THE PRUDENTIAL SERIES FUND, INC.
751 Broad Street
Newark, N.J. 07102
(877) 778-5008
-------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-------------------------
To the Shareholders of The Prudential Series Fund, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the Meeting)
of The Prudential Series Fund, Inc., (the Fund), will be held at the offices of
The Prudential Insurance Company of America, 100 Mulberry Street, Gateway Center
Three, 14th Floor, Newark, NJ on January 31, 2001, at 9:00 a.m. local time. The
purpose of the Meeting is to consider and act upon the following proposals and
to transact such other business as may properly come before the Meeting or any
adjournments thereof.
1. To elect a Board of Directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountant to the Fund.
3. To approve a "manager-of-managers" structure for the Fund, under which
the Fund may enter into and make changes to subadvisory agreements
without shareholder approval.
4. To approve a new management contract for the Fund.
5. To approve new subadvisory contracts for the Fund.
6. To amend certain of the Fund's fundamental investment policies.
7. To amend the Fund's By-Laws.
8. To amend the fundamental investment objective of the Fund's Equity
Income Portfolio.
The Board of Directors has fixed the close of business on November 17, 2000
as the record date for the determination of the shareholders of the Fund
entitled to notice of, and to vote at, such Meeting and any adjournments
thereof.
By order of the Board of Directors
Christopher Sprague.
Secretary
November , 2000
<PAGE>
PROXY STATEMENT
-------------------------
SPECIAL MEETING OF SHAREHOLDERS OF
THE PRUDENTIAL SERIES FUND, INC.
TO BE HELD ON JANUARY 31, 2001
-------------------------
This Proxy Statement is furnished in connection with a solicitation of
proxies made by, and on behalf of, the Board of Directors to be used at the
Special Meeting of Shareholders of The Prudential Series Fund, Inc. (the Fund)
and at any adjournments thereof (the Meeting) to be held on January 31, 2001 at
9:00 a.m. Eastern time at the offices of The Prudential Insurance Company of
America (Prudential), 100 Mulberry Street, Gateway Center Three, 14th Floor,
Newark, NJ. The Fund began to mail copies of this Proxy Statement on or about
November , 2000.
The purpose of the Meeting is set forth in the accompanying Notice. The
solicitation is being made primarily by the mailing of this Proxy Statement and
the accompanying proxy card. Supplementary solicitations may be made by mail,
telephone, telegraph, facsimile, electronic means or by personal interview by
representatives of the Fund or Prudential. Proxies may be revoked at any time
before they are voted. The expenses in connection with preparing this Proxy
Statement and its enclosures and of all solicitations will be paid by the Fund.
The Fund may reimburse brokerage firms and others for their reasonable expenses
in forwarding solicitation material to the beneficial owners of shares.
The principal business address of Prudential (the Fund's investment adviser
and current administrator), and of Prudential Investment Management Services LLC
(PIMS) (the Fund's principal underwriter) is 751 Broad Street, Newark, NJ 07102.
PIMS is an indirect wholly-owned subsidiary of Prudential. The principal
business address of the Fund's proposed new investment adviser, Prudential
Investments Fund Management LLC (PIFM), is 100 Mulberry Street, Gateway Center
Three, 14th floor, Newark, NJ 07102. PIFM currently serves as the investment
adviser to certain Portfolios of the Fund under an interim management contract.
If the enclosed proxy card is executed and returned, it may nevertheless be
revoked at any time prior to its use by written notification received by the
Fund, by the execution of a later-dated proxy card, or by attending the meeting
and voting in person.
All proxy cards solicited by the Board of Directors that are properly
executed and received by the Secretary prior to the Meeting, and are not
revoked, will be voted at the Meeting. Shares represented by such proxies will
be voted in accordance with the instructions thereon. Prudential, its affiliated
insurance companies, and certain other insurers are the legal owners of all Fund
shares, but in accordance with current policy of the Securities and Exchange
Commission (SEC), these insurers pass voting rights to the variable annuity and
variable life insurance contractholders and certain plan participants that have
allocated purchase payments to subaccounts corresponding to Portfolios of the
Fund. In addition to voting Fund shares in accordance with
contractholder/participant instructions that they do receive, Prudential and
those insurers will vote shares that are not voted by
contractholders/participants, as well as shares owned beneficially by such
insurers themselves, in the same proportions as the votes that actually are cast
by contractholders/participants. Prudential, its affiliated insurers, and the
other insurers will apportion votes to each contractholder/participant in direct
proportion to the dollar value of the pertinent variable contract as of the
record date.
1
<PAGE>
HOW CAN I VOTE MY SHARES?
o BY MAIL: By signing, dating, voting and returning the proxy card in the
enclosed postage paid envelope.
o BY PHONE: With a toll-free call to 1-888-221-0697 between 9:00 A.M. and
10:00 P.M. (Eastern Time).
o BY INTERNET: By signing onto the internet site listed on your proxy card
and entering the proper information, including the control number also
listed on your poxy card.
o IN PERSON: By attending the meeting and voting your shares.
If you have questions regarding this proxy statement please call (877) 778-5008,
from 8 a.m. to 6 p.m. Eastern Time, Monday through Friday.
Class 1 and Class 2 shares of each Portfolio of the Fund issued and
outstanding as of November 17, 2000 are indicated in the following table:
PORTFOLIO # OF SHARES
--------- -----------
Conservative Balanced ........................................
Diversified Bond .............................................
Diversified Conservative Growth ..............................
Equity .......................................................
Equity Income ................................................
Flexible Managed .............................................
Global .......................................................
Government Income ............................................
High Yield Bond ..............................................
Money Market .................................................
Natural Resources ............................................
Prudential Jennison ..........................................
Small Capitalization Stock ...................................
Stock Index ..................................................
20/20 Focus ..................................................
Zero Coupon Bond 2005 ........................................
As of November 17, 2000, the directors/nominees and Fund officers owned, in
the aggregate, none of the Fund's outstanding shares--all of the Fund's
outstanding shares are owned by insurance company separate accounts. To the
knowledge of the Fund, no shareholder of record (other than Prudential, its
affiliated insurers, and the other insurers) owned beneficially more than 5% of
the outstanding shares of the Fund as of November 17, 2000. None of the Fund's
executive officers has any substantial economic interest in any matter to be
acted upon at the meeting.
FOR A FREE COPY OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999 AND THE SEMIANNUAL REPORT FOR THE FISCAL PERIOD ENDED JUNE 30,
2000, CALL (877) 778-5008 OR WRITE TO PRUDENTIAL AT 751 BROAD STREET, NEWARK, NJ
07102-3777.
2
<PAGE>
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING IS SUFFICIENT
TO APPROVE PROPOSAL 1, AND A MAJORITY OF ALL VOTES OF THE FUND CAST AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSALS 2 AND 7. APPROVAL OF PROPOSALS 3, 4,
5(A), 5(B), AND 6 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE
OUTSTANDING VOTING SECURITIES" OF EACH AFFECTED PORTFOLIO OF THE FUND IN ORDER
TO BE DEEMED EFFECTIVE WITH RESPECT TO EACH SUCH PORTFOLIO. APPROVAL OF PROPOSAL
8 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" OF THE FUND'S EQUITY INCOME PORTFOLIO. A "MAJORITY OF THE
OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE OF (A) 67% OR MORE OF
THE VOTING SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE
HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE PRESENT OR
REPRESENTED BY PROXY OR (B) MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES,
WHICHEVER IS LESS.
The following table summarizes the proposals and lists the Proxy Statement
page where the proposal is discussed in more detail.
PROPOSAL # PROPOSAL DESCRIPTION PAGE
---------- -------------------- ----
1. To elect as Directors the 19 nominees presented in 5
Proposal 1.
2. To ratify the selection of PricewaterhouseCoopers LLP as 14
independent accountant of the Fund.
3. To approve a "manager-of-managers" structure for the 15
Fund, under which the Fund may enter into and make
changes to subadvisory agreements without shareholder
approval.
4. To approve a new management contract with Prudential 16
Investments Fund Management LLC.
5(a) To approve a new subadvisory agreement between 22
Prudential Investments Fund Management LLC and
Prudential Investment Corporation.
5(b) To approve a new subadvisory agreement between 23
Prudential Investments Fund Management LLC and Jennison
Associates LLC.
6. To amend certain fundamental investment policies of the 26
Fund.
7. To amend the Fund's By-Laws so that fundamental 30
investment policies are specified only in the
Registration Statement rather than also in the By-Laws.
8. To amend the fundamental investment objective of the 30
Fund's Equity Income Portfolio.
3
<PAGE>
<TABLE>
<CAPTION>
The table below indicates the Proposals that are applicable to each Portfolio of the Fund.
PORTFOLIO PROPOSAL 1 PROPOSAL 2 PROPOSAL 3 PROPOSAL 4 PROPOSAL 5(A) PROPOSAL 5(B) PROPOSAL 6
--------- ---------- ---------- ---------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Conservative Balanced X X X X X X
Diversified Bond X X X X X X
Diversified Conservative Growth X X X X X X X
Equity X X X X X X
Equity Income X X X X X X
Flexible Managed X X X X X X
Global X X X X X X
Government Income X X X X X X
High Yield Bond X X X X X X
Money Market X X X X X X
Natural Resources X X X X X X
Prudential Jennison X X X X X X
Small Capitalization Stock X X X X X X
Stock Index X X X X X X
20/20 Focus X X X X X X
Zero Coupon Bond 2005 X X X X X X
PORTFOLIO PROPOSAL 7 PROPOSAL 8
--------- ---------- ----------
Conservative Balanced X
Diversified Bond X
Diversified Conservative Growth X X
Equity X
Equity Income X
Flexible Managed X
Global X
Government Income X
High Yield Bond X
Money Market X
Natural Resources X
Prudential Jennison X
Small Capitalization Stock X
Stock Index X
20/20 Focus X
Zero Coupon Bond 2005 X
</TABLE>
4
<PAGE>
1. TO ELECT A BOARD OF DIRECTORS.
The purpose of this proposal is to elect an expanded Board of Directors of
the Fund. The Fund currently has four directors, three of whom are are not
"interested persons" of Prudential or the Fund under the Federal securities laws
("independent directors") and have been previously elected by Fund shareholders.
The current independent directors have nominated 13 additional individuals to
serve as independent directors of the Fund. Each of these nominees currently
serves as an independent director to one or more mutual funds within the
Prudential mutual fund complex. The current independent directors have also
nominated three officers of the Fund's adviser to serve as directors of the
Fund. One of those individuals, John R. Strangfeld, Jr., currently serves as
Chairman and President of the Fund.
The Fund's current directors believe that expanding the size of the Board
and adding directors who also serve as directors of other mutual funds advised
by Prudential affiliates is in the best interests of the Fund. The principal
reasons for adding these individuals as directors are:
o to bring additional experience and diversity of viewpoints to the
Board;
o to bring the benefit of experience derived from service on the boards
of other Prudential mutual funds;
o to increase the number of directors in light of the increasing number
of Series Fund Portfolios; and
o to promote continuity on the Board going forward.
If elected, the directors of the Fund intend to form several groups of
directors called "investment committees." Each investment committee will focus
on particular Portfolios of the Fund (e.g., equity portfolios, fixed income
portfolios) and provide appropriate reports to the full Board.
None of the nominees are related to one another. None of the Fund's
directors or persons nominated to become Fund directors owns shares of the
Fund's adviser or its affiliates. Those nominees indicated by an asterisk (*) in
the table below are "interested persons" of the Fund by virtue of, among other
things, their affiliation with either the Fund, the Fund's investment adviser or
the Fund's principal underwriter. The business experience and address of each
nominee is as follows:
5
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Eugene C. Dorsey (73) Retired President, Chief Executive Prudential Investments
Officer and Trustee of the Gannett 100 Mulberry Street
Foundation (now Freedom Forum); former Gateway Center Three,
publisher of four Gannett newspapers and 14th floor
Vice President of Gannett Company; past Newark, NJ 07102-4077
Chairman of Independent Sector (national
coalition of philanthropic
organizations); former Chairman of the
American Council for the Arts; former
Director of the Advisory Board of Chase
Manhattan Bank of Rochester and Director
or Trustee of several funds within the
Prudential Mutual Funds Complex.
Saul K. Fenster Ph.D President, New Jersey Institute of Prudential Investments 1983
(67) Technology. He serves as a Commissioner 100 Mulberry Street
of the Middle States Association, Gateway Center Three,
Commission on Higher Education. He is 14th floor
currently a member of the New Jersey Newark, NJ 07102-4077
Commission on Science and Technology and
a director of the New Jersey State
Chamber of Commerce. Mr. Fenster serves
on the boards of the Society of
Manufacturing Engineering Education
Foundation, the Research and Development
Council of New Jersey, Prosperity New
Jersey, Inc., the Edison Partnership,
National Action Council for Minorities in
Engineering; Director of IDT Corporation
and Director or Trustee of several funds
within the Prudential Mutual Funds
complex.
Delayne D. Gold (62) Marketing and Management Consultant; Prudential Investments
Director or Trustee of several funds 100 Mulberry Street
within the Prudential Mutual Funds Gateway Center Three,
complex. 14th floor
Newark, NJ 07102-4077
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert F. Gunia* (53) Executive Vice President and Chief Prudential Investments
Administrative Officer (since June 1999) 100 Mulberry Street
of Prudential Investments; Corporate Vice Gateway Center Three,
President (September 1997-March 1999) of 14th floor
The Prudential Insurance Company of Newark, NJ 07102-4077
America (Prudential); Executive Vice
President and Treasurer (since December
1996) of Prudential Investments Fund
Management LLC (PIFM); President (since
April 1999) of Prudential Investment
Management Services LLC (PIMS); former
Senior Vice President (March 1987-May
1999) and former Chief Administrative
Officer (July 1989-September 1996) of
Prudential Securities Incorporated
(Prudential Securities); Director
(January 1989-September 1996), Executive
Vice President, Treasurer and Chief
Financial Officer (June 1987-December
1996) of Prudential Mutual Fund
Management, Inc. (PMF); Vice President
and Director (since May 1989) of The Asia
Pacific Fund, Inc. and Director or
Trustee of several funds within the
Prudential Mutual Funds complex.
