PRUDENTIAL MONEYMART ASSETS, INC.
- --------------------------------------------------------------------------------
PROSPECTUS DATED FEBRUARY 27, 1998
- --------------------------------------------------------------------------------
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 toknow before investing and is available at the Web
site of The Prudential Insurance Company of America (http://www.prudential.com).
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the Commission) in a Statement of Additional Information,
dated February 27, 1998, 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.
The Commission maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference and
other information regarding the Fund.
- --------------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.
WHAT IS PRUDENTIAL 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 Fund's net asset value 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 Investments Fund Management LLC (PIFM 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,
1998, PIFM served as manager or administrator to 64 investment companies,
including 42 mutual funds, with aggregate assets of approximately $63 billion.
The Prudential Investment Corporation (PIC), doing business as Prudential
Investments (PI, the Subadviser or the investment adviser), furnishes investment
advisory services in connection with the management of the Fund under a
Subadvisory Agreement with PIFM. See "How the Fund is Managed--Manager" at page
11.
WHO DISTRIBUTES THE FUND'S SHARES?
Prudential Securities Incorporated (Prudential Securities or the
Distributor), a major securities underwriter and securities and commodities
broker, acts as the Distributor of the Fund's shares. The Fund reimburses
Prudential Securities 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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
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 investment
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
net asset value per share (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.
Prudential Securities 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 and short-term capital gains, if any, and make distributions
annually of any net long-term capital gains. Dividends and distributions 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.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
CLASS A SHARES CLASS Z SHARES
-------------- --------------
<S> <C> <C> <C> <C>
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
(as a percentage of average net assets) CLASS A SHARES CLASS Z SHARES
-------------- ---------------
Management Fees .................................................... .301% .301%
12b-1 Fees ......................................................... .125% None
Other Expenses ..................................................... .275% .275%
---- ----
Total Fund Operating Expenses ...................................... .701% .576%
==== ====
1 3 5 10
EXAMPLE YEAR YEARS YEARS YEARS
---- ----- ----- -----
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 $22 $39 $87
Class Z ............................................................ $6 $18 $32 $72
</TABLE>
- -------------
The above example is based on data for the Fund's fiscal year ended December 31,
1997. 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.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR INDICATED)
- --------------------------------------------------------------------------------
The following financial highlights for the Class A shares of the Fund for
the fiscal year ended December 31, 1997 have been audited by Price Waterhouse
LLP, independent accountants, and for the nine years ended December 31, 1996, by
Deloitte & Touche LLP, independent auditors. The report by Price Waterhouse LLP
and each of the reports by Deloitte & Touche LLP on such financial statements
was unqualified. This information should be read in conjunction with the
financial statements and notes thereto, which appear in the Statement of
Additional Information. The following financial highlights contain selected data
for a Class A share of common stock outstanding, total return, ratios to average
net assets and other supplemental data for the years indicated. This information
is based on data contained in the financial statements.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES(b)
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <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 $1.000 $1.000
Net investment income
and net realized gains . .050 .048 .054 .037 .027 .035 .058 .077 .086 .069
Dividends and distributions (.050) (048) (.054) (.037) (.027) (.035) (.058) (.077) (.086) (.069)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year ................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN(a): ........ 5.09% 4.97% 5.51% 3.72% 2.70% 3.59% 5.95% 8.00% 8.96% 7.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000) .............$6,863,647 $7,315,223 $7,221,658$6,544,880$7,318,633$6,703,281$7,138,159$7,411,932 $8,168,972 $5,240,662
Average net assets (000).$7,121,692 $7,326,023 $6,914,520$7,071,381$7,742,989$7,116,739$7,763,251$8,262,329 $6,947,060 $5,139,264
Ratios to average net
assets:
Expenses, including
distribution fee ...... .70% .71% .69% .71% .71% .66% .68% .73% .69% .71%
Expenses, excluding
distribution fee ...... .58% .59% .56% .58% .58% .54% .56% .60% .57% .58%
Net investment income ... 4.97% 4.83% 5.38% 3.65% 2.63% 3.43% 5.72% 7.62% 8.57% 6.98%
- ----------------------
(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.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A CLASS Z SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED)
- --------------------------------------------------------------------------------
The following financial highlights for the Class Z shares of the Fund for
the fiscal year ended December 31, 1997 have been audited by Price Waterhouse
LLP, independent accountants, and for the period from March 1, 1996 through
December 31, 1996, by Deloitte & Touche LLP, independent auditors. The report by
Price Waterhouse LLP and the report by Deloitte & Touche LLP on such financial
statements 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 common 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.
CLASS Z SHARES
------------------------------------
MARCH 1, 1996 (a)
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $1.000 $1.000
Net investment income and net
realized gains .......................... 0.51 .040
Dividends and distributions .............. (0.51) (.040)
------ ------
Net asset value, end of period ........... $1.000 $1.000
====== ======
TOTAL RETURN(b): ......................... 5.22% 4.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) .......... $157,352 $149,212
Average net assets (000) ................. $159,508 $121,135
Ratios to average net assets:
Expenses, including distribution fee ..... .58% .59%(c)
Expenses, excluding distribution fee ..... .58% .59%(c)
Net investment income .................... 5.10% 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.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
CALCULATION OF YIELD
- --------------------------------------------------------------------------------
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, 1997 for
Class A and Class Z shares of the Fund:
CLASS A SHARES
--------------
Value of hypothetical account at end of period $1.000996919
Value of hypothetical account at beginning of period 1.000000000
------------
Base period return $ .000996919
============
CURRENT YIELD (.000996919 x (365/7)) 5.20%
EFFECTIVE ANNUAL YIELD, assuming weekly compounding 5.34%
CLASS Z SHARES
--------------
Value of hypothetical account at end of period $1.001020889
Value of hypothetical account at beginning of period 1.000000000
------------
Base period return $ .001020889
============
CURRENT YIELD (.001020889 x (365/7)) 5.32%
EFFECTIVE ANNUAL YIELD, assuming weekly compounding 5.51%
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, 1997 was 54 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 and other
industry publications, business periodicals and market indices.
- --------------------------------------------------------------------------------
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------
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 THE FUND'S 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 THE FUND'S 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 Services, Inc. (Moody's) or AA or D-2 by Duff & Phelps Credit
Rating Co. (Duff & 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 & 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 a security (i) rated in one of the two highest
short-term rating categories (a) by at least two nationally recognized
statistical rating organizations assigning a rating to the security or issuer
or, (b) if only one rating organization assigned a rating, by that rating
organization or (ii) if unrated, of comparable quality as determined by the
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.
See Appendix A in the Statement of Additional Information for a description
of certain securities ratings.
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 PIFM pursuant to
an order of the SEC.
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. For a more detailed description of
puts, see "Investment Objective and Policies" in the Statement of Additional
Information.
VARIABLE RATE AND FLOATING 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase securities on a "when-issued" or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time of entering into the transaction. The Fund will
limit such purchases to those in which the date for delivery and payment falls
within 90 days of the date of the commitment. The Fund will make commitments
for such when-issued transactions only with the intention of actually acquiring
the securities. The Fund's Custodian will maintain, in a segregated account of
the Fund, cash or other liquid assets having a value equal to or greater than
the Fund's purchase commitments. If the Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition, it could, as with
the disposition of any other portfolio security, incur a gain or loss due to
market fluctuations. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during the period between
purchase and settlement. See "Investment Objective and Policies--When-Issued and
Delayed Delivery Securities" 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
9
<PAGE>
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 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.
