INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to \P 240.14a-11(c) or \P 240.14a-12
PRUDENTIAL GROWTH FUND, INC.
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(Name of Registrant as Specified in Its Charter)
PRUDENTIAL GROWTH FUND, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Preliminary Copy
PRUDENTIAL GROWTH FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
To our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of
Prudential Growth Fund, Inc. (the Fund), will be held at 3:00 P.M. on
, 1994, at 199 Water Street, New York, N.Y. 10292, for the following
purposes:
1. To elect Directors.
2. To approve an amendment of the Fund's Articles of Incorporation
to permit a conversion feature for Class B Shares.
3. To approve an amended and restated Class A Distribution and
Service Plan.
4. To approve an amended and restated Class B Distribution and
Service Plan.
5. To approve an amendment of the Fund's Articles of Incorporation
to change the name of the Fund to "Prudential Strategist Fund, Inc."
6. To ratify the selection by the Board of Directors of Price
Waterhouse as independent accountants for the fiscal year ending February
28, 1995.
7. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Only shares of Common Stock of the Fund of record at the close of
business on , 1994 are entitled to notice of and to vote at
this Meeting or any adjournment thereof.
S. Jane Rose
Secretary
Dated: , 1994
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE FUND OF
FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR
PROXY PROMPTLY.
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Preliminary Copy
PRUDENTIAL GROWTH FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
----------------
PROXY STATEMENT
----------------
This statement is furnished by the Board of Directors of Prudential
Growth Fund, Inc., (the Fund), in connection with its solicitation of
proxies for use at a Special Meeting of Shareholders to be held at 3:00
P.M. on , 1994 at 199 Water Street, New York, New York 10292, the Fund's
principal executive office. The purpose of the Meeting and the matters to
be acted upon are set forth in the accompanying Notice of Special Meeting.
If the accompanying form of Proxy is executed properly and returned,
shares represented by it will be voted at the Meeting in accordance with
the instructions on the Proxy. However, if no instructions are specified,
shares will be voted for the election of Directors and for each of the
other proposals. A Proxy may be revoked at any time prior to the time it
is voted by written notice to the Secretary of the Fund or by attendance
at the Meeting. If sufficient votes to approve one or more of the proposed
items are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares present at the Meeting or represented by proxy.
When voting on a proposed adjournment, the persons named as proxies will
vote for the proposed adjournment all shares that they are entitled to
vote with respect to each item, unless directed to disapprove the item, in
which case such shares will be voted against the proposed adjournment.
If a Proxy that is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote"
(that is, a proxy from a broker or nominee indicating that such person has
not received instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to which the
broker or nominee does not have discretionary power), the shares
represented thereby will be considered not to be present at the Meeting
for purposes of determining the existence of quorum for the transaction of
business and be deemed not cast with respect to such proposal. If no
instructions are received by the broker or nominee from the shareholder
with reference to routine matters, the shares represented thereby may be
considered for purposes of determining the existence of a quorum for the
transaction of business and will be deemed cast with respect to such
proposal. Also, a properly executed and returned Proxy marked with an
abstention will be considered present at the Meeting for the purposes of
determining the existence of a quorum for the transaction of business.
However, abstentions and broker "non-votes" do not constitute a vote "for"
or "against" the matter, but have the effect of a negative vote on matters
which require approval by a requisite percentage of the outstanding
shares.
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The close of business on February 11, 1994 has been fixed as the
record date for the determination of shareholders entitled to notice of,
and to vote at, the Meeting. On that date, the Fund had shares of Common
Stock outstanding and entitled to vote, consisting of Class A shares and
Class B shares. Each share will be entitled to one vote at the Meeting. It
is expected that the Notice of Special Meeting, Proxy Statement and form
of Proxy will first be mailed to shareholders on or about March , 1994.
Management does not know of any person or group who owned beneficially
5% or more of the outstanding shares of either class of Common Stock of
the Fund as of , 1994.
The expense of solicitation will be borne by the Fund and will include
reimbursement of brokerage firms and others for expenses in forwarding
proxy solicitation material to beneficial owners. The solicitation of
proxies will be largely by mail. The Board of Directors of the Fund has
authorized management to retain Shareholder Communications Corporation, a
proxy solicitation firm, to assist in the solicitation of proxies for this
Meeting. This cost, including specified expenses, is not expected to
exceed $20,600 and will be borne by the Fund. In addition, solicitation
may include, without cost to the Fund, telephonic, telegraphic or oral
communication by regular employees of Prudential Securities Incorporated
(Prudential Securities) and its affiliates.