Maurice F. Holmes (57) Director of Center for Innovation in Prudential Investments
Product Development, Professor of 100 Mulberry Street
Engineering, Massachusetts Institute of Gateway Center Three,
Technology (since January, 1998); Chief 14th floor
Engineer and Corporate Vice President, Newark, NJ 07102-4077
Xerox Corporation (1972 to 1997); and
Director or Trustee of several funds
within the Prudential Mutual Funds
complex.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert E. LaBlanc President of Robert E. LaBlanc Prudential Investments
(66) Associates, Inc. (telecommunications); 100 Mulberry Street
formerly General Partner at Salomon Gateway Center Three,
Brothers and Vice-Chairman of Continental 14th floor
Telecom. Director of Storage Technology Newark, NJ 07102-4077
Corporation, Chartered Semiconductor
Manufacturing, Ltd., Titan Corporation,
Salient 3 Communications, Inc. and
Tribune Company; Trustee of Manhattan
College; and Trustee or Director of
several funds within the Prudential
Mutual Funds complex.
Douglas H. CEO (since May, 2000), Vice Chairman Prudential Investments
McCorkindale (61) (since 1984) and President (since 100 Mulberry Street
September 1997) of Gannett Co. Inc. Gateway Center Three,
(publishing and media); Director of 14th floor
Gannett Co., Inc., Frontier Corporation Newark, NJ 07102-4077
and Continental Airlines, Inc.; and
Director or Trustee of several funds
within the Prudential Mutual Funds
complex.
W. Scott McDonald, Vice President, Kaludis Consulting Group, Prudential Investments 1983
Jr. Ph.D (63) Inc. (a Sallie Mae company serving higher 100 Mulberry Street
education). From 1991 to 1995, Chief Gateway Center Three,
Operating Officer, Fairleigh Dickinson 14th floor
University. From 1975-1991, Executive Newark, NJ 07102-4077
Vice President and Chief Operating
Officer, Drew University. A founding
director of School, College and
University Underwriters Ltd. and Director
or Trustee of several funds within the
Prudential Mutual Fund complex.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas T. Mooney (58) President of the Greater Rochester Metro Prudential Investments
Chamber of Commerce; former Rochester 100 Mulberry Street
City manager; former Deputy Monroe County Gateway Center Three,
Executive; Trustee of Center for 14th floor
Governmental Research, Inc.; Director of Newark, NJ 07102-4077
Blue Cross of Rochester, Monroe County
Water Authority, Executive Service Corps
of Rochester and Director or Trustee of
several funds within the Prudential
Mutual Funds complex.
Stephen P. Munn (58) Chairman, President and Chief Executive Prudential Investments
Officer, Carlisle Companies Incorporated 100 Mulberry Street
(manufacturer of industrial products) Gateway Center Three,
and; Director or Trustee of several funds 14th floor
within the Prudential Mutual Funds Newark, NJ 07102-4077
complex.
David R. Odenath* (43) Officer in Charge, President, Chief Prudential Investments
Executive Officer and Chief Operating 100 Mulberry Street
Officer (since June 1999) of PIFM; Senior Gateway Center Three,
Vice President (since June 1999) of 14th floor
Prudential; Senior Vice President (August Newark, NJ 07102-4077
1993-May 1999) of PaineWebber Group, Inc.
and Director or Trustee of several funds
within the Prudential Mutual Funds
complex.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard A. Redeker*** Former employee of Prudential Investments Prudential Investments
(57) (October 1996-December 1998); prior 100 Mulberry Street
thereto, President, Chief Executive Gateway Center Three,
Officer and Director (October 14th floor
1993-September 1996) of PMF; Executive Newark, NJ 07102-4077
Vice President, Director and Member of
the Operating Committee (October
1993-September 1996) of Prudential
Securities; Director (October
1993-September 1996) of Prudential
Securities Group, Inc.; Executive Vice
President, The Prudential Investment
Corporation (January 1994-September
1996); Director (January 1994-September
1996) of Prudential Mutual Fund
Distributors, Inc. and Prudential Mutual
Fund Services, Inc. and Director or
Trustee of several funds within the
Prudential Mutual Funds complex.
Robin B. Smith (61) Chairman and Chief Executive Officer Prudential Investments
(since August 1996), formerly President 100 Mulberry Street
and Chief Executive Officer (January Gateway Center Three,
1988-August 1996) and President and Chief 14th floor
Operating Officer of Publishers Clearing Newark, NJ 07102-4077
House; Director of BellSouth Corporation,
Texaco Inc., Springs Industries Inc. and
Kmart Corporation; and Director or
Trustee of several funds within the
Prudential Mutual Funds complex.
-------------
*** Mr. Redeker and his wife have borrowed, and since repaid, an amount in
excess of $60,000 from a margin account maintained with Prudential
Securities Incorporated.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John R. Strangfeld, Chairman, Prudential Securities The Prudential Insurance 1999
Jr.* (47) Incorporated since 2000 and Executive Company of America
Vice President, Global Asset Management 100 Mulberry Street
since 1998; Chairman, Chief Executive Gateway Center Three,
Officer and President, The Prudential 15th floor
Investment Corporation (since 1999); Newark, NJ 07102-3777
Director, The Prudential Investment
Corporation (since 1996); Chief Executive
Officer, Private Asset Management Group
(PAMG) from 1996 to 1998; President,
PAMG, from 1994 to 1996 and Director or
Trustee of several funds within the
Prudential Mutual Funds complex.
Stephen Stoneburn (57) President and Chief Executive Officer The Prudential Insurance
(since June 1996) of Quadrant Media Corp. Company of America
(a publishing company); formerly 100 Mulberry Street
President (June 1995-June 1996) of Argus Gateway Center Three,
Integrated Media, Inc.; Senior Vice 14th floor
President and Managing Director (January Newark, NJ 07102-4077
1993-1995) of Cowles Business Media.
Senior Vice President of Fairchild
Publications, Inc. and Director or
Trustee of several funds within the
Prudential Mutual Funds complex.
Nancy H. Teeters (70) Economist; former Vice President and The Prudential Insurance
Chief Economist, International Business Company of America
Machines Corporation; former Director of 100 Mulberry Street
Inland Steel Industries (July 1984-1999); Gateway Center Three,
and Director or Trustee of several funds 14th floor
within the Prudential Mutual Funds Newark, NJ 07102-4077
complex.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION OR
NOMINEE PRINCIPAL BUSINESS APPOINTMENT
(AGE) OCCUPATION** ADDRESS TO FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joseph Weber Ph.D Vice President, Finance, Interclass The Prudential Insurance 1983
(76) (international corporate learning) since Company of America
1991. Former President, The Alliance for 100 Mulberry Street
Learning. Retired Vice President, Member Gateway Center Three,
of the Board of Directors, Member of the 14th floor
Executive and Operating Committees, Newark, NJ 07102-4077
Hoffmann-LaRoche Inc. Member, Board of
Overseers, New Jersey Institute of
Technology. Trustee and Vice Chairman
Emeritus, Fairleigh Dickinson University;
and Director or Trustee of several funds
within the Prudential Mutual Funds
complex.
Louis A. Weil, III Former Chairman (January 1999-July 2000), The Prudential Insurance
(59) President and Chief Executive Officer Company of America
(January 1996-July 2000) and Director 100 Mulberry Street
(since September 1991) of Central Gateway Center Three,
Newspapers, Inc.; Chairman of the Board 14th floor
(since January 1996), Publisher and Chief Newark, NJ 07102-4077
Executive Officer (August 1991-December
1995) of Phoenix Newspapers, Inc.; and
Director or Trustee of several funds
within the Prudential Mutual Funds
complex.
Clay T. Whitehead President of National Exchange Inc. (new The Prudential Insurance
(61) business development firm) and Director Company of America
or Trustee of several funds within the 100 Mulberry Street
Prudential Mutual Funds complex. Gateway Center Three,
14th floor
Newark, NJ 07102-4077
-------------
** Except as otherwise indicated, each individual has held the office shown or
other offices in the same company for the last five years.
</TABLE>
12
<PAGE>
If elected, the directors will hold office generally without limit except
that (a) any director may resign; and (b) any director may be removed by the
holders of not less than two-thirds of the Fund's outstanding capital stock. In
the case of a vacancy on the Board, the remaining directors will fill such
vacancy by appointing another director, so long as immediately after such
appointment, at least two-thirds of the directors have been elected by
shareholders.
The Board, which is currently composed of one "interested" director
(because he is an officer of the adviser) and three "non-interested" or
"independent" directors, met five times during the twelve months ended December
31, 1999. Each incumbent director attended each of these meetings. It is
expected that the directors will meet at least four times a year at regularly
scheduled meetings.
The Fund has an Audit Committee, which is composed entirely of independent
directors, and normally meets twice a year, or as required, in conjunction with
meetings of the Board of Directors. Currently, Messrs. Fenster, McDonald and
Weber are members of the Audit Committee. Among other things, the Fund's Audit
Committee has the following responsibilities:
o Recommending to the Board of Directors of the Fund the selection,
retention or termination, as appropriate, of the independent public
accountants for the Fund.
o Reviewing the independent public accountants' compensation, the
proposed terms of their engagement, and their independence.
o Reviewing annual financial statements and unaudited semiannual
financial statements, including any adjustments to those statements
recommended by the independent public accountants, and any significant
issues that arose in connection with the preparation of those
financial statements.
o Reviewing changes in accounting policies or practices that had or are
expected to have a significant impact on the preparation of financial
statements.
o Generally acting as a liaison between the independent public
accountants and the Board of Directors.
During the twelve months ended December 31, 1999, the Audit Committee held
two meetings.
The Fund's Nominating Committee is currently composed of Messrs. Fenster,
McDonald, and Weber. The committee members confer periodically and hold meetings
as required. The responsibilities of the Nominating Committee include, but are
not limited to, recommending to the Board the individuals to be nominated to
become independent directors. During the twelve months ended December 31, 1999,
the Nominating Committee held one meeting. The Fund does not have a compensation
committee. The Nominating Committee will consider nominees recommended by
shareholders. Recommendations should be submitted to the Committee in care of
the Secretary of the Fund.
13
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth information describing the compensation of
each current director of the Fund, and each director nominee, for his/her
services for the calendar year ended December 31, 1999.
COMPENSATION TABLE
-------------------------------------------------------------------------------------
PENSION OR
RETIREMENT TOTAL
BENEFITS ESTIMATED COMPENSATION
ACCRUED ANNUAL FROM FUND AND
AGGREGATE AS PART OF BENEFITS FUND COMPLEX*
NAME OF PERSON, COMPENSATION FUND UPON PAID TO
POSITION FROM FUND EXPENSES RETIREMENT DIRECTORS**
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eugene C. Dorsey, Director $ -0- $ -0- $ -0- $103,574
-----------------------------------------------------------------------------------
Saul K. Fenster, Director $22,800 $ -0- $ -0- $ 35,000
-----------------------------------------------------------------------------------
Delayne D. Gold, Director $ -0- $ -0- $ -0- $144,500
-----------------------------------------------------------------------------------
Robert F. Gunia, Director $ -0- $ -0- $ -0- $ -0-
-----------------------------------------------------------------------------------
Maurice F. Holmes, Director $ -0- $ -0- $ -0- $ -0-
-----------------------------------------------------------------------------------
Robert E. LaBlanc, Director $ -0- $ -0- $ -0- $ 61,250
-----------------------------------------------------------------------------------
Douglas H. McCorkindale,
Director $ -0- $ -0- $ -0- $ 97,916
-----------------------------------------------------------------------------------
W. Scott McDonald Jr.,
Director $22,800 $ -0- $ -0- $ -0- $ 35,000
-----------------------------------------------------------------------------------
Thomas T. Mooney, Director $ -0- $ -0- $ -0- $135,102
-----------------------------------------------------------------------------------
Stephen P. Munn, Director $ -0- $ -0- $ -0- $ 62,250
-----------------------------------------------------------------------------------
David R. Odenath, Jr.,
Director $ -0- $ -0- $ -0- $ -0-
-----------------------------------------------------------------------------------
Richard A. Redeker, Director $ -0- $ -0- $ -0- $ 95,000
-----------------------------------------------------------------------------------
Robin B. Smith, Director $ -0- $ -0- $ -0- $156,478
-----------------------------------------------------------------------------------
John R. Strangfeld, Director
and President $ -0- $ -0- $ -0- $ -0-
-----------------------------------------------------------------------------------
Stephen Stoneburn, Director $ -0- $ -0- $ -0- $ 61,250
-----------------------------------------------------------------------------------
Nancy H. Teeters, Director $ -0- $ -0- $ -0- $ 97,000
-----------------------------------------------------------------------------------
Joseph Weber, Director $22,800 $ -0- $ -0- $ 35,000
-----------------------------------------------------------------------------------
Louis A. Weil, III, Director $ -0- $ -0- $ -0- $ 96,000
-----------------------------------------------------------------------------------
Clay T. Whitehead, Director $ -0- $ -0- $ -0- $ 77,000
-----------------------------------------------------------------------------------
* Information is for the calendar year ended December 31, 1999 for 50
funds in the Prudential mutual funds complex. With respect to the
nominees other than Messrs. Fenster, McDonald and Weber, each such
nominee was paid by other funds within the Prudential complex, and not
by the Fund. Interested Directors of the Fund (currently, Mr.
Strangfeld) are compensated by Prudential.
** Certain of the director/trustee fees depicted in the table include
amounts representing deferred compensation.
In the election of Directors, those 19 nominees receiving the highest
number of votes cast at the Meeting, providing a quorum is present, shall be
elected.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
2. TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANT OF THE FUND.
By a vote of the independent directors, the firm of PricewaterhouseCoopers
LLP has been selected as independent accountant for the Fund to sign or certify
any financial statements of the Fund required by any law or regulation to be
certified by an independent accountant and
</TABLE>
14
<PAGE>
filed with the Securities and Exchange Commission (SEC) or any state. Under
certain circumstances the Investment Company Act of 1940 (1940 Act) requires
that shareholders ratify the directors' selection of the accountant. In
addition, as required by the 1940 Act, the vote of the Directors is subject to
the right of the Fund, by vote of a majority of its outstanding voting
securities at any meeting called for the purpose of voting on such action, to
terminate such employment without penalty. PricewaterhouseCoopers LLP has
advised the Fund that, to the best of its knowledge and belief, as of the record
date, no PricewaterhouseCoopers LLP professional had any direct or indirect
ownership interest in the Fund inconsistent with independence standards
pertaining to accountants.