10
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, the total expenses of the Fund's
Class A and Class Z shares as a percentage of average net assets were .701% and
.576%, respectively. See "Financial Highlights."
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM 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 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. PIFM is organized as a
New York limited liability company. For the fiscal year ended December 31, 1997,
the Fund paid management fees to PIFM of .301% of the Fund's average net assets.
See "Manager" in the Statement of Additional Information.
As of January 31, 1998, PIFM served as the manager to 42 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 $63 billion.
UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PIFM 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 PIFM AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC), DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, SUBADVISER OR
THE INVESTMENT ADVISER), PI FURNISHES INVESTMENT ADVISORY SERVICES IN CONNECTION
WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PIFM FOR ITS REASONABLE
COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the Management
Agreement, PIFM continues to have responsibility for all investment advisory
services and supervises PI's performance of such services.
PIFM and PIC 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 THE
DISTRIBUTOR), 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), THE DISTRIBUTOR INCURS THE EXPENSES OF DISTRIBUTING
CLASS A SHARES OF THE FUND AND IS REIMBURSED AS DESCRIBED BELOW. The Distributor
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
with respect to both the Class A and Class Z shares. These expenses include
account servicing fees paid to, or on account of, financial advisors 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
11
<PAGE>
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 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 advisors. The entire
distribution fee may be used to pay account servicing fees. For the fiscal year
ended December 31, 1997, 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.
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.
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 and Brokerage" in the Statement of Additional
Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company (State Street or the Custodian), 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 or the Transfer Agent), 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 PIFM. Its mailing address is
P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
YEAR 2000
The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact on handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no adverse
impact on the Fund, the Manager, the Distributor, the Transfer Agent and the
Custodian have advised the Fund that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of their outside service providers, will be
adapted in time for that event.
12
<PAGE>
- --------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------
THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING
ITS LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. THE BOARD OF DIRECTORS HAS FIXED THE SPECIFIC TIME
OF DAY FOR THE COMPUTATION OF THE NAV TO BE 4:30 P.M., NEW YORK TIME,
IMMEDIATELY AFTER THE DECLARATION OF DIVIDENDS ON EACH DAY THE FUND IS OPEN FOR
BUSINESS. THE FUND IS OPEN FOR BUSINESS EACH DAY THAT THE NEW YORK STOCK
EXCHANGE IS OPEN FOR TRADING.
The Fund will compute its NAV once daily on each of its business days
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 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, Fund's NAV at $1.00 per share. See "Net Asset Value" in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
TAXATION OF THE FUND
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code 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. In general, tax-exempt shareholders will
not be required to pay taxes on amounts distributed to them.
Distributions of net long-term capital gains (i.e., the excess of
net long-term capital gains over net short-capital losses) are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held shares in the Fund. The Fund does not expect to realize long-term capital
gains or losses. In determining the amount of capital gains to be distributed,
any capital loss carryovers from prior years will be offset against capital
gains. The maximum long-term capital gains rate for individual shareholders for
securities held between 12 and 18 months currently is 28%
13
<PAGE>
and for securities held more than 18 months is 20%. The maximum tax rate for
individual shareholders for ordinary income is 39.6%. The maximum long-term
capital gains rate for corporate shareholders is currently the same as the
maximum tax rate for ordinary income.
Neither distributions of net investment income nor distributions of capital
gains, if any, will be eligible for the dividends received deduction allowed to
corporate shareholders.
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). The Clinton Administration budget plan includes a tax proposal
which, if enacted as legislation, would eliminate the 30% withholding tax
applicable to distributions from the Fund to foreign investors. There can be no
assurance that any such legislation will be enacted or, if enacted, as to the
effective date of such legislation.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes. See "Taxes, Dividends
and Distributions" in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
THE FUND EXPECTS TO DECLARE DAILY AND PAY MONTHLY DIVIDENDS OF NET
INVESTMENT INCOME AND SHORT-TERM CAPITAL GAINS, IF ANY, AND MAKE DISTRIBUTIONS
ANNUALLY OF ANY NET LONG-TERM CAPITAL GAINS. A shareholder generally begins to
earn dividends on the first business day after his or her order is placed with
the Fund, as described above, 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 not be entitled to dividends
declared on the date of redemption. See "How to Sell Your Shares--Redemption of
Shares Purchased Through Prudential Securities."
DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL SHARES OF THE FUND
BASED ON THE NAV OF THE FUND'S SHARES ON THE PAYMENT DATE, UNLESS THE
SHAREHOLDER ELECTS IN WRITING NOT LESS THAN FIVE BUSINESS DAYS PRIOR TO THE
PAYMENT DATE TO RECEIVE SUCH DIVIDENDS AND DISTRIBUTIONS IN CASH. Such election
should be submitted to Prudential Mutual Fund Services LLC, Attention: Account
Maintenance, P.O. Box 15015, New Brunswick, New Jersey 08906-5015. If you hold
your shares through Prudential Securities, you should contact your financial
advisor to elect to receive dividends and distributions in cash. The Fund will
notify each shareholder after the close of the Fund's taxable year both of the
dollar amount and taxable status of that year's dividends and distributions on a
per share basis.
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, 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, (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., New York time, 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. Payments may be
made by cash, wire, check or through your brokerage account.
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.
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 defined contribution assets; (ii)
participants in any fee-based program sponsored by Prudential Securities, The
Prudential Savings Bank, F.S.B. or any affiliate which includes mutual funds as
investment options and for which the Fund is an available option; (iii) certain
participants in the MEDLEY Program (group variable annuity contracts) sponsored
by Prudential for whom Class Z shares of the Prudential Mutual Funds are an
available option; (iv) Benefit Plans for which Prudential Retirement Services
serves as recordkeeper and as of September 20, 1996, (a) were Class Z
shareholders of the Prudential Mutual Funds or (b) executed a letter of intent
to purchase Class Z shares of the Prudential Mutual Funds; (v) current and
former Directors/Trustees of the Prudential Mutual Funds (including the Fund);
and (vi) employees of Prudential and/or Prudential Securities who participate in
a Prudential-sponsored employee savings plan.
16
<PAGE>
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 from its own resources based on a
percentage of the net asset value of shares sold by such persons.
PURCHASES THROUGH PRUDENTIAL SECURITIES
AUTOMATIC INVESTMENT (AUTOSWEEP)
Prudential Securities has advised the Fund that it has automatic investment
procedures (Autosweep) for Fund Class A investors 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
advisor. 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 benefit 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)
17
<PAGE>
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.
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, your name and individual account number. It is
not necessary to call PMFS to make subsequent purchase orders by wire. 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
18
<PAGE>
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 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."
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., New York time, 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., New York time, 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 VisaR 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 PIFM
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 advisor 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."
19
<PAGE>
Prudential Securities clients for whom Prudential Securities has purchased
shares of the Fund may have these shares redeemed only through Prudential
Securities. Please contact your Prudential Securities financial advisor.
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."
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 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 CASHIER'S CHECKS.
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 higher
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.
20
<PAGE>
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, 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
21
<PAGE>
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 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.
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 "Shareholder Investment
Account--Exchange Privilege" in the Statement of Additional Information. An
exchange will be treated as a redemption and purchase for tax purposes.