ELECTION OF DIRECTORS
(Proposal No. 1)
At the Meeting, eight Directors will be elected to hold office for a
term of unlimited duration until their successors are elected and qualify.
It is the intention of the persons named in the accompanying form of Proxy
to vote for the election of John C. Davis, Lawrence C. McQuade, Thomas A.
Owens, Jr., Richard Redeker, Robert J. Schultz, Gerald A. Stahl, Stephen
Stoneburn and Robert H. Wellington, all of whom are currently members of
the Board of Directors. Each of the nominees has consented to be named in
this Proxy Statement and to serve as a Director if elected. All of the
current members of the Board of Directors, with the exception of Mr.
Redeker and Mr. Stahl, have previously been elected by the shareholders.
Messrs. Davis and Stoneburn have served as Directors since 1983. Messrs.
Owens, Schultz and Wellington have served as Directors since 1987. Mr.
McQuade has served as a Director since 1990. Messrs. Stahl and Redeker have
served as Directors since May 12, 1993 and November 17, 1993, respectively.
William C. Norby retired from the Board on February 2, 1994.
The Board of Directors has no reason to believe that any of the
nominees named above will become unavailable for election as a Director,
but if that should occur before the Meeting, proxies will be voted for
such persons as the Board of Directors may recommend.
The Fund's By-laws provide that the Fund will not be required to hold
annual meetings of shareholders if the election of Directors is not
required under the Investment Company Act of 1940, as amended (the
Investment Company Act). It is the present
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intention of the Board of Directors of the Fund not to hold annual
meetings of shareholders unless such shareholder action is required.
INFORMATION REGARDING DIRECTORS
Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund , 1994
---------------------------- --------- ----------------
John C. Davis (73), Retired (since December 1982); Director [2,596]
formerly Senior Vice President, Executive
Department and Director, The Atchison, Topeka
and Santa Fe Railway Company and Vice President
and Director, Santa Fe Industries, Inc.;
Director of Prudential Growth Fund, Inc.,
Prudential Intermediate Global Income Fund, Inc.
and Prudential MoneyMart Assets.
*Lawrence C. McOuade (66), Vice Chairman of Pru- President 0
dential Mutual Fund Management, Inc. (PMF) and
(since 1988); Managing Director, Investment Director
Banking, Prudential Securities (1988-1991);
Director of Quixote Corporation (since February
1992) and BUNZL, PLC (since June 1991); formerly
Director of Crazy Eddie Inc. (1987-1990) and
Kaiser Tech, Ltd. and Kaiser Aluminum and
Chemical Corp. (March 1987-November 1988);
formerly Executive Vice President and Director
of W.R. Grace & Company; President and Director
of Prudential Adjustable Rate Securities Fund,
Inc., Prudential Equity Fund, Inc., Prudential
Global Fund, Inc., Prudential Global Genesis
Fund, Prudential Global Natural Resources Fund,
Prudential GNMA Fund, Prudential Government Plus
Fund, Prudential Growth Fund, Inc., Prudential
Growth Opportunity Fund, Prudential High Yield
Fund, Prudential IncomeVertible(R) Fund, Inc.,
Prudential Institutional Liquidity Portfolio,
Inc., Prudential Intermediate Global Income
Fund, Inc., Prudential MoneyMart Assets,
Prudential Multi-Sector Fund, Inc., Prudential
National Municipals Fund, Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Special Money
Market Fund, Prudential Structured Maturity
Fund, Prudential Tax-Free Money Fund, Prudential
Utility Fund, The Global Government
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Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund , 1994
---------------------------- --------- ----------------
Plus Fund, Inc., The Global Yield Fund, Inc. and
The High Yield Income Fund, Inc.; President and
Trustee of The BlackRock Government Income
Trust, Command Government Fund, Command Money
Fund, Command Tax-Free Fund, Prudential
California Municipal Fund, Prudential Equity
Income Fund, Prudential FlexiFund, Prudential
Government Securities Trust, Prudential
Municipal Bond Fund, Prudential Municipal Series
Fund, Prudential U.S. Government Fund and The
Target Portfolio Trust.
Thomas A. Owens. Jr. (71), Consultant; Director of Director 0
EMCORE Corporation (manufacturer of electronic
materials), Prudential Adjustable Rate
Securities Fund, Inc., Prudential Global Fund,
Inc., Prudential Government Plus Fund,
Prudential Growth Fund, Inc., Prudential
IncomeVertible(R) Fund, Inc., Prudential
Intermediate Global Income Fund, Inc.,
Prudential MoneyMart Assets, Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Structured
Maturity Fund and Prudential Utility Fund;
Trustee of Prudential U.S. Government Fund.