For the Fund's fiscal years ended 1998 and 1999, the firm of
PricewaterhouseCoopers LLP acted as the Fund's independent accountant. The
independent accountant's audit reports for the Fund for the fiscal years ended
1998 and 1999 did not contain an adverse opinion or disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit scope, or
accounting principles. Further, there were no disagreements between the Fund and
the independent accountant on accounting principles or practices, financial
statement disclosures, or audit scope or procedures, which if not resolved to
the satisfaction of the independent accountants would have caused them to make
reference to the subject matter of the disagreements in connection with their
reports on the financial statements for such years.
The independent accountants examine annual financial statements for the
Fund and provide other audit and tax-related services. In recommending the
selection of the Fund's accountants the Audit Committee reviewed the nature and
scope of the services to be provided (including non-audit services) and whether
the performance of such services would affect the accountant's independence.
Representatives of PricewaterhouseCoopers LLP are not expected to be present at
the Meeting, but have been given the opportunity to make a statement if they so
desire, and will be available should any matter arise requiring their presence.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
3. TO APPROVE A MANAGER-OF-MANAGERS STRUCTURE FOR THE FUND.
The Board, including all of the independent directors, has approved, and
recommends that shareholders approve, a proposal to adopt a manager-of-managers
structure to govern the Fund. THIS NEW STRUCTURE WILL NOT CHANGE FEES.
Under a manager-of-managers structure, the Fund's investment manager will
be authorized to select (with approval of the Board's independent directors) one
or more subadvisers to handle the actual day-to-day investment management of the
Fund. (The investment manager, not the Fund, pays the fee of any subadviser, so
Fund expenses do not increase when a subadviser is hired.) Under this structure,
the investment manager will monitor each subadviser's performance through
quantitative and qualitative analysis and periodically report to the Board as to
whether each subadviser's agreement should be renewed, terminated or modified.
The investment manager is also responsible for allocating assets among the
subadvisers if the Fund has more than one subadviser. In those circumstances,
the allocation for each subadvisers can range from 0% to 100% of the Fund's
assets, and the investment manager can change the allocations without Board or
shareholder approval.
Currently, the Fund must prepare a proxy statement and obtain shareholder
approval for any subadvisory agreement. Under the proposed manager-of-managers
structure, shareholder approval would not be required. Instead, the investment
manager (with approval of the Board's independent directors) could hire new
subadvisers and amend their agreements without
15
<PAGE>
incurring the expense and delay of a proxy statement and a shareholder meeting.
Nevertheless, even though shareholder approval would not be required, the Fund
would send shareholders an information statement containing substantially all of
the information about the new subadviser and the new or amended subadvisory
agreement that would otherwise have been included in a proxy statement.
Prudential and the Board believe that this structure allows advisory changes to
be made more quickly and efficiently, without sacrificing the quality of service
to shareholders.
The manager-of-managers structure operates under an order issued by the
Securities and Exchange Commission (SEC). The order requires that we seek your
approval of the structure before we implement it. It is that approval that we
seek with this Proposal 3. Currently, the order permits us to hire or amend
subadvisory agreements, without shareholder approval, only with subadvisers that
are not affiliated with Prudential. We may, however, seek an order from the SEC
permitting us to hire one or more new affiliated subadvisers and permitting us
to amend existing agreements with affiliated subadvisers without shareholder
approval. With this Proposal, we seek your approval to extend the
manager-of-managers structure to affiliated subadvisers if and when we obtain
such an order from the SEC. We may also seek an amended order from the SEC
permitting us not to disclose the specific fees to specific subadvisers because
that may permit us to hire subadvisers at lower fees. With this Proposal, we
seek your approval for any such arrangement approved by the SEC. We will, of
course, comply with any conditions imposed by the SEC under any amended order.
If shareholders approve Proposals 3 and 4 described in this Proxy
Statement, the initial investment manager will be PIFM, the Prudential
subsidiary primarily responsible for mutual fund management. If one or more
subadvisers are added to the Fund, PIFM will be responsible for determining the
allocation of assets among the subadvisers and will have the flexibility to
increase the allocation to any one subadviser to as much as 100% and decrease
the allocation to any one subadviser to as little as 0%. It is possible that
PIFM will continue to be satisfied with the performance record of the existing
subadvisers, and not recommend any additional subadvisers. The
manager-of-managers structure we are asking shareholders to approve will give
the Fund the flexibility to efficiently retain additional subadvisers, but it is
possible that no subadvisers will be added.
MATTERS CONSIDERED BY THE BOARD
On August 22, 2000, the Board, including all of the independent directors,
approved the proposal to present the manager-of-managers structure to
shareholders. The Board received materials discussing this type of management
structure in advance of the meeting and had the opportunity to ask questions and
request further information in connection with such consideration. The Board
considered that the advisory fees would not change as a result of the proposal
and that the new manager-of-managers structure will provide an opportunity to
hire subadvisers and amend their subadvisory agreements more efficiently and
with less expense. The Board also considered that PIFM has substantial
experience in evaluating investment advisers and that PIFM will bring that
experience to the task of evaluating the current subadvisers for the Fund and
any potential new subadviser.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
4. TO APPROVE A NEW MANAGEMENT CONTRACT FOR THE FUND.
The Board, including all of the independent directors, has approved, and
recommends that shareholders of the Fund approve, a proposal to adopt a new
management contract (the New Contract) (attached as Exhibit A). If approved at
the Meeting, the New Contract will supersede the existing management contract
between the Fund and Prudential (the Existing Contract). ADVISORY FEES WILL NOT
CHANGE UNDER THE NEW CONTRACT. THIS REMAINS TRUE
16
<PAGE>
NOTWITHSTANDING THE FACT THAT THE FEE SHARING ARRANGEMENT BETWEEN PIFM AND ITS
AFFILIATED SUBADVISERS WILL DIFFER FROM THAT PREVIOUSLY IN EFFECT WITH
PRUDENTIAL IF PROPOSALS 5(A) AND 5(B) ARE APPROVED.
The Fund has recently created 20 new Portfolios. Prudential, as the initial
sole shareholder of these new Portfolios, has approved the New Contract on
behalf of those new Portfolios. Here, the Board is asking the shareholders of
the following, existing Portfolios of the Fund to approve the New Contract:
Conservative Balanced Portfolio, Diversified Bond Portfolio, Diversified
Conservative Growth Portfolio, Equity Portfolio, Equity Income Portfolio,
Flexible Managed Portfolio, Global Portfolio, Government Income Portfolio, High
Yield Bond Portfolio, Money Market Portfolio, Natural Resources Portfolio,
Prudential Jennison Portfolio, Small Capitalization Stock Portfolio, Stock Index
Portfolio, 20/20 Focus Portfolio, and Zero Coupon Bond 2005 Portfolio
(collectively, the Existing Portfolios).
The New Contract includes two primary changes -- a Prudential subsidiary as
the investment manager and a "manager-of-managers" structure for the Fund.
First, under the New Contract, Prudential Investments Fund Management LLC
(PIFM), a wholly-owned subsidiary of Prudential, serves as the investment
manager. Under the Existing Contract, Prudential is the investment manager. PIFM
already serves as investment manager to most funds in the Prudential mutual fund
family, and the Board and management determined that it was appropriate to
centralize responsibility for overall mutual fund investment management in one
Prudential subsidiary to the extent possible. This change does not affect the
personnel providing the actual day-to-day investment management of the Fund.
On September 29, 2000, the Fund's Board approved an interim management
agreement under which PIFM became the investment manager to the Conservative
Balanced, Diversified Conservative Growth, Equity, Equity Income, Flexible
Managed, Global, Natural Resources, Prudential Jennison, Small Capitalization
Stock, Stock Index, and 20/20 Focus Portfolios of the Fund. This interim
contract superseded the Existing Contract for those Portfolios as of that date,
and the interim agreement lasts for up to 150 days pending shareholder approval
of the New Contract at the January 31, 2001 shareholder meeting.
As a second change, the New Contract establishes a "manager-of-managers"
structure for the Fund. Under that structure, PIFM will be authorized to select
(with Board approval) one or more subadvisers to handle the actual day-to-day
investment management of the Portfolios. (PIFM, not the Fund, pays the fee of
any subadviser, so Fund expenses do not increase when a subadviser is hired.)
PIFM will monitor each subadviser's performance through quantitative and
qualitative analysis and periodically report to the Board as to whether each
subadviser's contract should be renewed, terminated or modified. The
"manager-of-managers" proposal is described in Proposal 3.
Currently, the Fund already has two Prudential subsidiaries that serve as
subadvisers -- Prudential Investment Corporation (PIC) and Jennison Associates
LLC (Jennison). Proposal 5 seeks shareholder approval of new subadvisory
agreements with PIC and Jennison (although some Portfolios currently advised by
PIC will be advised by Jennison). Therefore, if Proposals 4 and 5 are approved,
PIFM will serve as the manager of the Fund, and PIC and Jennison will serve as
subadvisers.
Set forth below is additional information about the Existing Contract, the
New Contract and the new Manager, PIFM.
17
<PAGE>
EXISTING CONTRACT
The Existing Contract between Prudential and the Fund is dated July 14,
1988 and was supplemented on March 1, 1995 and February 25, 1999. Prudential is
primarily a mutual life insurance company incorporated in 1873 under New Jersey
law. Prudential is currently considering reorganizing itself into a
publicly-traded stock company through a process known as "demutualization."
Prudential is working toward completing the demutualization process in 2001,
although there is no certainty that the demutualization will be completed by
that time or that the necessary approvals will be obtained. Also, it is possible
that after careful review, Prudential could decide not to demutualize or could
delay its plans.
The Existing Contract was most recently renewed by the Fund's Board on May 23,
2000. The Existing Contract was last submitted to a vote of the Fund's
shareholders on April 30, 1999 with respect to the Diversified Conservative
Growth Portfolio and the 20/20 Focus Portfolio, and the reason for that
submission was to make the Existing Contract applicable to those Portfolios.
During calendar year 1999, the Fund paid Prudential $144,825,584 in investment
advisory fees. During calendar year 1999, the Fund paid $104,200 in transfer
agency fees to Prudential Mutual Fund Services LLC, a wholly-owned subsidiary of
PIFM. Finally, during calendar year 1999, the Fund paid $358 to Prudential
Investment Management Services LLC (a wholly-owned subsidiary of Prudential) and
$215 to PIFM with respect to distribution and administration fees, respectively,
for the Fund's Class II shares.
Under the Existing Contract, Prudential manages the investments of certain Fund
Portfolios and determines the composition of the assets of such Portfolios,
including the purchase, retention, or sale of the securities and cash contained
in the portfolios. Prudential (or a subadviser, under Prudential's supervision)
is responsible for the selection of brokers and dealers to effect all
transactions, and is authorized to pay higher commissions in order to receive
research services. In general, the Fund bears its own expenses pursuant to the
Existing Contract, although Prudential generally pays the salaries of its
employees who provide services to the Fund. For its services, Prudential is paid
as follows:
TOTAL ADVISORY FEES AS % OF AVERAGE
EXISTING PORTFOLIOS NET ASSETS
------------------- ----------
Conservative Balanced 0.55
Diversified Bond 0.40
Diversified Conservative Growth 0.75
Equity 0.45
Equity Income 0.40
Flexible Managed 0.60
Global 0.75
Government Income 0.40
High Yield Bond 0.55
Money Market 0.40
Natural Resources 0.45
Prudential Jennison 0.60
Small Capitalization Stock 0.40
Stock Index 0.35
20/20 Focus 0.75
Zero Coupon Bond 2005 0.40
18
<PAGE>
NEW CONTRACT
Under the New Contract, each Portfolio of the Fund would receive investment
advisory services from Prudential Investments Fund Management LLC (PIFM). PIFM
is a wholly-owned subsidiary of PIFM Holdco, Inc. (PPHCo), which is a
wholly-owned subsidiary of Prudential Asset Management Holding Company (PAMHCo),
which is a wholly-owned subsidiary of Prudential. The address for PIFM, PPHCo
and PAMHCo is 100 Mulberry Street, Newark, N.J. 07102-4077. PIFM serves as
manager to almost all of the other investment companies that comprise the
Prudential mutual fund complex. As of April 30, 2000, PIFM managed and/or
administered open-end and closed-end management investment companies with assets
of approximately $76.2 billion. The following table sets out comparable retail
mutual funds for which PIFM serves as investment adviser, and indicates the size
of each such retail fund as well as the rate of PIFM's compensation.