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 ADVISOR.
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.
FREQUENT TRADING
The Fund and the other Prudential Mutual Funds are not intended to serve as
vehicles for frequent trading in response to short-term fluctuations in the
market. Due to the disruptive effect that market timing investment strategies
and excessive trading can have on efficient portfolio management, the Fund
reserves the right to refuse purchase orders and
22
<PAGE>
exchanges by any person, group or commonly controlled accounts, if, in the
Manager's sole judgment, such person, group or accounts were following a market
timing strategy or were otherwise engaging in excessive trading (Market Timers).
To implement this authority to protect the Fund and its shareholders from
excessive trading, the Fund will reject all exchanges and purchases from a
Market Timer unless the Market Timer has entered into a written agreement with
the Fund or its affiliates pursuant to which the Market Timer has agreed to
abide by certain procedures, which include a daily dollar limit on trading. The
Fund may notify the Market Timer of rejection of an exchange or purchase order
subsequent to the day on which the order was placed.
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
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 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.
23
<PAGE>
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.
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 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
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
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 International Bond 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 Total Return Fund, Inc.
EQUITY FUNDS
Prudential Balanced Fund
Prudential Distressed Securities Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Small Cap Index 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 Active Balanced Fund
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
MONEY MARKET FUNDS
o Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
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 ............................................. 11
Manager ............................................................ 11
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
- --------------------------------------------------------------------------------
MF108A
- --------------------------------------------------------------------------------
Class A: 74435H-10-2
CUSIP Nos.:
Class Z: 74435H-20-1
- --------------------------------------------------------------------------------
PRUDENTIAL
MONEYMART
ASSETS, INC.
P R O S P E C T U S
FEBRUARY 27, 1998
WWW.PRUDENTIAL.COM
PRUDENTIAL
INVESTMENTS
[LOGO]
<PAGE>
PRUDENTIAL MONEYMART ASSETS, INC.
Statement of Additional Information
Dated February 27, 1998
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 27, 1998, a copy
of which may be obtained from the Fund upon request at the address or telephone
number noted above.
TABLE OF CONTENTS
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
---- ---------------
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-12 23
Net Asset Value ....................................... B-14 13
Portfolio Transactions and Brokerage .................. B-15 12
Taxes, Dividends and Distributions .................... B-15 13
Custodian, Transfer and Dividend Disbursing
Agent and Independent Accountants ................... B-16 12
Financial Statements .................................. B-17 --
Report of Independent Accountants ..................... B-26 --
Independent Auditors' Report .......................... B-27 --
Appendix I--Description of Ratings .................... I-1 --
Appendix II--Information Relating to The Prudential ... II-1 --
- --------------------------------------------------------------------------------
MF108B
<PAGE>
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 rate 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.
When-Issued and Delayed Delivery Securities. From time to time, in the
ordinary course of business, the Fund may purchase securities on a when-issued
or delayed delivery basis, i.e., delivery and payment can take place a month or
more after the date of the transaction. At the time a Fund makes the commitment
to purchase securities on a when-issued or delayed delivery basis, it will
record the transaction and thereafter reflect the value, each day, of such
securities in determining its net asset value. The Fund will make commitments
for such when-issued transactions only with the intention of actually acquiring
the securities and, to facilitate such acquisitions, the Fund will instruct its
custodian bank to maintain, in a separate account of the Fund, cash, U.S.
Government securities or other liquid unencumbered assets, marked-to-market
daily, having a value equal to or greater than the Fund's purchase commitments.
On the delivery dates for such transactions the Fund will meet its obligations
from maturities or sales of the securities held in the separate account and/or
from then-available cash flow. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. There is a risk that the securities may not be delivered and
the Fund may incur a loss.
Repurchase Agreements. The Fund participates in a joint repurchase account
with other investment companies managed by Prudential Investments 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 desig-
B-2
<PAGE>
nated 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 agreements 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 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
B-3
<PAGE>
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.
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.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
POSITION
NAME, ADDRESS AND AGE (1) WITH FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
- ------------------------- --------- --------------------------------------------
<S> <C> <C>
Edward D. Beach (73) Director President and Director of BMC Fund, Inc., a closed-end investment
company; previously, Vice Chairman of Broyhill Furniture Industries,
Inc.; Certified Public Accountant; Secretary and Treasurer of
Broyhill Family Foundation, Inc.; Member of the Board of Trustees of
Mars Hill College; and Director of The High Yield Income Fund, Inc.
Stephen C. Eyre (75) Director Executive Director of The John A. Hartford Foundation, Inc.
(charitable foundation) (May 1985 through December 1997); Director of
Faircom, Inc.; and Trustee Emeritus of Pace University.
Delayne Dedrick Gold (59) Director Marketing and Management Consultant; Director of The High Yield
Income Fund, Inc.
* Robert F. Gunia (51) Director Vice President, Prudential Investments (since September 1997);
Executive Vice President and Treasurer (since December 1996),
Prudential Investments Fund Management, LLC (PIFM); Senior Vice
President (since March 1987) of Prudential Securities Incorporated
(Prudential Securities); formerly Chief Administrative Officer (July
1990-September 1996), Director (January 1989-September 1996), and
Executive Vice President, Treasurer and Chief Financial Officer (June
1987-September 1996) of Prudential Mutual Fund Management, Inc.
(PMF); Vice President and Director (since May 1989) of The Asia
Pacific Fund, Inc.; Director of The High Yield Income Fund, Inc.
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME, ADDRESS AND AGE (1) WITH FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
- ------------------------- --------- --------------------------------------------
<S> <C> <C>
Don G. Hoff (62) Director Chairman and Chief Executive Officer (since 1980) of Intertec, Inc.
(investments); Chairman and Chief Executive Officer of The Lamour
Corporation, Inc.; Director of Innovative Capital Management, Inc.
and The Greater China Fund, Inc; and Chairman and Director of The
Asia Pacific Fund, Inc.
Robert E. LaBlanc (63) Director President (since 1981) of Robert E. LaBlanc Associates, Inc.
(telecommunications) since 1981; formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Director of
Storage Technology Corporation, Titan Corporation, Salient 3
Communications, Inc. and Tribune Company; and Trustee of Manhattan
College.
* Mendel A. Melzer, Director Chief Investment Officer (since October 1996) of Prudential Mutual
CFA, (37) Funds; formerly Chief Financial Officer (November 1995-October 1996)
751 Broad Street of Prudential Investments; Senior Vice President and Chief Financial
Newark, NJ 07102 Officer of Prudential Preferred Financial Services (April
1993-November 1995), Managing Director of Prudential Investment
Advisors (April 1991-April 1993) and Senior Vice President of
Prudential Capital Corporation (July 1989-April 1991); Chairman and
Director of Prudential Series Fund, Inc; and Director of The High
Yield Income Fund, Inc.
* Richard A. Redeker (54) President and Employee of Prudential Investments; formerly President, Chief
751 Broad Street Director Executive Officer and Director (October 1993-September 1996) of PMF,
Newark, NJ 07102 Executive Vice President, Director and Member of the Operating
Committee (October 1993-September 1996), Prudential Securities,
Director (October 1993-September 1996) of Prudential Securities
Group, Inc. (PSG), Executive Vice President, The Prudential
Investment Corporation (January 1994-September 1996), Director
(January 1994-September 1996), Prudential Mutual Fund Distributors,
Inc. and Prudential Mutual Fund Services, Inc. and Senior Executive
Vice President and Director of Kemper Financial Services, Inc.
