President
Article 13 Merger of Agreement
13.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
PRUDENTIAL-BACHE MONEYMART
ASSETS, INC.
BY: /s/ Robert F. Gunia
-----------------------------
ATTEST:
/s/ S. Jane Rose
------------------------
PRUDENTIAL MUTUAL FUND
SERVICES, INC.
BY: /s/ Fred A. Fiandaca
-----------------------------
ATTEST:
/s/ Lynda M. Pugliese
------------------------
17
GARDNER, CARTON & DOUGLAS
One First National Plaza
Chicago, Illinois 60603
(312) 726-2452
April 2, 1976
Securities and Exchange Commission
500 North Capitol Street
Washington, D.C. 20549
Re: MoneyMart Assets Inc.
25,000,000 Shares of Common Stock,
$.10 par value
Gentlemen:
As counsel for MoneyMart Assets Inc., a Maryland corporation (the "Fund"),
we have examined into the proceedings taken and being taken for the registration
by the Fund of 25,000,000 shares of its Common Stock, $.10 par value.
We have examined all instruments, documents, and records which, in our
opinion, were necessary of examination for the purpose of rendering this
opinion. Based upon such examination, we are of the opinion that the
above-described shares of Common Stock will be, if and when issued by the Fund
in the manner described in the Registration Statement, validly authorized and
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
subject Registration Statement and to the use of our name whenever it appears in
said Registration Statement, including the Prospectus constituting a part
thereof, as originally filed or as subsequently amended.
Very truly yours,
GARDNER, CARTON & DOUGLAS
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 33 to Registration
Statement No. 2-55301 of Prudential MoneyMart Assets, Inc. of our report dated
February 4, 1997, appearing in the Statement of Additional Information, which is
a part of such Registration Statement, and to the references to us under the
headings "Financial Highlights" in the Prospectus, which is a part of such
Registration Statement, and "Custodian, Transfer and Dividend Disbursing Agent
and Independent Accountants" in the Statement of Additional Information.
/s/ DELOITTE & TOUCHE LLP
- ------------------------------
Deloitte & Touche LLP
New York, New York
February 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000067590
<NAME> PRUDENTIAL MONEYMART ASSETS, INC.
<SERIES>
<NUMBER> 001
<NAME> PRUDENTIAL MONEYMART ASSETS, INC. (CLASS A)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 7,402,273,744
<RECEIVABLES> 285,451,470
<ASSETS-OTHER> 13,089,864
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 229,455,085
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,925,279
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,464,434,714
<SHARES-COMMON-STOCK> 7,464,434,714
<SHARES-COMMON-PRIOR> 7,221,657,963
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,464,434,714
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 411,058,692
<OTHER-INCOME> 0
<EXPENSES-NET> 52,818,105
<NET-INVESTMENT-INCOME> 358,240,587
<REALIZED-GAINS-CURRENT> 390,335
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 358,630,922
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,398,251,715
<NUMBER-OF-SHARES-REDEEMED> (31,500,427,083)
<SHARES-REINVESTED> 344,952,119
<NET-CHANGE-IN-ASSETS> 601,407,673
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22,378,655
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52,818,105
<AVERAGE-NET-ASSETS> 7,326,023,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000067590
<NAME> PRUDENTIAL MONEYMART ASSETS, INC.
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<NAME> PRUDENTIAL MONEYMART ASSETS, INC. (CLASS Z)
<S> <C>
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