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS OF
COMPARABLE PIFM- COMPARABLE FUND ADVISORY FEE FOR
SERIES FUND PORTFOLIO ADVISED RETAIL FUND AS OF 9/30/00 COMPARABLE FUND
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conservative Balanced Prudential Balanced Fund $ 974,881,000 0.65% to $1 billion
0.60% thereafter
Diversified Bond Prudential Total Return $ 269,351,000 0.50%
Bond Fund
Diversified Prudential $ 74,773,000 0.75%
Conservative Growth Diversified-Conservative
Growth Fund
Equity Prudential Equity Fund $ 3,961,919,000 0.50% to $500 million
0.475% next $500 million
0.45% over $1 billion
Prudential Value Fund $ 1,432,095,000 0.60% to $500 million
Equity Income (formerly the Prudential 0.50% next $500 million
Equity Income Fund) 0.475% next $500 million
0.45% over $1.5 billion
Flexible Managed Prudential Active $ 185,272,000 0.65%
Balanced Fund
Global Prudential World Fund, $ 817,201,000 0.75%
Inc. - Prudential Global
Growth Fund
Government Income Prudential Government $ 1,048,049,000 0.50% to $3 billion
Income Fund 0.35% over $3 billion
High Yield Prudential High Yield $ 2,947,129,000 0.50% to $250 million
Fund 0.475% next $500 million
0.45% next $750 million
0.425% next $500 million
0.40% next $500 million
0.375% next $500 million
0.35% thereafter
Money Market Command Money Fund $14,333,273,000 0.50% to $500 million
0.425% next $500 million
0.375% next $500 million
0.35% over $1.5 billion
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS OF
COMPARABLE PIFM- COMPARABLE FUND ADVISORY FEE FOR
SERIES FUND PORTFOLIO ADVISED RETAIL FUND AS OF 9/30/00 COMPARABLE FUND
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Natural Resources Prudential Natural $ 83,172,000 0.75%
Resources Fund
Prudential Jennison Prudential Jennison $7,261,778,000 0.60% to $300 million
Growth Fund 0.575% next $4.7 billion
0.550% over $5 billion
Small Capitalization Prudential Small $ 621,061,000 0.30%
Stock Company Fund
Stock Index Prudential Stock Index $2,632,575,000 0.30%
Fund
20/20 Focus Prudential 20/20 Focus $1,103,846,000 0.75% to $1 billion
Fund 0.70% thereafter
Zero Coupon Bond Government Income $1,048,049,000 0.50% to $3 billion
2005 Fund 0.35% over $3 billion
</TABLE>
The New Contract under which PIFM would provide management services to the Fund
is attached as Exhibit A hereto. In brief, the New Contract provides that:
o PIFM will administer the Fund's business affairs and supervise the
Fund's investments, and PIFM may engage one or more subadvisers for
each Portfolio, which will have primary responsibility for determining
what investments the Portfolio will purchase, retain, and sell; and
o PIFM (or the sub-adviser) will select brokers to effect trades for the
Fund, and may pay a higher commission to a broker that provides
research services; and
o For each Portfolio of the Fund, PIFM will charge the same advisory fee
as is currently charged to each such Portfolio by Prudential under the
Existing Contract;
o PIFM may replace a Portfolio's subadviser or amend a subadvisory
contract; and
o If a Portfolio has more than one subadviser, PIFM will determine the
allocation of assets among the Portfolio's subadvisers.
The table below lists the name and principal occupation of the principal
executive officers and each director of PIFM. The address of each person is 100
Mulberry Street, Gateway Center Three, 14th floor, Newark, NJ 07102-4077.
ROBERT F. GUNIA--Executive Vice President & Chief Administrative Officer since
1996. Prior to 1996, positions to Executive Vice President and Chief Financial
Officer, Prudential Mutual Fund Management, Inc. Age 53.
WILLIAM V. HEALEY--Executive Vice President, Chief Legal Officer & Secretary
since 1999. 1998 to present, Corporate Vice President and Associate General
Counsel, The Prudential Insurance Company of America. 1986-1998, positions to
Associate General Counsel, The Dreyfus Corporation. Age 47.
THEODORE F. KILKUSKIE--Executive Vice President since 2000. 1995-2000, Senior
Vice President, Manulife Financial. Age 45.
20
<PAGE>
DAVID R. ODENATH, Jr.--President, Chief Executive Officer and Chief Operating
Officer since 1999. 1993-1999, Senior Vice President, Paine Webber. Age 43.
JUDY A. RICE--Executive Vice President since 1999. 1992-1999, Senior Vice
President, Prudential Securities Incorporated. Age 52.
AJAY SAWHNEY--Executive Vice President since 2000. 1993-2000, positions with
Prudential International Investments (Senior Managing Director), Prudential
Healthcare (Managing Director-Finance) and Portfolio Management Group. Age 47.
LYNN M. WALDVOGEL--Executive Vice President since 1999. 1995-1999, Senior Vice
President, Paine Webber. Age 45.
Messrs. Gunia, Healey and Odenath are also officers of the Fund.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the New Contract to shareholders was approved by
the Board of Directors of the Fund, including all of the independent directors,
on August 22, 2000. The Board received materials relating to the New Contract in
advance of the meeting at which the New Contract was considered, and had the
opportunity to ask questions and request further information in connection with
such consideration. The Board considered that advisory fees would not change as
a result of this proposal. The Board also considered that it was appropriate
that PIFM, as the Prudential subsidiary specializing in mutual fund management,
serve as manager for the Fund, and that the change from Prudential to PIFM will
not have an effect on the actual personnel who manage the Fund. The Board also
considered that the new "manager-of-managers" structure will provide an
opportunity to hire subadvisers not affiliated with Prudential and amend their
subadvisory agreements more efficiently and with less expense to Fund
shareholders. The Board also considered that the other provisions of the New
Contract are substantially similar to the Existing Contract.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
5. TO APPROVE NEW SUBADVISORY AGREEMENTS FOR THE FUND.
The Board, including the independent directors, has approved, and recommends
that shareholders approve, a proposal to adopt two subadvisory agreements (the
Subadvisory Agreements) for certain existing Portfolios of the Fund.
Implementation of these Subadvisory Agreements with PIFM is contingent on
shareholder approval of item 4 above (i.e., approval of PIFM as investment
adviser to the Fund). If approved at the Meeting, the Subadvisory Agreements
will supersede (a) the existing subadvisory agreement between Prudential and
Prudential Investment Corporation (PIC) and (b) the existing subadvisory
agreements between Prudential and Jennison Associates LLC (Jennison). If PIFM is
approved as investment adviser, Prudential will transfer to PIFM the subadvisory
contracts with The Dreyfus Corporation, Franklin Advisers, Inc. and Pacific
Investment Management Company pertaining to the Diversified Conservative Growth
Portfolio.
The Board is asking for shareholder approval of the Subadvisory Agreements,
as follows:
o SUBADVISORY AGREEMENT BETWEEN PIFM AND PIC. The Board is asking
shareholders of the following, existing Portfolios of the Fund to
approve this Subadvisory Agreement: Conservative Balanced Portfolio,
Diversified Bond Portfolio, Diversified Conservative Growth Portfolio,
Flexible Managed Portfolio, Government Income Portfolio, High Yield
Bond Portfolio, Money Market Portfolio, Small
21
<PAGE>
Capitalization Stock Portfolio, Stock Index Portfolio, and Zero Coupon
Bond 2005 Portfolio.
o SUBADVISORY AGREEMENT BETWEEN PIFM AND JENNISON. The Board is asking
shareholders of the following, existing Portfolios of the Fund to
approve this Subadvisory Agreement: Diversified Conservative Growth
Portfolio, Equity Portfolio, Equity Income Portfolio, Global Portfolio,
Natural Resources Portfolio, Prudential Jennison Portfolio, and 20/20
Focus Portfolio.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
PROPOSAL 5 (a).
PROPOSED SUBADVISORY AGREEMENT BETWEEN PIFM AND PIC
Under an agreement dated December 31, 1984 with Prudential (the 1984 Agreement),
PIC manages some or all of the assets of the Conservative Balanced Portfolio,
Diversified Bond Portfolio, Diversified Conservative Growth Portfolio, Flexible
Managed Portfolio, Government Income Portfolio, High Yield Bond Portfolio, Money
Market Portfolio, Small Capitalization Stock Portfolio, Stock Index Portfolio,
and Zero Coupon Bond 2005 Portfolio. The 1984 Agreement provides that as
compensation for PIC's services, Prudential will reimburse PIC for its costs and
expenses, but it was recently amended to provide that Prudential will pay PIC
(i) for Portfolios other than Small Capitalization Stock, 50% of the fee that
Prudential receives; and (ii) for the Small Capitalization Stock Portfolio, 65%
of the fee that Prudential receives. This Subadvisory Agreement was last
submitted to shareholders on September 29, 1989 with respect to the Global
Equity, Government Securities and Zero Coupon Bond 2005 portfolios, and was last
renewed by the Fund's Board of Directors on May 23, 2000. During calendar year
1999, Prudential paid PIC $112,700,466 under the 1984 Agreement for PIC's
advisory services to the above-referenced Portfolios of the Fund.
The proposed subadvisory agreement between PIFM and PIC (the Proposed PIC
Agreement) is attached hereto as Exhibit B.
The Proposed PIC Agreement, in brief, provides that:
O PIFM GENERALLY WILL PAY PIC ONE-HALF OF THE INVESTMENT MANAGEMENT FEE
THAT PIFM RECEIVES FROM THE FUND WITH RESPECT TO THE PORTION OF EACH
PORTFOLIO MANAGED BY PIC. THIS FEE ARRANGEMENT IS THE SAME TYPE OF
ARRANGEMENT AS HAS EXISTED FOR PIFM'S SUBADVISORY ARRANGEMENTS WITH
PIC FOR PRUDENTIAL'S RETAIL MUTUAL FUNDS. IT DIFFERS FROM THE BASIS
UPON WHICH PRUDENTIAL COMPENSATED PIC, WHICH CONSISTED OF
REIMBURSEMENT OF COSTS AND EXPENSES.
o PIC will manage the pertinent Portfolios' investments and otherwise
determine what investments each such Portfolio will purchase, retain,
and sell.
o PIC will select brokers to effect trades for the pertinent Portfolio
and may pay a higher commission to a broker that provides bona fide
research services.
o PIC will maintain certain books and records on behalf of the pertinent
Portfolio.
o PIFM, with Board approval, can substitute another subadviser for PIC.
o PIFM may replace a Portfolio's subadviser or amend a subadvisory
agreement; and
o If a Portfolio has more than one subadviser, PIFM will determine the
allocation of assets among the Portfolio's subadvisers.
PIC provides investment advice to a number of SEC-registered investment
companies as well as other pooled investment vehicles.
22
<PAGE>
PIC is a wholly-owned subsidiary of Prudential Asset Management Holding
Company (PAMHCo), which is a wholly-owned subsidiary of Prudential. The address
for PIC and PAMHCo is 100 Mulberry Street, Newark, NJ 07102. Proposal 4 includes
a table setting out each Portfolio, its comparable retail fund advised by PIFM,
and the fee rate for that comparable retail fund. For each Portfolio subject to
this Proposal 5(a), PIC also serves as the subadviser for the comparable retail
fund listed in that previous table. PIC's subadvisory fee for those retail funds
is 50% [65% for the Small Cap Index Fund] of the overall advisory fee (provided
that the percentage is reduced by 2.5% [5.0% for the Command Money Fund] at each
asset breakpoint level where the overall advisory fee rate is reduced).
The table below lists the name and principal occupation of the principal
executive officers and each director of PIC. The address of each person is 100
Mulberry Street, Newark, NJ 07102-4077.
JACK W. GASTON--Director since 1999. Senior Managing Director, The Prudential
Investment Corporation, since 1986. Age 53.
PHILIP N. RUSSO--Director since 1999. Vice President, Operations - Finance, The
Prudential Insurance Company of America, since 1997; prior to 1997, Managing
Director, Bankers Trust. Age 49.
JOHN R. STRANGFELD, JR.--Chairman, Prudential Securities Incorporated since
2000. Chairman, Chief Executive Officer and President, The Prudential Investment
Corporation, since 1999. Director since 1996. Executive Vice President, The
Prudential Insurance Company of America, since 1998; prior to 1998, positions to
Chief Executive Officer, Private Asset Management Group, Prudential. Age 47.
JAMES J. SULLIVAN--Director since 1999. Since 1981, positions to Vice President
and Managing Director, The Prudential Investment Corporation. Age 40.
BERNARD WINOGRAD--Director since 1998. Chief Executive Officer, Prudential Real
Estate Investors, The Prudential Investment Corporation, since 1996. From 1989
to 1996, Executive Vice President and Chief Financial Officer, The Taubman
Company. Age 49.
Mr. Strangfeld is an officer of the Fund.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the Proposed PIC Agreement to shareholders was
approved by the Board of Directors of the Fund, and all of the independent
directors, on July 6, 2000. The Board received materials relating to the
Proposed PIC Agreement in advance of the meeting at which the Proposed PIC
Agreement was considered, and had the opportunity to ask questions and request
further information in connection with such consideration. The Board considered
that the Proposed PIC Agreement would not have an effect on the actual personnel
who manage the Fund, and that the terms of the Proposed PIC Agreement were
comparable to the existing 1984 Agreement. The Board also considered that new
subadvisory agreements were required in light of the change of Managers from
Prudential to PIFM discussed in Proposal 4, and also endorsed a
"manager-of-managers" structure as respects the Proposed PIC Agreement.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
PROPOSAL 5(b)
PROPOSED SUBADVISORY AGREEMENT BETWEEN PIFM AND JENNISON
Under an agreement dated April 27, 1995 (the 1995 Agreement) among the Fund,
Prudential, and Jennison, Jennison currently manages all of the assets of the
Growth Stock Portfolio (now
23
<PAGE>
Prudential Jennison Portfolio). The 1995 Agreement provides that as compensation
for Jennison's services, Prudential will pay Jennison a fee equal, on an
annualized basis, to the following:
0.75% on the first $10,000,000 of the Portfolio's average daily net assets
0.50% on the next $30,000,000 of the Portfolio's average daily net assets
0.35% on the next $25,000,000 of the Portfolio's average daily net assets
0.25% on the next $335,000,000 of the Portfolio's average daily net assets
0.22% on the next $600,000,000 of the Portfolio's average daily net assets
0.20% on the balance of the Portfolio's average daily net assets
Under an agreement dated May 1, 1999 (the 1999 Agreement) among the Fund,
Prudential, and Jennison, Jennison currently manages a portion the assets of the
Diversified Conservative Growth Portfolio and the 20/20 Focus Portfolio. The
1999 Agreement provides that as compensation for Jennison's services, Prudential
will pay Jennison a fee equal, on an annualized basis, to the following:
o for the 20/20 Focus Portfolio, 0.30 of 1% of the first $300 million of
average daily net assets managed by Jennison and 0.25 of 1% on the
balance of the portion of 20/20 Focus Portfolio's average daily net
assets managed by Jennison; and
o for the Diversified Conservative Growth Portfolio, 0.30 of 1% of the
first $300 million of average daily net assets managed by Jennison and
0.25 of 1% on the balance of the Diversified Conservative Growth
Portfolio's average daily net assets managed by Jennison.
The 1995 Agreement was last submitted to shareholders on April 5, 1995, and was
last renewed by the Fund's Board of Directors on May 23, 2000. During calendar
year 1999, Prudential paid Jennison $4,178,689 under the 1995 Agreement for
advisory services to the Prudential Jennison Portfolio.