(September 1978-September 1993); and President and Director of The
High Yield Income Fund, Inc.
Robin B. Smith (58) Director Chairman and Chief Executive Officer (since August 1996) of
Publishers Clearing House; formerly President and Chief Executive
Officer (January 1989-August 1996) and President and Chief Operating
Officer (September 1981-December 1988) of Publishers Clearing House;
Director of BellSouth Corporation, Texaco Inc., Springs Industries
Inc. and Kmart Corporation.
Stephen Stoneburn (54) Director President and Chief Executive Officer (since June 1996) of Quadrant
Media Corp. (a publishing company); formerly President (June
1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995), Cowles Business
Media; Senior Vice President (January 1991-1992) and Publishing Vice
President (May 1989-December 1990) of Gralla Publications (a division
of United Newspapers, U.K.); and Senior Vice President of Fairchild
Publications, Inc.
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME, ADDRESS AND AGE (1) WITH FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
- ------------------------- --------- --------------------------------------------
<S> <C> <C>
Nancy H. Teeters (67) Director Economist; formerly Vice President and Chief Economist (March
1986-June 1990) of International Business Machines Corporation;
member of the Board of Governors of the Horace Rackham School of
Graduate Studies of the University of Michigan; Director (since July
1991) of Inland Steel Corporation; and Director of The High Yield
Income Fund, Inc.
S. Jane Rose (52) Secretary Senior Vice President (since December 1996 of PIFM; Senior Vice
President and Senior Counsel (since July 1992) of Prudential
Securities; formerly Senior Vice President (January 1991-September
1996) and Senior Counsel (June 1987-September 1996) of PMF.
Robert C. Rosselot (37) Assistant Assistant General Counsel (since September 1997) of PIFM. Formerly,
Secretary partner with the firm of Howard & Howard, Bloomfield Hills, Michigan
(December 1995-September 1997) and, prior thereto, Corporate Counsel,
Federated Investors (1990-1995).
Grace C. Torres (38) Treasurer and First Vice President (since December 1996) of PIFM; First Vice
Principal President (since March 1994) of Prudential Securities; formerly First
Financial and Vice President (March 1994-September 1996), Prudential Mutual Fund
Accounting Management, Inc. and Vice President (July 1989-March 1994) of Bankers
Officer Trust Corporation.
Stephen M. Ungerman (44) Assistant Tax Director (since March 1996) Prudential Investments and the
Treasurer Private Asset Group of The Prudential Insurance Company of America;
formerly First Vice President (February 1993-September 1996)
Prudential Mutual Fund Management, Inc. and Senior Tax Manager
(1981-January 1993) Price Waterhouse LLP.
</TABLE>
- ---------------
(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Investments 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 Securities or PIFM
Drectors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Pudential Scurities.
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.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the Manager.
The Fund pays each of its Directors who is not an affiliated person of PIFM
annual compensation of $7,000, in addition to certain out-of-pocket expenses.
The amount of compensation paid to each Director may change as a result of the
introduction of additional funds upon which the Director will be asked to serve.
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>
The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended December 31, 1997 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 that of all other funds managed by
PIFM (Fund Complex) for the calendar year ended December 31, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
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 $7,000 None N/A $135,000(38/63)*
Stephen C. Eyre--Director $7,000 None N/A $ 45,000(12/13)*
Delayne D. Gold--Director $7,000 None N/A $135,000(38/63)*
Robert F. Gunia (1)--Director -- None N/A --
Don G. Hoff--Director $7,000 None N/A $ 45,000(12/13)*
Robert F. LaBlanc--Director $7,000 None N/A $ 45,000(12/13)*
Mendel A. Melzer (1)--Director -- None N/A --
Richard A. Redeker (1)--Director -- None N/A --
Robin B. Smith--Director $7,000 None N/A $ 90,000(27/34)*
Stephen Stoneburn--Director $7,000 None N/A $ 45,000(12/13)*
Nancy H. Teeters--Director $7,000 None N/A $ 90,000(26/50)*
</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.
(2) Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1997, including amounts deferred at the
election of Directors under the funds' Deferred Compensation Plans.
Including accrued interest, total deferred compensation amounted to
$139,081 for Robin B. Smith.
As of February 6, 1998, 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 6, 1998, the beneficial owners, directly or indirectly, of
more than 5% of the outstanding Common Stock of the Prudential MoneyMart
Assets, Inc. were: Pru Defined Contributions Svsc, FBO Pru-Non-Trust Account.
Att: John Surdy, 30 Scranton Office Park, Moosic, PA held 23,144,960 Class Z
shares, or approximately 14% of the outstanding Class Z shares; Prudential Trust
Company, FBO Pru-DC Trust Acounts, Attn: John Surdy, 30 Scranton Office Park,
Moosic, PA held 24,524,182 Class Z shares or approximately 15% of the
outstanding Class Z shares.
As of February 6, 1998, Prudential Securities held, solely of record on
behalf of other persons, 7,065,378,917 Class A shares of the Fund's Common
Stock, representing approximately 97% 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 Investments Fund Management LLC (PIFM
or the Manager) (formerly, Prudential Mutual Fund Management LLC), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. PIFM 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, 1998, PIFM managed and/or administered
open-end and closed-end management investment companies with assets of
approximately $62 billion. According to the Investment Company Institute, as of
December 31, 1997, the Prudential Mutual Funds were the 17th largest family of
mutual funds in the United States.
B-8
<PAGE>
PIFM is a subsidiary of Prudential Securities. Prudential Mutual Fund
Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary of PIFM and
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), PIFM, 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, PIFM is obligated to keep certain books and
records of the Fund. PIFM 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 PIFM for the Fund are not exclusive under the terms of the
Management Agreement and PIFM is free to, and does, render management services
to others.
For its services, PIFM receives, pursuant to 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 payable to PIFM, but excluding
interest, taxes, brokerage commissions, distribution fees and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the 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 compensation due to PIFM will be reduced by
the amount of such excess. Reductions in excess of the total compensation
payable to PIFM will be paid by PIFM to the Fund. No such reductions were
required during the fiscal year ended December 31, 1997. Currently, the Fund
believes that there are no such expense limitations.
In connection with its management of the corporate affairs of the Fund,
PIFM bears the following expenses:
(a) the salaries and expenses of its and the Fund's personnel except
the fees and expenses of Directors who are not affiliated persons of PIFM
or the Fund's investment adviser;
(b) all expenses incurred by PIFM or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund, as described below; and
(c) the costs and expenses payable to The Prudential Investment
Corporation, doing business as Prudential Investments (PI), pursuant to the
subadvisory agreement between PIFM 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, including the
preparation and printing of the Fund's registration statements and prospectuses
for such purposes, and paying the fees and expenses of notice filings made in
accordance with state securities laws, (k) allocable communications expenses
with respect to investor services and all expenses of shareholders' and
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 PIFM will not be liable for any
error of judgment or for any loss suffered by the Fund in connection with the
matters to which the Management Agreement relates, except a loss resulting from
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, 1997, 1996 and 1995, PIFM received
management fees of $21,943,602, $22,378,655 and $20,840,442, respectively.
B-9
<PAGE>
PIFM has entered into the Subadvisory Agreement with PI, a wholly-owned
subsidiary of Prudential. The Subadvisory Agreement provides that PI will
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. PIFM 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 PIFM for the reasonable costs and expenses
incurred by PI in furnishing services.
The Subadviser maintains a 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, PIFM or PI upon not more than 60 days' nor less than 30
days' written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved 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 the
Distributor), One Seaport Plaza, New York, New York 10292, acts as the
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
National Association of Securities Dealers, Inc. (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
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.
See "How the Fund is Managed--Distributor" in the Prospectus.
For the fiscal year ended December 31, 1997, Prudential Securities incurred
distribution expenses in the aggregate of $8,902,115, all of which was recovered
through the distribution fee paid by the Class A shares of the Fund.
It is estimated that the distribution expenses (i) account servicing fee
credits to Prudential Securities branch offices for payments of account
servicing fees to account executives (91.09% or $8,108,713) and (ii) an
allocation of overhead and other branch office distribution-related expenses
(8.91% or $793,402). 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.
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 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.
B-10
<PAGE>
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
the Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act of 1933, as amended.
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.
The Fund's shares are sold, without a sales charge, on a continuing basis
on each business day at their net asset value (NAV) next determined (see "How
the Fund Values its Shares" in the Prospectus) after a purchase order becomes
effective. Shares of the Fund may be purchased by investors directly through
Prudential Mutual Fund Services LLC (PMFS), or by Prudential Securities clients
through an account at Prudential Securities. Shares may also be purchased
through Pruco Securities Corporation (Prusec). Prudential Securities clients who
hold Fund shares through Prudential Securities may benefit through
administrative conveniences afforded them as Prudential Securities clients, but
may be subject to certain additional restrictions imposed by Prudential
Securities. See "Shareholder Guide--How to Buy Shares of the Fund" in the
Prospectus.
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. Also, shares purchased by check are not available to
cover checks until 10 calendar days after receipt of the purchase check by PMFS.
See "Shareholder Guide--How to Sell Your Shares" in the Prospectus. 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."
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.
PMFS reserves the right to assess a service charge 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
B-11
<PAGE>
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 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 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. The Fund does not forward redemption proceeds
with respect to shares purchased by check until at least 10 calendar days after
receipt of the purchase check by PMFS.
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, at the
address set forth above.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor institution" includes
any bank, broker, dealer or credit union. The Transfer Agent reserves the right
to request additional information from, and make reasonable inquiries of, any
eligible guarantor institution. Signature guarantees by savings banks, savings
and loan associations and notaries will not be accepted. PMFS may request
further documentation from corporations, executors, administrators, trustees or
guardians. 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. See "Shareholder Guide--How to Sell Your Shares" in the Prospectus
for additional information on Expedited Redemption.
REGULAR REDEMPTION. Shareholders may redeem their shares by sending to
PMFS, at the address set forth above, a written request, accompanied by duly
endorsed stock certificates, if issued. All written requests for redemption, and
any share certificates, must be endorsed by the shareholder with signature
guaranteed, as described above under "Expedited Redemption." PMFS may request
further documentation from corporations, executors, administrators, trustees or
guardians. Redemption proceeds are sent to a shareholder's address by check.
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.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
For the convenience of investors, all dividends and distributions are
automatically invested in full and fractional shares of the Fund at NAV. An
investor may direct the Transfer Agent in writing not less than 5 full business
days prior to the payable date to have subsequent dividends and/or distributions
sent in cash rather than invested. In the case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payment will be made directly to the dealer. Any
B-12
<PAGE>
shareholder who receives a cash payment representing a dividend or distribution
may reinvest such dividend or distribution at NAV by returning the check or the
proceeds to the Transfer Agent within 30 days after the payment date. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent.
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 NAV 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.
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets, Inc. (Class A shares)
Prudential Tax-Free Money Fund, Inc.
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
Prudential Mutual 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.
In addition, an investor may direct the Transfer Agent to redeem on a
monthly or other periodic basis specified amounts (minimum of $100) of shares of
the Fund and invest the proceeds of such redemptions in shares of another
Prudential Mutual Fund pursuant to the "Exchange Privilege."
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.
B-13
<PAGE>
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 NAV on
shares held under this plan. See "Shareholder Investment Account--Automatic
Reinvestment of Dividends and Distributions" above.
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.
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
a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meet the conditions required under
the Internal Revenue Code will not be subject to tax upon withdrawal from the
account.
NET ASSET VALUE
The NAV per share is the net worth of the Fund (assets, including
securities at value, minus liabilities) divided by the number of shares
outstanding.
The Fund uses the amortized cost method to determine the value of its
portfolio securities. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period until maturity.
The method does not take into account unrealized capital gains and losses which
may result from the effect of fluctuating interest rates on the market value of
the security.
B-14
<PAGE>
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 investment adviser under the direction of the Board
of Directors, to be of minimal credit risk and of "eligible quality" in
accordance with regulations of the SEC. The Board of Directors 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 include review of the Fund's portfolio holdings by the Board, at
such intervals as deemed appropriate, to determine whether the Fund's NAV
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 of Directors. 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
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,
redemptions of shares in kind, or the use of available market quotations to
establish a NAV per share.
The New York Stock Exchange is closed on the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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 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, DIVIDENDS AND DISTRIBUTIONS
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 ("Internal Revenue Code"). Qualification as a regulated
investment company under the Internal Revenue Code requires, among other things,
that the Fund (a) derive at least 90% of its annual gross income (without offset
for losses from the sale or other disposition of securities or foreign
currencies) from interest, payments with respect to securities loans, dividends
and gains from the sale or other disposition of securities or foreign currencies
and certain financial futures, options and forward contracts thereon; and (b)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by
cash, U.S. Government securities and other securities limited in respect of any
one issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities). In addition, in order not to be subject to federal
income tax on amounts distributed to shareholders, the Fund must distribute to
its shareholders as ordinary dividends at least 90% of its net investment income
and net short-term capital gains in excess of its net long-term capital losses
earned in each year.
B-15
<PAGE>
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. The Fund does not expect to realize long-term capital gains
or losses. 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.
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.
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.
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 PIFM. PMFS provides customary transfer agency
services to the Fund, including the handling of shareholder communications, the
processing of shareholder transactions, the maintenance of shareholder account
records, payment of dividends and distributions and related functions. For these
services, PMFS receives an annual fee per shareholder account, 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, 1997, the Fund incurred fees of approximately $16,979,000
for such services.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Fund's independent public accountants and in that capacity
audits the Fund's annual financial statements.
B-16
<PAGE>
Portfolio of Investments
as of December 31 1997 PRUDENTIAL MONEYMART ASSETS, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Bank Notes--5.8%
American Express Centurion BankD
$30,000 5.94%, 1/5/98 $ 30,000,775
9,000 5.95%, 1/13/98 8,999,894
36,000 6.04%, 1/23/98 36,008,647
Comerica Bank of DetroitD
25,000 5.90%, 1/5/98 24,998,494
98,000 5.90%, 1/11/98 97,992,555
Corestates Bank N.A.D
25,000 5.97%, 1/28/98 25,000,000
U.S. Bank N.AD
183,000 5.86%, 1/21/98 182,916,830
--------------
405,917,195
- ------------------------------------------------------------
Certificates Of Deposit - Domestic--0.8%
Chase Manhattan Bank (USA)
45,000 5.75%, 2/10/98 45,000,000
CoreStates Bank N.A.