The 1999 Agreement was last submitted to shareholders on April 30, 1999, and was
last renewed by the Fund's Board of Directors on May 23, 2000. During calendar
year 1999, Prudential paid Jennison $56,519 under the 1999 Agreement for
Jennison's advisory services to the 20/20 Focus Portfolio and Diversified
Conservative Growth Portfolio of the Fund.
The proposed subadvisory agreement between PIFM and Jennison (the Proposed
Jennison Agreement) is attached hereto as Exhibit C. Under the Proposed Jennison
Agreement, Jennison would provide subadvisory services to the following existing
portfolios of the Fund: Diversified Conservative Growth Portfolio, Equity
Portfolio, Equity Income Portfolio, Global Portfolio, Natural Resources
Portfolio, Prudential Jennison Portfolio, and 20/20 Focus Portfolio.
It should be noted that for certain of these portfolios (i.e., Equity Portfolio,
Equity Income Portfolio, Global Portfolio, and Natural Resources Portfolio,
Jennison's service as subadviser will be new, whereas for the other Portfolios
(i.e., Diversified Conservative Growth, Prudential Jennison, and 20/20 Focus),
Jennison has been providing subadvisory services to at least a portion of the
Portfolio for several years. With respect to the former portfolios, Jennison is
undertaking subadvisory duties that historically have been performed by PIC. For
the Equity, Equity Income, Global, Natural Resources, Diversified Conservative
Growth (value sleeve), and 20/20 Focus (value sleeve) Portfolios, Jennison
currently serves as subadviser under an interim contract with PIFM that will
terminate upon shareholder approval of the Proposed Jennison Agreement. This is
part of a broader organizational transition, under which Prudential is
transferring the equity management of the majority of mutual funds from PIC to
Jennison. This organizational transition is occurring incrementally during the
remainder of 2000.
24
<PAGE>
Jennison, 466 Lexington Avenue, New York, NY 10017, is a wholly-owned
subsidiary of PIC. PIC is a wholly-owned subsidiary of Prudential Asset
Management Holding Company (PAMHCo), which is a wholly-owned subsidiary of
Prudential. The address for PIC and PAMHCo is 100 Mulberry Street, Newark, NJ
07102. Jennison has provided investment advice to a number of SEC-registered
investment companies since 1990. Proposal 4 includes a table setting out each
Portfolio, its comparable retail fund advised by PIFM, and the fee rate for that
comparable retail fund. For each Portfolio subject to this Proposal 5(b),
Jennison either currently serves as the subadviser or will serve as the
subadviser before the end of 2000 for the comparable retail fund listed in that
previous table. Jennison' s subadvisory fee for those retail funds is 50% of the
overall advisory fee (provided that the percentage is reduced by 2.5% at each
asset level where the overall advisory fee rate is reduced).
The table below lists the name and principal occupation of the principal
executive officers and each director of Jennison. The address of each person is
466 Lexington Avenue, New York, NY 10017.
MICHAEL A. DEL BALSO--Director since 1998. Executive Vice President, Jennison
Associates LLC; since 1998; prior to 1998, various positions to Senior Vice
President, Jennison Associates Capital Corp. Age 56.
MARY-JANE FLAHERTY--Director since 2000. Managing Director, Strategic
Initiatives, The Prudential Investment Corporation since December 1998; Prior to
December 1998, various positions to Chief Financial Officer, The Prudential
Investment Corporation and various positions to Vice President, The Prudential
Insurance Company of America. Age 47.
JOHN H. HOBBS--Chairman since 1998. Chief Executive Officer, Jennison Associates
LLC since 1998; prior to 1998, various positions to Chairman and Chief Executive
Officer, Jennison Associates Capital Corp. Age 64.
KAREN E. KOHLER--Executive Vice President since 2000. Treasurer since 1999.
Chief Compliance Officer and Director since 1998; prior to 1998, various
positions to Senior Vice President, Chief Compliance Officer and Secretary,
Jennison Associates Capital Corp. Age 37.
KATHLEEN A. McCARRAGHER--Director since 1998. Executive Vice President, Jennison
Associates LLC since 1998. 1992-1998, Managing Director, Weiss, Peck & Greer
LLC. Age 39.
PHILIP N. RUSSO--Director since 2000. Vice President and Director, The
Prudential Investment Corporation since 1999; Vice President, The Prudential
Insurance Company of America, since 1997, prior to 1997, Managing Director,
Bankers Trust. Age 49.
SPIROS SEGALAS--Director since 1998. President and Chief Investment Officer,
Jennison Associates LLC since 1998. Prior to 1998, various positions to
President and Chief Investment Officer, Jennison Associates Capital Corp. Age
67.
VICTOR SIM--Director since 2000. Vice President, Prudential Insurance Company of
America since 1997. 1992-1997 Vice President, Canadian Imperial Bank of
Commerce. Age 57.
JOHN R. STRANGFELD, JR.--Director since 2000. Chief Executive Officer,
Prudential Securities Incorporated since 2000. Chairman, Chief Executive Officer
and President, The Prudential Investment Corporation since 1999. Executive Vice
President, Prudential, since 1998; prior to 1998, various positions to Chief
Executive Officer, Private Asset Management Group, Prudential. Age 47.
KEVIN C. UEBELEIN--Director since 2000. Senior Managing Director, Mergers &
Acquisitions, The Prudential Investment Corporation, since 2000; prior to 2000,
various positions to Managing Director, New Products, Private Asset Management
Group, Prudential Insurance Company of America. Age 41.
BERNARD B. WINOGRAD--Director since 2000. Chief Executive Officer, Prudential
Real Estate Investors, since December 1996; Senior Vice President and Director,
The Prudential Investment Corporation, since December 1996; prior to December
1996, The Taubman Company LLC. Age 49.
25
<PAGE>
The Proposed Jennison Agreement, in brief, provides that:
O WHERE JENNISON PREVIOUSLY SUBADVISED A PORTFOLIO (OR A PORTION OF A
PORTFOLIO), PIFM WILL PAY JENNISON THE SAME SUBADVISORY FEE THAT
PRUDENTIAL PAID JENNISON.
O WHERE JENNISON IS ASSUMING SUBADVISORY DUTIES FORMERLY PERFORMED BY
PIC, JENNISON GENERALLY WILL BE PAID 50% OF THE FEE THAT PIFM RECEIVES
FOR THE JENNISON-MANAGED ASSETS. (JENNISON'S FEE WILL BE EXPRESSED AS
A SPECIFIC PERCENTAGE FOR EACH APPLICABLE PORTFOLIO). THIS DIFFERS
FROM THE BASIS UPON WHICH PRUDENTIAL COMPENSATED PIC, WHICH CONSISTED
OF REIMBURSEMENT OF COSTS AND EXPENSES.
o Jennison will provide day-to-day management of the pertinent
Portfolio's investments and otherwise determine what investments each
such Portfolio will purchase, retain, and sell.
o Jennison will select brokers to effect trades for those Portfolios,
and may pay a higher commission to a broker that provides bona fide
research services.
o Jennison will maintain certain books and records on behalf of the
pertinent Portfolios.
o PIFM may replace a Portfolio's subadviser or amend a subadvisory
agreement.
o If a Portfolio has more than one subadviser, PIFM will determine the
allocation of assets among the Portfolio's subadvisers.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the Proposed Jennison Agreement to shareholders was
approved by the Board of Directors of the Fund, and all of the independent
directors, on July 6, 2000. The Board received materials relating to the
Proposed Jennison Agreement in advance of the meeting at which the Proposed
Jennison Agreement was considered, and had the opportunity to ask questions and
request further information in connection with such consideration. The Board
considered that the fees to be paid to Jennison are comparable to the existing
fee arrangements. The Board also considered that it is appropriate to switch
subadvisory agreements for certain of the equity related Portfolios in light of
the transition of all equity management from PIC to Jennison, and endorsed the
"manager-of-managers" approach.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
6. TO AMEND CERTAIN FUNDAMENTAL INVESTMENT POLICIES OF THE FUND.
The Board of Directors has approved, and recommends that shareholders of
the Fund approve, the amendment of certain fundamental investment policies of
the Fund.
The 1940 Act requires a mutual fund to indicate, in its registration statement,
its policy with respect to each of the following:
o issuing senior securities
o borrowing money, including the purpose for which the proceeds will be
used
o underwriting securities of other issuers
o concentrating investments in a particular industry or group of
industries
o purchasing or selling real estate or commodities
o making loans
In addition to those items, a fund is free to designate, as fundamental,
investment policies concerning other investment practices. The Fund's Statement
of Additional Information (SAI) currently sets out fundamental policies with
regard to the specific practices listed above. A fundamental policy is one that
cannot be changed without the approval of a majority of the
26
<PAGE>
fund's outstanding voting securities. As discussed below, the Board recommends
that certain of those policies be amended to afford more flexibility, and
conform to the counterpart policies of the Prudential retail mutual funds.
A detailed analysis of the changes recommended by the Board follows (the numbers
set out below correspond to the numbering of the current fundamental investment
policies, which are set out in each item below, in the Fund's SAI):
1. None of the Portfolios will buy or sell real estate and mortgages, although
the Portfolios may buy and sell securities that are secured by real estate and
securities of real estate investment trusts and of other issuers that engage in
real estate operation. Buy or sell commodities or commodities contracts, except
that the Diversified Stock, Balanced, and Specialized Portfolios may purchase
and sell stock index futures contracts and related options; the Fixed Income
Portfolios (other than the Money Market and Zero Coupon Bond Portfolios), the
Global Portfolio, and the Balanced Portfolios may purchase and sell interest
rate futures contracts and related options; and all Portfolios (other than the
Money Market, Government Income, Zero Coupon Bond, and Small Capitalization
Stock Portfolios) may purchase and sell foreign currency futures contracts and
related options and forward foreign currency exchange contracts.
RECOMMENDATION: The Fund's policies in this regard are substantially similar to
those of recently-introduced Prudential retail mutual funds. However, the fact
that the current fundamental policy names specific Fund Portfolios makes the
fundamental policy impractical with regard to new Portfolios that the Fund may
add from time to time. For this reason, the Board recommends that in lieu of the
current fundamental policy, shareholders approve the following two fundamental
policies, which are substantially identical to fundamental policies governing
recently-introduced Prudential retail funds:
"None of the Portfolios will buy or sell real estate, except that investment in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported or secured by interests in real estate are not subject to this
limitation, and except that the Portfolios may exercise rights relating to such
securities, including the right to enforce security interests and to hold real
estate acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner"; and
"None of the Portfolios will buy or sell commodities or commodity contracts,
except that a Portfolio may, consistent with its investment style, purchase and
sell financial futures contracts and options thereon. For purposes of this
restriction, futures contracts on currencies and on securities indices and
forward foreign currency exchange contracts are not deemed to be commodities or
commodity contracts."
3. None of the Portfolios will acquire securities for the purpose of exercising
control or management of any company except in connection with a merger,
consolidation, acquisition or reorganization.
RECOMMENDATION: The 1940 Act does not require a fund to adopt a fundamental
policy concerning controlling investments in other issuers, and current
Prudential retail funds have been eliminating this restriction. Accordingly, the
Board recommends that the Fund also eliminate this fundamental investment
policy.
5. None of the Portfolios will purchase securities on margin or otherwise borrow
money or issue senior securities except that the Diversified Bond, Diversified
Conservative Growth, High Yield Bond and Government Income Portfolios, as well
as the fixed income portions of the Balanced Portfolios, may enter into reverse
repurchase agreements, dollar rolls and may purchase securities on a when-issued
and delayed delivery basis; except that the Money Market
27
<PAGE>
Portfolio and the money market portion of any Portfolio may enter into reverse
repurchase agreements and may purchase securities on a when-issued and delayed
delivery basis; and except that the Equity, Prudential Jennison, 20/20 Focus,
Small Capitalization Stock, Equity Income, Natural Resources and Global
Portfolios may purchase securities on a when-issued or a delayed delivery basis.
The Fund may also obtain such short-term credit as it needs for the clearance of
securities transactions and may borrow from a bank for the account of any
Portfolio as a temporary measure to facilitate redemptions (but not for
leveraging or investment) or to exercise an option, an amount that does not
exceed 5% of the value of the Portfolio's total assets (including the amount
owed as a result of the borrowing) at the time the borrowing is made. Interest
paid on borrowings will not be available for investment. Collateral arrangements
with respect to futures contracts and options thereon and forward foreign
currency exchange contracts (as permitted by restriction no. 1) are not deemed
to be the issuance of a senior security or the purchase of a security on margin.
Collateral arrangements with respect to the writing of the following options by
the following Portfolios are not deemed to be the issuance of a senior security
or the purchase of a security on margin: Diversified Stock and Specialized
Portfolios other than the Stock Index Portfolio (options on equity securities,
stock indexes, foreign currencies) and the Small Capitalization Stock Portfolio
(options on equity securities, stock indexes); the Diversified Conservative
Growth and the Balanced Portfolios (options on debt securities, equity
securities, stock indexes, foreign currencies); Diversified Bond and High Yield
Bond Portfolios (options on debt securities, foreign currencies); Government
Income Portfolio (options on debt securities); 20/20 Focus Portfolio (options on
stock indexes). Collateral arrangements entered into by the Fixed Income
Portfolios (other than the Money Market and Zero Coupon Bond Portfolios),
Diversified Conservative Growth Portfolio and the Balanced Portfolios with
respect to interest rate swap agreements are not deemed to be the issuance of a
senior security or the purchase of a security on margin.
RECOMMENDATION: The 1940 Act allows a registered open-end investment company to
borrow from bank, provided that immediately after such borrowing, there is an
asset coverage of at least 300% for all the company's borrowings. Reflecting
this standard, current Prudential retail fund registration statements permit a
fund to borrow up to 331 @3% of the value of its total assets (calculated when
the loan is made) for temporary, extraordinary or emergency purposes or for the
clearance of transactions. Current retail fund registration statements also
recite, as required by the 1940 Act, the Fund's policy regarding the issuance of
senior securities. For the same reasons that were articulated in section 1
above, the Board recommends that shareholders delete this restriction, and in
its place substitute what appears immediately below. In addition, the amended
investment restriction would provide the Fund with flexibility in adopting an
inter-fund lending program if an exemptive order is obtained from the SEC staff.