8,000 5.78%, 1/23/98 8,000,000
--------------
53,000,000
- ------------------------------------------------------------
Certificates Of Deposit - Eurodollar--5.7%
Abbey National Treasury Services
PLC
300,000 5.81%, 3/3/98 300,000,000
Toronto Dominion Bank
50,000 5.62%, 1/30/98 50,000,000
Westdeutsche Landesbank
Girozentrale
49,000 5.82%, 8/3/98 48,977,744
--------------
398,977,744
- ------------------------------------------------------------
Certificates Of Deposit - Yankee--17.5%
Bank of Montreal
35,000 5.64%, 1/15/98 35,000,000
44,000 5.64%, 1/29/98 44,000,000
86,000 5.65%, 1/29/98 86,000,000
Banque Nationale De Paris
100,000 5.65%, 1/27/98 100,000,000
Bayerische Hypotheken und Weschel
Bank
22,000 5.94%, 10/22/98 21,989,838
Canadian Imperial Bank of Commerce
$41,000 5.81%, 3/11/98 $ 41,000,340
275,000 5.81%, 3/17/98 275,000,000
35,000 5.80%, 3/23/98 35,000,000
Commerzbank U.S. Finance, Inc.
28,000 6.08%, 5/27/98 27,996,257
Credit Agricole Indosuez
80,000 5.87%, 8/10/98 79,976,842
50,000 5.90%, 10/19/98 49,980,947
20,000 5.95%, 10/21/98 19,992,328
Dresdner Bank AG
73,000 5.76%, 7/31/98 72,941,530
National Westminster Bank PLC
50,000 6.06%, 5/26/98 49,990,523
56,000 6.09%, 5/27/98 55,995,723
5,000 5.92%, 6/23/98 5,000,282
Rabobank Nederland
150,000 5.98%, 3/20/98 149,993,873
Societe Generale North America,
Inc.
50,000 5.82%, 3/4/98 50,000,000
Swiss Bank Corp.
30,000 6.07%, 5/27/98 29,995,417
--------------
1,229,853,900
- ------------------------------------------------------------
Commercial Paper--42.1%
A. H. Robins Co., Inc.
32,702 5.56%, 1/28/98 32,565,633
AC Acquisition Holding Co.
25,000 5.61%, 1/29/98 24,890,917
American General Finance Corp.
37,000 5.57%, 1/23/98 36,874,056
29,000 5.72%, 3/13/98 28,672,848
Aristar, Inc.
16,000 5.84%, 1/29/98 15,927,324
9,000 5.95%, 2/12/98 8,937,525
Associates Corp. of North America
50,000 5.57%, 1/20/98 49,853,014
125,000 5.61%, 1/27/98 124,493,542
23,000 5.73%, 3/12/98 22,743,742
50,000 5.73%, 3/13/98 49,434,958
80,000 5.73%, 3/17/98 79,045,000
Avco Financial Services, Inc.
45,000 5.61%, 1/30/98 44,796,638
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-17
<PAGE>
Portfolio of Investments
as of December 31 1997 PRUDENTIAL MONEYMART ASSETS, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper (cont'd.)
Barnett Banks, Inc.
$50,000 6.00%, 1/28/98 $ 49,775,000
Barton Capital Corp.
45,000 5.95%, 2/9/98 44,709,938
Carnival Corp.
33,000 5.83%, 1/30/98 32,845,019
Caterpillar Financial Services
Corp.
5,500 5.95%, 1/27/98 5,476,365
Centric Capital Corp.
45,000 6.00%, 1/26/98 44,812,500
Chrysler Financial Corp.
85,000 5.79%, 2/9/98 84,466,838
CIT Group Holdings, Inc.
53,000 5.56%, 2/24/98 52,557,980
Coca-Cola Enterprises, Inc.
9,000 5.85%, 2/27/98 8,916,638
Dresdner U.S. Finance, Inc.
45,000 5.56%, 1/28/98 44,812,350
Duke Capital Corp.
22,100 5.90%, 1/21/98 22,027,561
61,000 5.90%, 1/23/98 60,780,061
Enterprise Funding Corp.
12,888 5.82%, 2/19/98 12,785,906
Falcon Asset Securitization Corp.
32,000 5.90%, 1/21/98 31,895,111
First Chicago Financial Corp.
28,000 5.72%, 2/13/98 27,808,698
36,000 5.73%, 2/26/98 35,679,120
First Data Corp.
20,000 5.60%, 1/27/98 19,919,111
Ford Motor Credit Corp.
119,000 5.57%, 1/22/98 118,613,349
General Electric Capital Corp.
50,000 5.74%, 1/8/98 49,944,194
100,000 5.71%, 1/12/98 99,825,528
110,000 5.70%, 1/13/98 109,791,000
General Motors Acceptance Corp.
294,200 5.76%, 2/9/98 292,364,192
Halifax PLC
20,000 5.72%, 3/11/98 19,780,733
Martin Marietta Materials
12,000 5.88%, 2/5/98 11,931,458
Mont Blanc Capital Corp.
$90,000 5.90%, 1/23/98 $ 89,675,500
13,000 5.82%, 2/13/98 12,909,628
National Australia Funding,
Delaware
15,000 5.72%, 3/13/98 14,830,783
Old Line Funding Corp.
42,263 5.88%, 1/20/98 42,131,955
28,000 5.90%, 1/21/98 27,908,222
11,710 5.90%, 1/29/98 11,656,264
30,000 5.88%, 1/30/98 29,858,021
Receivables Capital Corp.
116,353 5.89%, 1/30/98 115,800,937
SAFECO Corp.
33,000 5.73%, 2/20/98 32,737,375
22,000 5.83%, 2/26/98 21,800,485
52,000 5.77%, 3/12/98 51,416,589
SAFECO Credit Company, Inc.
28,000 5.76%, 3/17/98 27,664,000
Sears Roebuck Acceptance Corp.
44,000 5.59%, 1/22/98 43,856,523
50,000 5.59%, 1/23/98 49,829,195
Smith Barney Inc.
85,000 5.62%, 1/21/98 84,734,611
74,000 5.62%, 1/27/98 73,699,642
Societe Generale
43,000 5.74%, 3/16/98 42,493,090
Special Purpose Accounts
Receivable Cooperative Corp.
25,000 5.84%, 2/20/98 24,797,222
18,000 5.86%, 2/20/98 17,853,500
14,000 5.80%, 3/26/98 13,810,533
Triple A One Funding Corp.
36,500 5.90%, 1/16/98 36,410,271
Variable Funding Capital Corp.
66,000 5.91%, 1/12/98 65,880,815
25,000 5.89%, 1/27/98 24,893,653
42,000 5.88%, 1/29/98 41,807,920
Windmill Funding Corp.
86,497 5.89%, 1/29/98 86,100,748
Xerox Capital (Europe) PLC
42,400 6.85%, 1/2/98 42,391,932
Xerox Overseas Holdings PLC
32,000 5.79%, 2/10/98 31,794,133
--------------
2,958,497,394
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-18
<PAGE>
Portfolio of Investments
as of December 31 1997 PRUDENTIAL MONEYMART ASSETS, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Loan Participations--1.2%
Bell Atlantic Network Funding
Corp.
$12,000 6.33%, 1/23/98 $ 12,000,000
Countrywide Home Loan, Inc.
26,000 6.25%, 1/30/98 26,000,000
Englehard Corp.
37,770 6.05%, 1/16/98 37,770,000
10,230 6.05%, 1/20/98 10,230,000
--------------
86,000,000
- ------------------------------------------------------------
Other Corporate Obligations--24.4%
General Motors Acceptance Corp.
25,000 5.73%, 2/2/98 24,999,199
Goldman Sachs Group, L.P.D
370,700 6.03%, 4/22/98 370,700,000
Liquid Asset Backed Securities
TrustD
102,000 5.97%, 1/22/98 102,000,000
Merrill Lynch & Co., Inc.D
38,000 5.96%, 1/8/98 37,997,149
5,000 5.68%, 1/12/98 4,999,918
134,000 5.90%, 1/26/98 133,991,856
Morgan Stanley Dean Witter
Discover Group, Inc.D
55,000 5.88%, 1/15/98 55,000,000
96,000 6.07%, 2/13/98 96,000,000
Restructured Asset SecuritiesD
175,000 5.99%, 1/28/98 175,000,000
Short-Term Repackaged Asset TrustD
86,000 6.00%, 1/15/98 86,000,000
Short-Term Card Account TrustD
272,000 6.00%, 1/15/98 272,000,000
SMM Trust Notes 1997-XD
87,000 6.00%, 1/12/98 87,000,000
Strategic Money Market Trust
1997-AD
265,000 5.91%, 3/23/98 265,000,000
--------------
1,710,688,122
Total Investments--97.5%
(amortized cost $6,842,934,355*) $6,842,934,355
Other assets in excess of
liabilities--2.5% 178,064,200
--------------
Net Assets--100% $7,020,998,555
--------------
--------------
</TABLE>
- ---------------
* Federal income tax basis for portfolio securities is the
same as for financial reporting purposes.
D 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, 1997 was as
follows:
<TABLE>
<S> <C>
Commercial Banks..................................... 41.5%
Asset Backed Securities.............................. 14.5
Security Brokers & Dealers........................... 12.2
Motor Vehicle........................................ 7.4
Personal Credit Institutions......................... 6.6
Short-Term Business Credit........................... 6.1
Fire & Marine Casualty Insurance..................... 1.9
Department Stores.................................... 1.3
Electrical Services.................................. 1.2
Photographic Equipment............................... 1.1
Bank Holding Companies-Domestic...................... 0.9
Pharmaceuticals...................................... 0.8
Refinery............................................. 0.7
Water Transportation................................. 0.5
Mortgage Banks....................................... 0.4
Telephone & Communications........................... 0.2
Construction Machines & Equipment.................... 0.1
Beverages............................................ 0.1
-----
97.5
Other assets in excess of liabilities................ 2.5
-----
100.0%
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-19
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL MONEYMART ASSETS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets December 31, 1997
-----------------
<S> <C>
Investments, at amortized cost which approximates market value.......................................... $ 6,842,934,355
Cash.................................................................................................... 1,167,776
Receivable for Fund shares sold......................................................................... 283,378,201
Interest receivable..................................................................................... 35,936,679
Deferred expenses and other assets...................................................................... 173,639
-----------------
Total assets......................................................................................... 7,163,590,650
-----------------
Liabilities
Payable for Fund shares reacquired...................................................................... 135,427,516
Accrued expenses........................................................................................ 3,569,320
Management fee payable.................................................................................. 1,807,426
Dividends payable....................................................................................... 1,416,072
Distribution fee payable................................................................................ 371,761
-----------------
Total liabilities.................................................................................... 142,592,095
-----------------
Net Assets.............................................................................................. $ 7,020,998,555
-----------------
-----------------
Net assets were comprised of:
Common Stock, at par ($.001 par value; 15 billion shares authorized for issuance).................... $ 701,205,591
Paid-in capital in excess of par..................................................................... 6,319,792,964
-----------------
Net assets, December 31, 1997........................................................................... $ 7,020,998,555
-----------------
-----------------
Class A:
Net asset value, offering price and redemption price per share
($6,863,646,717 divided by 6,863,646,717 shares of common stock issued and outstanding)........... $1.00
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per share
($157,351,838 divided by 157,351,838 shares of common stock issued and outstanding)............... $1.00
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-20
<PAGE>
PRUDENTIAL MONEYMART ASSETS, INC.
MONEYMART ASSETS, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31, 1997
<S> <C>
Income
Interest............................. $412,764,608
------------------
Expenses
Management fee....................... 21,943,602
Distribution fee--Class A............ 8,902,115
Transfer agent's fees and expenses... 16,979,000
Reports to shareholders.............. 2,011,000
Registration fees.................... 438,000
Custodian's fees and expenses........ 215,000
Insurance expense.................... 127,000
Director's fees and expenses......... 57,000
Legal fees and expenses.............. 45,000
Audit fee............................ 35,000
Miscellaneous........................ 55,640
------------------
Total expenses.................... 50,808,357
------------------
Net investment income................... 361,956,251
Net Realized Gain on Investments
Net realized gain on investment
transactions......................... 10,050
------------------
Net Increase in Net Assets
Resulting from Operations............... $361,966,301
------------------
------------------
</TABLE>
PRUDENTIAL MONEYMART ASSETS, INC.
MONEYMART ASSETS, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1997 1996
<S> <C> <C>
Operations
Net investment income... $ 361,956,251 $ 358,240,587
Net realized gain on
investment
transactions......... 10,050 390,335
---------------- ----------------
Net increase in net
assets resulting from
operations........... 361,966,301 358,630,922
---------------- ----------------
Dividends and distributions
to shareholders (Note 1)
Class A.............. (353,829,321) (353,704,755)
Class Z.............. (8,136,980) (4,926,167)
---------------- ----------------
(361,966,301) (358,630,922)
---------------- ----------------
Fund share transactions
(Note 4)
(At $1.00 per share)
Proceeds from shares
sold................. 32,812,146,168 31,398,251,715
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions........ 346,107,446 344,952,119
Cost of shares
reacquired........... (33,601,689,773) (31,500,427,083)
---------------- ----------------
Net increase (decrease)
in net assets from
Fund share
transactions......... (443,436,159) 242,776,751
---------------- ----------------
Total increase
(decrease).............. (443,436,159) 242,776,751
Net Assets
Beginning of year.......... 7,464,434,714 7,221,657,963
---------------- ----------------
End of year................ $ 7,020,998,555 $ 7,464,434,714
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-21
<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 any discount or premium.
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. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management. Net investment income of the Fund
consists of interest accrued and discount earned less estimated expenses
applicable to the dividend period. Net investment income (other than
distribution fees), and realized gains or losses, if any, are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class at the beginning of the day.
Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net investment income to its
shareholders. Therefore, no federal income tax provision is required.
The cost of portfolio securities for federal income tax purposes is
substantially the same as for financial reporting purposes.
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. Payment of dividends is
made monthly.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM 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. PIFM 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 PIFM is computed daily and payable monthly, 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 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, PIFM 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 PIFM,
serves as the Fund's transfer agent. During the year ended December 31, 1997,
the Fund incurred fees of approximately $15,471,100 for the services of PMFS. As
of December 31, 1997, approximately $1,236,600 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 nonaffiliates.
- --------------------------------------------------------------------------------
B-22
<PAGE>
Notes to Financial Statements PRUDENTIAL MONEYMART ASSETS, INC.