"None of the Portfolios will purchase securities on margin (but a Portfolio may
obtain such short-term credits as may be necessary for the clearance of
transactions); provided that the deposit or payment by a Portfolio of initial or
maintenance margin in connection with otherwise permissible futures or options
is not considered the purchase of a security on margin;" and
"None of the Portfolios will issue senior securities, borrow money or pledge
assets, except as permitted by the Investment Company Act of 1940 and rules
thereunder, or by exemptive order, SEC release, no-action letter, or similar
relief or interpretations. For purposes of this restriction, the purchase or
sale of securities on a when-issued or delayed-delivery basis, reverse
repurchase agreements, short sales, derivative and hedging transactions and
collateral arrangements with respect thereto, and obligations of the Fund to
Directors pursuant to deferred compensation arrangements are not deemed to be a
pledge of assets or the issuance of a senior security."
28
<PAGE>
8. None of the Portfolios will lend money, except that loans of up to 10% of the
value of each Portfolio may be made through the purchase of privately placed
bonds, debentures, notes, and other evidences of indebtedness of a character
customarily acquired by institutional investors that may or may not be
convertible into stock or accompanied by warrants or rights to acquire stock.
Repurchase agreements and the purchase of publicly traded debt obligations are
not considered to be "loans" for this purpose and may be entered into or
purchased by a Portfolio in accordance with its investment objectives and
policies.
RECOMMENDATION: To bring the Fund into parity with the comparable fundamental
policy of the Prudential retail funds, the Board proposes that the
above-referenced fundamental policy be replaced with the following:
"None of the Portfolios will make loans, except through loans of assets of a
Portfolio, repurchase agreements, trade claims, loan participations or similar
investments, or as permitted by the Investment Company Act of 1940 and rules
thereunder, or by exemptive order, SEC release, no-action letter or similar
relief or interpretations. Provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
instruments similar to any of the foregoing will not be considered the making of
a loan."
9. None of the Portfolios will underwrite the securities of other issuers,
except where the Fund may be deemed to be an underwriter for purposes of certain
federal securities laws in connection with the disposition of Portfolio
securities and with loans that a Portfolio may make pursuant to item 8 above.
RECOMMENDATION: This fundamental objective is substantially similar to that of
the Prudential retail funds. Nonetheless, to facilitate consistent
interpretation of this fundamental objective across the entire Prudential mutual
fund complex, the Board recommends that shareholders approve the following as a
fundamental policy to replace the Fund's current policy on this issue:
"None of the Portfolios will act as underwriter except to the extent that, in
connection with the disposition of portfolio securities, it may be deemed to be
an underwriter under certain federal securities laws."
10. None of the Portfolios will make an investment unless, when considering all
its other investments, 75% of the value of a Portfolio's assets would consist of
cash, cash items, obligations of the United States Government, its agencies or
instrumentalities, and other securities. For purposes of this restriction,
"other securities" are limited for each issuer to not more than 5% of the value
of a Portfolio's assets and to not more than 10% of the issuer's outstanding
voting securities held by the Fund as a whole. Some uncertainty exists as to
whether certain of the types of bank obligations in which a Portfolio may
invest, such as certificates of deposit and bankers' acceptances, should be
classified as "cash items" rather than "other securities" for purposes of this
restriction, which is a diversification requirement under the 1940 Act.
Interpreting most bank obligations as "other securities" limits the amount a
Portfolio may invest in the obligations of any one bank to 5% of its total
assets. If there is an authoritative decision that any of these obligations are
not "securities" for purposes of this diversification test, this limitation
would not apply to the purchase of such obligations.
RECOMMENDATION: The numerical test set out in the first part of this fundamental
policy paraphrases the diversification standard under the 1940 Act for mutual
funds. The latter part of this policy discusses an interpretive issue concerning
this standard. Under the 1940 Act, the
29
<PAGE>
Fund is required to recite in its registration statement its status as a
diversified management investment company, and may change this
sub-classification only if approved by a majority vote of shareholders. The
Board recommends deletion of this fundamental policy because to maintain a
fundamental investment policy on this issue is redundant.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
7. AMENDMENT OF THE FUND'S BY-LAWS TO ELIMINATE PROVISIONS REGARDING
FUNDAMENTAL INVESTMENT POLICIES.
Article XIV of the Fund's By-Laws currently sets forth a number of fundamental
investment policies to which the Fund must adhere. Article XIV may be amended
only by majority vote of the Fund's outstanding shares.
Neither the 1940 Act nor Maryland Corporation law requires such provisions to be
included in a mutual fund's By-Laws. Accordingly, the Board has recommended that
Fund shareholders vote to repeal Article XIV of the Fund's By-Laws. If
shareholders approve this proposal, the Fund's fundamental investment
restrictions would be set forth only in its SEC registration statement, which
would be consistent with industry practice. If approved, this would mean that
any future change to the Fund's fundamental policies could be accomplished
without having to amend Article XIV of the By-Laws--because that provision will
have been repealed.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
8. SERIES FUND EQUITY INCOME PORTFOLIO: PROPOSED CHANGE OF FUNDAMENTAL
INVESTMENT OBJECTIVE.
The Equity Income Portfolio's current investment objective is to seek both
current income and capital appreciation. To achieve this objective, the Equity
Income Portfolio seeks investments whose price will increase as well as pay
dividends above those of the S&P 500 Index. The Portfolio normally invests at
least 65% of its assets in equity and equity-related securities. Up to 35% of
the Portfolio's total assets may be invested in other debt obligations,
including non-convertible preferred stock. Up to 30% of the Portfolio's total
assets may be invested in foreign securities. The Portfolio is permitted to
invest up to 35% of its total assets in money market instruments.
At a special Board meeting held on May 2, 2000, the Fund's Board approved a
recommendation of the adviser that the Equity Income Portfolio change its
investment emphasis to a "large capitalization value" approach in order to
increase the prospects for enhanced performance. To facilitate that change, the
Board agreed to recommend to shareholders that the Portfolio's fundamental
objective of seeking current income be eliminated. If the Portfolio's
shareholders approve this change, the Equity Income Portfolio would be re-named
the "Prudential Value Portfolio." That name change would become effective on or
about May 1, 2001.
The Board recommends that shareholders of the Equity Income Portfolio amend the
Portfolio's fundamental investment objective to provide as follows:
"The Prudential Value Portfolio's investment objective is to seek capital
appreciation. It will seek to achieve this objective by focusing on undervalued
stocks--those stocks that are trading below their underlying asset value, cash
generating ability and overall earnings and earnings growth."
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
30
<PAGE>
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the contrary
will be voted on such matters in accordance with the judgment of the persons
therein designated.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the Fund by Prudential, PIFM, or a subadviser pursuant to authority
contained in the Fund's management contract.
Prudential, PIFM or a subadviser may place agency transactions with
Prudential Securities Incorporated (PSI), a wholly-owned subsidiary of
Prudential, if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for similar
services.
The brokerage commissions paid to PSI by each Portfolio of the Fund for the
fiscal year ended December 31, 1999 are listed in the following table:
% OF AGGREGATE
BROKERAGE COMMISSIONS
PORTFOLIO COMMISSIONS PAID PAID TO PSI
------------------------------------------------------------------------------
Conservative Balanced $ 2,600 .93%
Equity $ 319,224 12.75%
Equity Income $ 69,381 3.96%
Flexible Managed $ 10,257 1.31%
Natural Resources $ 3,431 .73%
Prudential Jennison $ 188,075 10.20%
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The Fund does not hold annual shareholder meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of the Fund.
31
<PAGE>
EXHIBIT A
THE PRUDENTIAL SERIES FUND, INC.
MANAGEMENT AGREEMENT
Agreement made this 7th day of September, 2000, between The Prudential
Series Fund, Inc., a Maryland Corporation, (the Fund), and Prudential
Investments Fund Management LLC, a New York limited liability company (the
Manager).
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund and the
Fund also desires to avail itself of the facilities available to the Manager
with respect to the administration of its day to day business affairs, and the
Manager is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of each series of
the Fund (each a Series or Portfolio) and as administrator of its business
affairs for the period and on the terms set forth in this Agreement. The Manager
accepts such appointment and agrees to render the services herein described, for
the compensation herein provided. The Manager is authorized to enter into a
subadvisory agreement with The Prudential Investment Corporation, Jennison
Associates LLC, or any other sub-adviser, whether or not affiliated with
Prudential (each, a Subadvisor) pursuant to which such Subadvisor shall furnish
to the Fund the investment advisory services in connection with the management
of the Fund (each, a Subadvisory Agreement). The Manager is authorized to retain
more than one Subadvisor for any Portfolio, and for any Portfolio with more than
one Subadvisor, the Manager is authorized to allocate the Portfolio's assets
among the Subadvisors. The Manager will continue to have responsibility for all
investment advisory services furnished pursuant to any Subadvisory Agreement.
The Fund and Manager understand and agree that Manager will manage the Fund in a
"manager-of-managers" style, which contemplates that Manager will, among other
things, (i) continually evaluate the performance of the Subadvisor to each
Portfolio through quantitative and qualitative analysis and consultations with
such Subadvisor (ii) periodically make recommendations to the Fund's Board as to
whether the contract with one or more Subadvisors should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board regarding the
results of its evaluation and monitoring functions. The Fund recognizes that a
Subadvisor's services may be terminated or modified pursuant to this process,
and that Manager may appoint a new Subadvisor for a Subadvisor that is so
removed.
32
<PAGE>
2. Subject to the supervision of the Board of Directors of the Fund, the
Manager shall administer the Fund's business affairs and, in connection
therewith, shall furnish the Fund with office facilities and with clerical,
bookkeeping and recordkeeping services at such office facilities and, subject to
Section 1 hereof and any Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's portfolio
investments, including the purchase, retention and disposition thereof, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's SEC registration statement, and subject to the following
understandings:
(a) The Manager (or a Subadvisor under the Manager's supervision)
shall provide supervision of the Fund's investments, and shall determine
from time to time what investments or securities will be purchased,
retained, sold or loaned by the Fund, and what portion of the assets will
be invested or held uninvested as cash.
(b) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation and By-Laws of the Fund and the Fund's SEC registration
statement and with the instructions and directions of the Board of
Directors of the Fund, and will conform to and comply with the requirements
of the 1940 Act and all other applicable federal and state laws and
regulations. In connection therewith, the Manager shall, among other
things, prepare and file (or cause to be prepared and filed) such reports
as are, or may in the future be, required by the Securities and Exchange
Commission.
(c) The Manager (or the Subadvisor under the Manager's supervision)
shall determine the securities and futures contracts to be purchased or
sold by the Fund and will place orders pursuant to its determinations with
or through such persons, brokers, dealers or futures commission merchants
(including but not limited to Prudential Securities Incorporated) in
conformity with the policy with respect to brokerage as set forth in the
Fund's SEC Registration Statement or as the Board of Directors may direct
from time to time. In providing the Fund with investment supervision, it is
recognized that the Manager (or the Subadvisor under the Manager's
supervision) will give primary consideration to securing the most favorable
price and efficient execution. Consistent with this policy, the Manager (or
Subadvisor under the Manager's supervision) may consider the financial
responsibility, research and investment information and other services
provided by brokers, dealers or futures commission merchants who may effect
or be a party to any such transaction or other transactions to which other
clients of the Manager (or Subadvisor) may be a party. It is understood
that Prudential Securities Incorporated (or a broker-dealer affiliated with
a Subadvisor) may be used as principal broker for securities transactions,
but that no formula has been adopted for allocation of the Fund's
investment transaction business. It is also understood that it is desirable
for the Fund that the Manager (or Subadvisor) have access to supplemental
investment and market research and security and economic analysis provided
by brokers or futures commission merchants, and that such brokers or FCMs
may execute brokerage transactions at a higher cost to the Fund than may
result when allocating brokerage to other brokers or futures commission
merchants on the basis of seeking the most favorable price and efficient
execution. Therefore, the Manager (or the Subadvisor under
33
<PAGE>
the Manager's supervision) is authorized to pay higher brokerage
commissions for the purchase and sale of securities and futures contracts
for the Fund to brokers or futures commission merchants who provide such
research and analysis, subject to review by the Fund's Board of Directors
from time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such broker or
futures commission merchant may be useful to the Manager (or the
Subadvisor) in connection with its services to other clients.
On occasions when the Manager (or a Subadvisor under the Manager's
supervision) deems the purchase or sale of a security or a futures contract
to be in the best interest of the Fund as well as other clients of the
Manager (or the Subadvisor) the Manager (or Subadvisor), to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities or futures contracts to be so sold
or purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities or futures contracts so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Manager (or the
Subadvisor) in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients.
(d) The Manager (or the Subadvisor under the Manager's supervision)
shall maintain all books and records with respect to the Fund's portfolio
transactions and shall render to the Fund's Board of Directors such
periodic and special reports as the Board may reasonably request.
(e) The Manager (or the Subadvisor under the Manager's supervision)
shall be responsible for the financial and accounting records to be
maintained by the Fund (including those being maintained by the Fund's
Custodian).
(f) The Manager (or the Subadvisor under the Manager's supervision)
shall provide the Fund's Custodian on each business day information
relating to all transactions concerning the Fund's assets.
(g) The investment management services of the Manager to the Fund
under this Agreement are not to be deemed exclusive, and the Manager shall
be free to render similar services to others.
(h) The Manager shall make reasonably available its employees and
officers for consultation with any of the Directors or officers or
employees of the Fund with respect to any matter discussed herein,
including, without limitation, the valuation of the Fund's securities.
3. The Fund has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation;
34
<PAGE>
(b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Fund
authorizing the appointment of the Manager and approving the form of this
agreement;
(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the Registration Statement), as filed
with the Securities and Exchange Commission (the Commission) relating to
the Fund and its shares of beneficial interest and all amendments thereto;
and
(e) Prospectus and Statement of Additional Information of the Fund.
4. The Manager shall authorize and permit any of its officers and employees
who may be elected as Directors or officers of the Fund to serve in the
capacities in which they are elected. All services to be furnished by the
Manager under this Agreement may be furnished through the medium of any such
officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to be
maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund, and it
will surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records as are required to be maintained by the Manager
pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the following
expenses:
(i) the salaries and expenses of all employees of the Manager, except
the fees and expenses of Directors who are not affiliated persons of the
Manager or the Fund's investment adviser,
(ii) all expenses incurred by the Manager in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund herein, and
(iii) the costs and expenses payable to a Subadvisor pursuant to a
Subadvisory Agreement.