- --------------------------------------------------------------------------------
Note 4. Capital
The Fund offers Class A and Class Z shares. Class Z shares are not subject to
any distribution and/or service fees 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. Of the 7,020,998,555 shares of common stock issued
and outstanding at December 31, 1997, PIFM owned 12,179 Class A shares.
Transactions in shares of common stock for the years ended December 31, 1996 and
1997 were as follows:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
Class A 1997 1996
- --------------------------- ---------------- ----------------
<S> <C> <C>
Shares sold................ 32,421,538,819 31,034,483,075
Shares issued in
reinvestment of dividends
and distributions........ 338,151,149 340,215,223
Shares reacquired.......... (33,211,266,138) (31,281,133,374)
---------------- ----------------
Net increase (decrease) in
shares outstanding....... (451,576,170) 93,564,924
---------------- ----------------
---------------- ----------------
<CAPTION>
March 1, 1996*
Year ended through
December 31, December 31,
1997 1996
---------------- ----------------
Class Z
- ---------------------------
<S> <C> <C>
Shares sold................ 390,607,349 301,984,043
Shares issued**............ -- 61,784,597
Shares issued in
reinvestment of dividends
and distributions........ 7,956,297 4,736,896
Shares reacquired.......... (390,423,635) (219,293,709)
---------------- ----------------
Net increase in shares
outstanding.............. 8,140,011 149,211,827
---------------- ----------------
---------------- ----------------
</TABLE>
- ---------------
* Commencement of offering of Class Z shares.
** Represents amounts issued in connection with the acquisition of The
Prudential Institutional Fund--Money Market Fund.
- --------------------------------------------------------------------------------
B-23
<PAGE>
Financial Highlights PRUDENTIAL MONEYMART ASSETS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<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... .050 .048 .054 .037 .027
Dividends and distributions to shareholders.... (.050) (.048) (.054) (.037) (.027)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN(a)................................ 5.09% 4.97% 5.51% 3.72% 2.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................ $6,863,647 $7,315,223 $7,221,658 $6,544,880 $7,318,633
Average net assets (000)....................... $7,121,692 $7,326,023 $6,914,520 $7,071,381 $7,742,989
Ratios to average net assets:
Expenses, including distribution fee........... .70% .71% .69% .71% .71%
Expenses, excluding distribution fee........... .58% .59% .56% .58% .58%
Net investment income.......................... 4.97% 4.83% 5.38% 3.65% 2.63%
<CAPTION>
Class Z
March 1,
Year Ended Through
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........... $ 1.000 $ 1.000
Net investment income and net realized gains... .051 .040
Dividends and distributions to shareholders.... (.051) (.040)
------------ ------------
Net asset value, end of period................. $ 1.000 $ 1.000
------------ ------------
------------ ------------
TOTAL RETURN(a)................................ 5.22% 4.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................ $157,352 $149,212
Average net assets (000)....................... $159,508 $121,135
Ratios to average net assets:
Expenses, including distribution fee........... .58% .59%(c)
Expenses, excluding distribution fee........... .58% .59%(c)
Net investment income.......................... 5.10% 4.86%(c)
</TABLE>
-----------------
(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-24
<PAGE>
Change of Auditors PRUDENTIAL MONEYMART ASSETS, INC.
- --------------------------------------------------------------------------------
Effective March 1, 1997, Deloitte & Touche LLP was terminated as the Fund's
auditors. For the years ended December 31, 1993 through December 31, 1996,
Deloitte & Touche LLP expressed an unqualified opinion on the Fund's financial
statements. There were no disagreements between Fund management and Deloitte &
Touche LLP prior to their termination. The Board of Directors approved the
termination of Deloitte & Touche LLP and the appointment of Price Waterhouse LLP
as the Fund's independent accountants.
- --------------------------------------------------------------------------------
B-25
<PAGE>
Report of Independent Accountants PRUDENTIAL MONEYMART ASSETS, INC.
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Prudential MoneyMart Assets, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential MoneyMart Assets, Inc.
(the 'Fund') at December 31, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The accompanying statement of changes in net assets for the
year ended December 31, 1996 and the financial highlights for the periods other
than the year ended December 31, 1997 were audited by other independent
accountants, whose opinion dated February 4, 1997 was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 6, 1998
- --------------------------------------------------------------------------------
B-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF PRUDENTIAL MONEYMART ASSETS, INC.:
We have audited the accompanying statement of changes in net assets of
Prudential MoneyMart Assets, Inc. (the "Fund") for the year ended December 31,
1996, and the financial highlights contained in the prospectus for each of the
years in the five year period ended December 31, 1996. This financial statement
and these financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement and
these 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 statement 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
statement. 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 statement and financial highlights present
fairly, in all material respects, the changes in net assets and the financial
highlights of Prudential MoneyMart Assets, Inc. 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 I
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.
I-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 payment is expected.
I-2
<PAGE>
APPENDIX II
INFORMATION RELATING TO 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,
1996 and is subject to change thereafter. All information relies on data
provided by The Prudential Investment Corporation (PIC) 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 PIC(1) are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December
31,1996. Principal products and services include life and health insurance,
other healthcare products, property and casualty insurance, securities
brokerage, asset management, investment advisory services and real estate
brokerage. Prudential (together with its subsidiaries) employs almost 81,000
persons worldwide, and maintains a sales force of approximately 11,500 agents
and nearly 6,400 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 nearly 50 million people
worldwide. Long one of the largest issuers of individual life insurance, the
Prudential has 22 million life insurance policies in force today with a face
value of $1 trillion. Prudential has the largest capital base ($12.1 billion) of
any life insurance company in the United States. Prudential provides auto
insurance for approximately 1.6 million cars and insures approximately 1.2
million homes.
MONEY MANAGEMENT. 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. As of
December 31, 1996, Prudential had more than $332 billion in assets under
management. Prudential Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part), manages over $211 billion in assets of
institutions and individuals. In Pensions & Investments, May 12, 1997,
Prudential was ranked third in terms of total assets under management.
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, approximately 4.6
million Americans receive healthcare from a Prudential managed care membership.
FINANCIAL SERVICES. The Prudential Bank, a wholly-owned subsidiary of
Prudential, has over $1 billion in assets and serves nearly 1.5 million
customers across 50 states.
INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS
As of August 31, 1997, Prudential Investments Fund Management is the
eighteenth largest mutual fund company 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 is a
portfolio of Prudential World Fund, Inc. and BlackRock Financial Management
Inc. as subadviser to The BlackRock Government Income Trust. There are
multiple subadvisers for The Target Portfolio Trust.
(2) As of December 31, 1996.
II-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, individual 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 PIC. 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. PIC 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 PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-U.S. accounts
managed by Prudential Mutual Fund Investment Management LLC, a division of
PIC, 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.
II-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 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
Annuities. As of December 31, 1997, assets held by Prudential Securities for its
clients approximated $235 billion. During 1997, approximately 29,000 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 1995, Prudential Securities' equity research team ranked 8th in
Institutional Investor magazine's 1995 "All America Research Team" survey. Three
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 proprietary 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.
Standard & Poor's rates Prudential Securities Incorporated BBB+ with a
"Stable Outlook."
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, 1997.
(8) On an annual basis, Institutional Investor magazine surveys more than 700
institutional 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.
II-3