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in connection with the
management of the investment and reinvestment of the Fund's assets,
(b) the fees and expenses of Fund Directors who are not "interested
persons" of the Fund within the meaning of the 1940 Act,
(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii)
preparing and maintaining the general accounting records of the Fund and
the provision of any such records to the Manager
35
<PAGE>
useful to the Manager in connection with the Manager's responsibility for
the accounting records of the Fund pursuant to Section 31 of the 1940 Act
and the rules promulgated thereunder, (iii) the pricing or valuation of the
shares of the Fund, including the cost of any pricing or valuation service
or services which may be retained pursuant to the authorization of the
Board of Directors of the Fund, and (iv) for both mail and wire orders, the
cashiering function in connection with the issuance and redemption of the
Fund's securities,
(d) the fees and expenses of the Fund's Transfer and Dividend
Disbursing Agent that relate to the maintenance of each shareholder
account,
(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund to federal, state
or other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of share certificates representing, and/or non-negotiable
share deposit receipts evidencing, shares of the Fund,
(j) the cost of fidelity, directors' and officers' and errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and Exchange
Commission, and paying notice filing fees under state securities laws,
including the preparation and printing of the Fund's registration
statements and the Fund's prospectuses and statements of additional
information for filing under federal and state securities laws for such
purposes,
(l) allocable communications expenses with respect to investor
services and all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing reports and notices to shareholders in the
amount necessary for distribution to the shareholders,
(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Distribution and
Service Plan adopted in a manner that is consistent with Rule 12b-1 under
the 1940 Act.
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Manager as full compensation therefor a fee
at the annual rates indicated below with respect to the average daily net assets
of each series of the Fund. This fee will be computed daily, and will be paid to
the Manager monthly.
36
<PAGE>
TOTAL ADVISORY FEES AS
PORTFOLIO % OF AVERAGE NET ASSETS
--------- -----------------------
Conservative Balanced 0.55
Diversified Bond 0.40
Diversified Conservative Growth 0.75
Equity 0.45
Equity Income 0.40
Flexible Managed 0.60
Global 0.75
Government Income 0.40
High Yield Bond 0.55
Money Market 0.40
Natural Resources 0.45
Prudential Jennison 0.60
Small Capitalization Stock 0.40
SP Aggressive Growth Asset Allocation Portfolio 0.84
SP AIM Aggressive Growth Portfolio 0.95
SP AIM Growth and Income Portfolio 0.85
SP Alliance Large Cap Growth Portfolio 0.90
SP Alliance Technology Portfolio 1.15
SP Balanced Asset Allocation Portfolio 0.75
SP Conservative Asset Allocation Portfolio 0.71
SP Davis Value Portfolio 0.75
SP Deutsche International Equity Portfolio 0.90
SP Growth Asset Allocation Portfolio 0.80
SP INVESCO Small Company Growth Portfolio 0.95
SP Jennison International Growth Portfolio 0.85
SP Large Cap Value Portfolio 0.80
SP MFS Capital Opportunities Portfolio 0.75
SP MFS Mid Cap Growth Portfolio 0.80
SP PIMCO High Yield Portfolio 0.60
SP PIMCO Total Return Portfolio 0.60
SP Prudential U.S. Emerging Growth Portfolio 0.60
SP Small/Mid Cap Value Portfolio 0.90
SP Strategic Partners Focused Growth Portfolio 0.90
Stock Index 0.35
20/20 Focus 0.75
Zero Coupon Bond 2005 0.40
If in any fiscal year, the aggregate annual ordinary operating expenses of
any Fund series (other than the Global Portfolio, 20/20 Focus Portfolio,
Diversified Conservative Growth Portfolio, or any of the Strategic Partners
("SP") series), including the investment management fee but excluding interest,
taxes, and brokerage commissions, exceed 0.75% of the series' net assets, the
Manager will waive that portion of the investment management fee for the
Portfolio for that fiscal year that is equal to the excess. Manager's
performance under this Agreement
37
<PAGE>
with respect to a series will commence only after shareholders of that series
have approved this Agreement. The parties acknowledge that with respect to the
four Asset Allocation Portfolios set out above, the management fee indicated
represents a blend of the management fees borne by the constituent Portfolios,
plus a .05% fee payable to the Manager.
8. The Manager shall not be liable for any error of judgment or for any
loss suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act) or loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, or by the Manager at any time, without the payment of any
penalty, on not more than 60 days' written notice to the other party. This
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
10. Nothing in this Agreement shall limit or restrict the right of any
officer or employee of the Manager who may also be a director, officer or
employee of the Fund to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any business,
whether of a similar or dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Board of
Directors of the Fund from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor, and shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
12. During the term of this Agreement, the Fund agrees to furnish the
Manager at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
shareholders of the Fund or the public, which refer in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Fund will continue to furnish to the Manager copies of any of the
above- mentioned materials which refer in any way to the Manager. Sales
literature may be furnished to the Manager hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery. The Fund shall furnish
or otherwise make available to the Manager such other information relating to
the business affairs of the Fund as the Manager at any time, or from time to
time, reasonably requests in order to discharge its obligations hereunder.
38
<PAGE>
13. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
14. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry
Street, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention:
President.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. The Fund may use the name "Prudential Series Fund, Inc." or any name
including the word "Prudential" only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the Manager's
business as Manager or any extension, renewal or amendment thereof remain in
effect. At such time as such an agreement shall no longer be in effect, the Fund
will (to the extent that it lawfully can) cease to use such a name or any other
name indicating that it is advised by, managed by or otherwise connected with
the Manager, or any organization which shall have so succeeded to such
businesses. In no event shall the Fund use the name "Prudential Series Fund,
Inc." or any name including the word "Prudential" if the Manager's function is
transferred or assigned to a company of which The Prudential Insurance Company
of America does not have control.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE PRUDENTIAL SERIES FUND, INC.
By:___________________________________
PRUDENTIAL INVESTMENTS FUND
MANAGEMENT LLC
By:___________________________________
39
<PAGE>
EXHIBIT B
PRUDENTIAL SERIES FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this _____ day of ___________, 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager), The Prudential Investment
Corporation (the Subadviser or PIC), and The Prudential Series Fund, Inc.
WHEREAS, the Manager has entered into a Management Agreement, dated
September 7th, 2000 (the Management Agreement), with The Prudential Series Fund,
Inc. (the Fund), a Maryland corporation and a diversified open-end management
investment company registered under the Investment Company Act of 1940 (the 1940
Act), pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to certain series of the Fund specified below (the Series, or
Portfolios), and the Subadviser is willing to render such investment advisory
services; and
WHEREAS, this Agreement between PIFM and the Subadviser is intended to
supersede the Service Agreement, dated December 31, 1984 pertaining to the Fund;
and
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
Directors of the Fund, the Subadviser shall manage the investment
operations of the Series of the Fund and the composition of the Series'
portfolio, including the purchase, retention and disposition thereof, in
accordance with the Series' investment objectives, policies and
restrictions as stated in the Prospectus (such Prospectus and Statement of
Additional Information as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus"), and
subject to the following understandings:
(i) The Subadviser shall provide supervision of the Series'
investments and determine from time to time what investments and
securities will be purchased, retained, sold or loaned by the Series,
and what portion of the assets will be invested or held uninvested as
cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Board of
Directors of the Fund, and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986 and
all other applicable federal and state laws and regulations. In
connection therewith, the Subadviser shall, among other things,
prepare and file such reports as are, or may in the future be,
required by the Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by each Series, and will place
orders with or through such persons, brokers, dealers or futures
commission merchants (including but not
40
<PAGE>
limited to Prudential Securities Incorporated) to carry out the policy
with respect to brokerage as set forth in the Fund's Prospectus or as
the Board of Directors may direct from time to time. In providing the
Series with investment supervision, it is recognized that the
Subadviser will give primary consideration to securing the most
favorable price and efficient execution. Within the framework of this
policy, the Subadviser may consider the financial responsibility,
research and investment information and other services provided by
brokers, dealers or futures commission merchants who may effect or be
a party to any such transaction or other transactions to which the
Subadviser's other clients may be a party. It is understood that
Prudential Securities Incorporated may be used as principal broker for
securities transactions, but that no formula has been adopted for
allocation of the Series' investment transaction business. It is also
understood that it is desirable for the Series that the Subadviser
have access to supplemental investment and market research and
security and economic analysis provided by brokers or futures
commission merchants who may execute brokerage transactions at a
higher cost to the Series than may result when allocating brokerage to
other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Subadviser is authorized to place
orders for the purchase and sale of securitiesand futures contracts
for the Series with such brokers or futures commission merchants,
subject to review by the Fund's Board of Directors from time to time
with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers or futures
commission merchants may be useful to the Subadviser in connection
with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Series
as well as other clients ofthe Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities or futures contracts
to be sold or purchased in order to obtain the most favorable price or
lower brokerage commissions and efficient execution. In such event,
allocation of the securities or futures contracts so purchased or
sold, as well as the expenses incurred in the transaction, will be
made by the Subadviser in the manner the Subadviser considers to be
the most equitable and consistent with its fiduciary obligations to
the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Series' portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's Board
of Directors such periodic and special reports as the Directors may
reasonably request. The Subadviser shall make reasonably available its
employees and officers for consultation with any of the Directors or
officers or employees of the Fund with respect to any matter discussed
herein, including, without limitation, the valuation of the Fund's
securities.
(v) The Subadviser shall provide the Series' Custodian on each
business day with information relating to all transactions concerning
the Series' assets, and shall provide the Manager with such
information upon request of the Manager.
41
<PAGE>
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, Subadviser and Manager understand and agree that Manager
manages the Fund in a "manager-of-managers" style, which contemplates
that Manager will, among other things, (i) continually evaluate the
performance of the subadviser to each Portfolio through quantitative
and qualitative analysis and consultations with such subadviser (ii)
periodically make recommendations to the Fund's Board as to whether
the contract with one or more subadvisers should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions.
Subadviser recognizes that its services may be terminated or modified
pursuant to this process. Manager is authorized to retain more than
one subadvisor for any Portfolio, and for any Portfolio with more than
one subadvisor, the Manager is authorized to allocate the Portfolio's
assets among the subadvisors.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as directors or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Series' books and records required
to be maintained by the Subadviser pursuant to paragraph 1(a) hereof and
shall timely furnish to the Manager all information relating to the
Subadviser's services hereunder needed by the Manager to keep the other
books and records of the Series required by Rule 31a-1 under the 1940 Act.
The Subadviser agrees that all records which it maintains for the Series
are the property of the Fund, and the Subadviser will surrender promptly
tothe Fund any of such records upon the Fund's request, provided, however,
that the Subadviser may retain a copy of such records. The Subadviser
further agrees to preserve for the periods prescribed by Rule 31a-2 of the
Commission under the 1940 Act any such records as are required to be
maintained by it pursuant to paragraph 1(a) hereof.
2. The Manager shall continue to have responsibility for all services
to be provided to the Series pursuant to the Management Agreement and, as
more particularly discussed above, shall oversee and review the
Subadviser's performance of its duties under this Agreement.
3. The Subadviser shall not be liable for any error of judgment or for
any loss suffered by the Fund or the Manager in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
4. For the following Fund Portfolios, PIFM will pay PIC, with respect
to the assets that PIC manages, a fee (payable quarterly) of 50% of the fee
that PIFM receives (65% of the PIFM fee, for Small Capitalization Stock
Portfolio) provided that such percentage is
42
<PAGE>
reduced at each asset breakpoint (if any) by 2.5% (reduced instead by 5% at
each asset breakpoint for the Money Market Portfolio of the Fund):
Conservative Balanced Portfolio
Diversified Bond Portfolio
Diversified Conservative Growth Portfolio
Flexible Managed Portfolio
Government Income Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
Zero Coupon Bond Portfolio 2005
5. This Agreement shall continue in effect for a period of more than
two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements
of the 1940 Act; provided, however, that this Agreement may be terminated
by the Fund at any time, without the payment of any penalty, by the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, or by the Manager or
the Subadviser at any time, without the payment of any penalty, on not more
than 60 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the
1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any
of the Subadviser's directors, officers, or employees who may also be a
director, officer or employee of the Fund to engage in any other business
or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or a dissimilar nature,
nor limit or restrict the Subadviser's right to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
7. During the term of this Agreement, the Manager agrees to furnish
the Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature may
be furnished to the Subadviser hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery.
43
<PAGE>
8. This Agreement may be amended by mutual consent, but the consent of
the Fund must be obtained in conformity with the requirements of the 1940
Act.
9. This Agreement shall be governed by the laws of the State of New
Jersey.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
BY:_______________________________________
THE PRUDENTIAL INVESTMENT CORPORATION
By________________________________________
THE PRUDENTIAL SERIES FUND, INC.
By________________________________________
44
<PAGE>
EXHIBIT C
PRUDENTIAL SERIES FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2001 between Prudential
Investments Fund Management LLC (PIFM or the Manager), Jennison Associates LLC
(the Subadviser or Jennison), and The Prudential Series Fund, Inc.
WHEREAS, the Manager has entered into a Management Agreement, dated
September 7th, 2000 (the Management Agreement), with The Prudential Series Fund,
Inc. (the Fund), a Maryland corporation and a diversified open-end management
investment company registered under the Investment Company Act of 1940 (the 1940
Act), pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to certain series of the Fund specified below (the Series, or
Portfolios), and the Subadviser is willing to render such investment advisory
services; and
WHEREAS, this Agreement between PIFM and the Subadviser is intended to
supersede (i) the agreement, dated May 1, 1999, among the Fund, The Prudential
Insurance Company of America (Prudential), and the Subadviser concerning the
Fund's 20/20 Focus and Diversified Conservative Growth Portfolios and (ii) the
agreement, dated April 27, 1995, among the Fund, Prudential, and the Subadviser
concerning the Prudential Jennison Portfolio, and (iii) the Agreements, dated
August 11, 2000 among Prudential Investments Fund Management LLC, Jennison
Associates LLC, and the Prudential Series Fund, Inc.; and
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
Directors of the Fund, the Subadviser shall manage the investment
operations of the Series of the Fund and the composition of the Series'
portfolio, including the purchase, retention and disposition thereof, in
accordance with the Series' investment objectives, policies and
restrictions as stated in the Prospectus (such Prospectus and Statement of
Additional Information as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus"), and
subject to the following understandings:
(i) The Subadviser shall provide supervision of the Series'
investments and determine from time to time what investments and
securities will be purchased, retained, sold or loaned by the Series,
and what portion of the assets will be invested or held uninvested as
cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Board of
Directors of the Fund, and, for multi-manager portfolios, cooperate
with the Manager's (or its designee's) personnel responsible for
ensuring compliance with the requirements of the 1940 Act, the
Internal Revenue Code of 1986 and all other applicable federal and
state laws and regulations. In connection therewith, the Subadviser
shall, among other things, prepare and file such reports as are, or
may in the future be, required by the Securities and Exchange
Commission.
45
<PAGE>
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by each Series, and will place
orders with or through such persons, brokers, dealers or futures
commission merchants (including but not limited to Prudential
Securities Incorporated) to carry out the policy with respect to
brokerage as set forth in the Fund's Prospectus or as the Board of
Directors may direct from time to time. In providing the Series with
investment supervision, it is recognized that the Subadviser will give
primary consideration to securing the most favorable price and
efficient execution. Within the framework of this policy, the
Subadviser may consider the financial responsibility, research and
investment information and other services provided by brokers, dealers
or futures commission merchants who may effect or be a party to any
such transaction or other transactions to which the Subadviser's other
clients may be a party. It is understood that Prudential Securities
Incorporated may be used as principal broker for securities
transactions, but that no formula has been adopted for allocation of
the Series' investment transaction business. It is also understood
that it is desirable for the Series that the Subadviser have access to
supplemental investment and market research and security and economic
analysis provided by brokers or futures commission merchants who may
execute brokerage transactions at a higher cost to the Series than may
result when allocating brokerage to other brokers on the basis of
seeking the most favorable price and efficient execution. Therefore,
the Subadviser is authorized to place orders for the purchase and sale
of securities and futures contracts for the Series with such brokers
or futures commission merchants, subject to review by the Fund's Board
of Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers or futures commission merchants may be useful
to the Subadviser in connection with the Subadviser's services to
other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Series
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities or futures contracts
to be sold or purchased in order to obtain the most favorable price or
lower brokerage commissions and efficient execution. In such event,
allocation of the securities or futures contracts so purchased or
sold, as well as the expenses incurred in the transaction, will be
made by the Subadviser in the manner the Subadviser considers to be
the most equitable and consistent with its fiduciary obligations to
the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Series' portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's Board
of Directors such periodic and special reports as the Directors may
reasonably request. The Subadviser shall make reasonably available its
employees and officers for consultation with any of the Directors or
officers or employees of the Fund with respect to any matter discussed
herein, including, without limitation, the valuation of the Fund's
securities.
46
<PAGE>
(v) The Subadviser shall provide the Series' Custodian on each
business day with information relating to all transactions concerning
the Series' assets, and shall provide the Manager with such
information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, Subadviser and Manager understand and agree that Manager
manages the Fund in a "manager-of-managers" style, which contemplates
that Manager will, among other things, (i) continually evaluate the
performance of the subadviser to each Portfolio through quantitative
and qualitative analysis and consultations with such subadviser (ii)
periodically make recommendations to the Fund's Board as to whether
the contract with one or more subadvisers should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions.
Subadviser recognizes that its services may be terminated or modified
pursuant to this process. Manager is authorized to retain more than
one subadvisor for any Portfolio, and for any Portfolio with more than
one subadviser, the Manager is authorized to allocate the Portfolio's
assets among the subadvisors.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as directors or officers of the Fund
to serve in the capacities in which they are elected. Services to be furnished
by the Subadviser under this Agreement may be furnished through the medium of
any of such directors, officers or employees.
(c) The Subadviser shall keep the Series' books and records required to be
maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall timely
furnish to the Manager all information relating to the Subadviser's services
hereunder needed by the Manager to keep the other books and records of the
Series required by Rule 31a-1 under the 1940 Act. The Subadviser agrees that all
records which it maintains for the Series are the property of the Fund, and the
Subadviser will surrender promptly to the Fund any of such records upon the
Fund's request, provided, however, that the Subadviser may retain a copy of such
records. The Subadviser further agrees to preserve for the periods prescribed by
Rule 31a-2 of the Commission under the 1940 Act any such records as are required
to be maintained by it pursuant to paragraph 1(a) hereof.
2. The Manager shall continue to have responsibility for all services to be
provided to the Series pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the Subadviser's part in the performance of its
duties or from its reckless disregard of its obligations and duties under this
Agreement.
4. For the services provided pursuant to this Agreement, the Manager shall
pay the Subadviser as full compensation therefor, an annual fee (payable
quarterly) equal to the
47
<PAGE>
following percentages of each listed series' average daily net assets under the
management of the Subadviser:
DIVERSIFIED CONSERVATIVE GROWTH PORTFOLIO.
.30 of 1% on the first $300 million of average daily net assets under the
Subadviser's management, and 0.25 of 1% with respect to the average daily net
assets under the Subadviser's management in excess of $300 million.
GROWTH EQUITY SLEEVE OF THE 20/20 FOCUS PORTFOLIO
.30 of 1% on the first $300 million of average daily net assets under the
Subadviser's management, and 0.25 of 1% with respect to the average daily net
assets under the Subadviser's management in excess of $300 million.
PRUDENTIAL JENNISON PORTFOLIO
0.75% on the first $10,000,000 of the Portfolio's average daily net assets; and
0.50% on the next $30,000,000 of the Portfolio's average daily net assets; and
0.35% on the next $25,000,000 of the Portfolio's average daily net assets; and
0.25% on the next $335,000,000 of the Portfolio's average daily net assets; and
0.22% on the next $600,000,000 of the Portfolio's average daily net assets; and
0.20% on the balance of the Portfolio's average daily net assets.
SP JENNISON INTERNATIONAL GROWTH PORTFOLIO.
0.60 of 1% of average daily net assets up to and including $300 million,
0.50 of 1% of average daily net assets in excess of $300 million and up to and
including $1.5 billion, and 0.45 of 1% of the average daily net assets over $1.5
billion.
SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO.
0.30 of 1% of the Portfolio's average daily net assets.
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO.
.30 of 1% on the first $300 million of average daily net assets under the
Subadviser's management, and 0.25 of 1% with respect to the average daily net
assets under the Subadviser's management in excess of $300 million.
48
<PAGE>
For the following Fund Portfolios, PIFM will pay Jennison, with respect to
the assets that Jennison manages, the following annualized fees:
Equity Portfolio (0.225%)
Equity Income Portfolio (0.20%)
Global Portfolio (0.375%)
Natural Resources Portfolio (0.225%)
Value Sleeve of 20/20 Focus Portfolio (0.375%)
Value Sleeve of Diversified Conservative Growth Portfolio (0.375%)
Jennison will not commence its services under this Agreement with respect
to a given Portfolio until shareholders of that Portfolio have approved this
Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, or by the Manager or the Subadviser at any time, without
the payment of any penalty, on not more than 60 days' written notice to the
other party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers, or employees who may also be a director,
officer or employee of the Fund to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or restrict the
Subadviser's right to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Sales literature may be furnished to the
Subadviser hereunder by first-class or overnight mail, facsimile transmission
equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New Jersey.
49
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
BY:_______________________________________
JENNISON ASSOCIATES LLC
BY:_______________________________________
THE PRUDENTIAL SERIES FUND, INC.
BY:_______________________________________
50
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS
JANUARY 31, 2001
As of November 17, 2000, the Record Date, you were entitled to give voting
instructions to your Insurance Company (the "Company") relative to the
proposals, as described in the accompanying Proxy Statement, to be voted upon at
the Special Meeting of Shareholders of The Prudential Series Fund, Inc. (the
"Fund") to be held on January 31, 2001 for each of your investment positions as
represented by the enclosed Voting Instruction Forms.
The Company will vote the appropriate number of Fund shares pursuant to the
instructions given. If no choice is made as to any or all of Proposals 1 through
8, the Company will vote "FOR" any such Proposal. With respect to any other
business which may properly come before the meeting, the Company will vote in
accordance with its best judgment. Implementation of Proposals 5(a) and 5(b) is
conditioned on approval of Proposal 4. For Proposals 3, 4, 5(a), 5(b) and 6, you
are entitled to vote on a portfolio-by-portfolio basis, using the enclosed
Voting Instruction Forms.
To execute your voting instructions:
o Sign and date each Voting Instruction Form.
o Mark your instructions on the reverse side of the form. NOTE: If you
wish to vote "FOR" all proposals, as the Board of Directors recommends,
simply fill in the box on the front of the form.
o Return the form(s) in the enclosed postage-paid envelope.
o If you wish to vote via the Internet, log on to www.proxyweb.com, enter
the control number shown on the Voting Instruction Form and follow the
instructions. Each form must be voted separately.
o If you wish to vote by touch-tone telephone, dial 1-888-221-0697, enter
the control number on the Voting Instruction Form and follow the voice
prompts. Each form must be voted separately.
NOTE: If you vote by Internet or phone, please do not return your Voting
Instruction Form(s).
YOUR VOTE IS IMPORTANT. TO SAVE THE FUND THE COST OF ADDITIONAL SOLICITATION,
PLEASE VOTE TODAY.
<PAGE>
THE BOARD OF DIRECTORS OF THE PRUDENTIAL SERIES FUND, INC. RECOMMENDS A VOTE
"FOR" ALL PROPOSALS.
--------------------------------------------------------------------------------
NOTE: YOUR VOTING INSTRUCTION FORM IS NOT VALID UNLESS IT IS SIGNED.
PLEASE BE SURE TO SIGN YOUR VOTING INSTRUCTION FORM ON THE REVERSE SIDE.
--------------------------------------------------------------------------------
Please fold and detach card at perforation before mailing.
PLEASE VOTE BY FILLING IN
VOTING INSTRUCTION FORM THE APPROPRIATE BOXES BELOW. VOTING INSTRUCTION FORM
1. To elect as Directors the following FOR WITHHOLD
19 nominees: (01) Eugene C. Dorsey, all nominees authority to
(02) Saul K. Fenster, (03) Delayne listed (except as vote for all
D. Gold, (04) Robert D. Gunia, (05) noted in space nominees
Maurice F. Holmes, (06) Robert E. provided) listed
LeBlanc, (07) Douglas McCorkindale,
(08) W. Scott McDonald, Jr., (09) / / / /
Thomas T. Mooney, (10) Stephen P.
Munn, (11) David R. Odenath, Jr.,
(12) Richard A. Redeker, (13) Robin
B. Smith, (14) John R. Strangfeld,
Jr., (15) Stephen Stoneburn, (16)
Nancy H. Teeters, (17) Joseph Weber,
(18) Louis A. Weil, III, (19) Clay
T. Whitehead
INSTRUCTION: To withhold authority to vote for any individual nominee, write
the name(s) on the line immediately below.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. To ratify the selection of PricewaterhouseCoopers as independent / / / / / /
accountants of the Fund.
3. To approve a "managers of managers" structure for the Fund. / / / / / /
4. To approve a new management contract with Prudential Investments Fund
Management LLC. / / / / / /
5(a). To approve a subadvisory agreement between Prudential Investments Fund
Management LLC and Prudential Investment Corporation. / / / / / /
5(b). To approve a subadvisory agreement between Prudential Investments Fund
Management LLC and Jennison Associates LLC. / / / / / /
6. To amend certain fundamental investment policies of the Fund. / / / / / /
7. To amend the Fund's By-Laws. / / / / / /
8. To amend the fundamental investment objective of the Fund's Equity Income
Portfolio. / / / / / /
</TABLE>
PSF
<PAGE>
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL-FREE 1-888-221-0697
OR LOG ON TO WWW.PROXYWEB.COM
Please fold and detach card at perforation before mailing
VOTING INSTRUCTION FORM
VOTING INSTRUCTIONS ARE HEREBY SOLICITED BY THE ABOVE-REFERENCED INSURANCE
COMPANY AND THE BOARD OF DIRECTORS OF THE PRUDENTIAL SERIES FUND, INC. (THE
"FUND") IN CONNECTION WITH A SPECIAL MEETING OF SHAREHOLDERS OF THE FUND TO BE
HELD ON JANUARY 31, 2001 AT THE OFFICES OF THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, 100 MULBERRY STREET, NEWARK, NEW JERSEY AT 9:00 A.M.
I (we) the undersigned hereby instruct the above-referenced Insurance Company to
vote the Fund shares to which I (we) the undersigned am (are) entitled to give
instructions as indicated on the reverse side of this form or as indicated
below.
I (we) wish to instruct the Company to vote "FOR" all proposals.
Date ___________________, 2000 [2001]
Each owner should sign as
his/her name appears on this
form; if a contract is owned
jointly, each owner should
sign; if a contract is held in
a fiduciary capacity, the
fiduciary should sign and
indicate his/her fiduciary
capacity.
------------------------------
------------------------------
Signature(s)/Fiduciary
Capacity, if applicable.
PSF
<PAGE>
The Prudential Series Fund, Inc.
ABOUT THE PROPOSALS
Proposals 1, 2, 3, 4, 6 and 7 apply to all Portfolios of the Fund. All Portfolio
votes will be combined for Proposals 1 and 2 as these Proposals relate to the
Fund as a whole. Each Portfolio votes separately on Proposals 3, 4, 5(a), 5(b),
and 6.
Proposal 5(a) applies only to the following Portfolios:
Conservative Balanced Portfolio Diversified Bond Portfolio
Diversified Conservative Growth Portfolio Flexible Managed Portfolio
Government Income Portfolio High Yield Bond Portfolio
Money Market Portfolio Small Capitalization Stock Portfolio
Stock Index Portfolio
Zero Coupon Bond Portfolio 2005
Proposal 5(b) applies only to the following Portfolios:
Equity Portfolio Diversified Conservative Growth Portfolio
Natural Resources Portfolio Equity Income Portfolio
20/20 Focus Portfolio Global Portfolio
Prudential Jennison Portfolio
Proposal 8 applies only to Equity Income Portfolio.