*Richard A. Redeker (50) , President, Chief Director 0
Executive Officer and Director (since October
1993), PMF; Executive Vice President Director
and Member of the Operating Committee (since
October 1993), Prudential Securities
Incorporated; Director (since October 1993) of
Prudential Securities Group, Inc. (PSG);
formerly Senior Executive Vice President and
Director of Kemper Financial Services, Inc.
(September 1978-September 1993); Director of
Global Utility Fund, Inc., Prudential Adjustable
Rate Securities Fund, Inc., Prudential Equity
Fund, Inc., Prudential Global Fund, Inc.,
Prudential Global Genesis Fund, Prudential
Global Natural Resources Fund, Prudential GNMA
Fund, Prudential Government Plus Fund,
Prudential Growth Fund, Inc., Prudential
IncomeVertible(R) Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc.,
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Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund , 1994
---------------------------- --------- ----------------
Prudential Intermediate Global Income Fund,
Inc., Prudential MoneyMart Assets, Prudential
Multi-Sector Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Special Money
Market Fund, Prudential Structured Maturity
Fund, Prudential Utility Fund, The Global Yield
Fund, Inc., The Global Government Plus Fund,
Inc., and The High Yield Income Fund, Inc.;
President and Trustee of The BlackRock
Government Income Trust, Command Government
Fund, Command Money Fund, Command TaxFree Fund,
Prudential California Municipal Fund, Prudential
Equity Income Fund, Prudential FlexiFund,
Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential U.S.
Government Fund, and the Target Portfolio Trust.
Robert J. Schultz (69), Retired (since January Director 0
1987); formerly Financial Vice President of
Commonwealth Edison Company (electric power
company); Director of Prudential Growth Fund,
Inc., Prudential IncomeVertible(R) Fund, Inc.,
Prudential Intermediate Global Income Fund,
Inc., Prudential MoneyMart Assets, Prudential
Structured Maturity Fund and Prudential Utility
Fund.
Gerald A. Stahl (54), President, Rochester Lumber Director 0
Company; Director, Prudential Growth Fund, Inc.
and Prudential Intermediate Global Income Fund,
Inc.
Stephen Stoneburn (50), Senior Vice President and Director 0
Managing Director, Cowles Business Media (since
January 1993); prior thereto, Senior Vice
President (January 1991-1992) and Publishing
Vice President (May 1989-December 1990) of
Gralla Publications (a division of United
Newspapers, U.K.); formerly Senior Vice
President of Fairchild Publications, Inc.;
Trustee of The BlackRock Government Income
Trust, Command Government Fund, Command Money
Fund and Command Tax-Free Fund; Director of
Prudential Growth Fund, Inc.,
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Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund , 1994
---------------------------- --------- ----------------
Prudential Intermediate Global Income Fund, Inc.
and Prudential Special Money Market Fund.
Robert H. Wellington (71), Chairman and Chief Director 0
Executive Officer, AMSTED Industries,
Incorporated (diversified manufacturer of
railroad, construction and industrial products)
(since December 1988); Director of AMSTED
Industries, Incorporated, Centel Corporation,
L.E. Meyers, Co. and DeSoto Inc.; Director of
Prudential Growth Fund, Inc., Prudential
Intermediate Global Income Fund, Inc. and
Prudential MoneyMart Assets.
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*Indicates "interested" Director, as defined in the Investment Company
Act, by reason of his affiliation with PMF or Prudential Securities.
The Directors and officers of the Fund as a group owned beneficially
shares of the Fund at , 1994, representing less than [1%] of the
outstanding shares of the Fund.
The Fund pays annual compensation of $7,500, plus travel and incidental
expenses, to each of the six Directors not affiliated with PMF or
Prudential Securities. The Directors have the option to receive the
Director's fee pursuant to a deferred fee agreement with the Fund. Under
the terms of the agreement, the Fund accrues daily the amount of such
Director's fee which accrues interest at a rate equivalent to the
prevailing rate applicable to 90-day U.S. Treasury bills at the beginning
of each calendar quarter or, pursuant to an exemptive order of the
Securities and Exchange Commission (SEC), at the rate of return of the
Fund. Payment of the interest so accrued is also deferred and accruals
become payable at the option of the Director. The Fund's obligation to make
payments of deferred Directors' fees, together with interest thereon, is a
general obligation of the Fund. During the fiscal year ended February 28,
1993 and the six-month period ended August 31, 1993, the Fund paid
Directors' fees of approximately $45,000 and $22,500, respectively, and
travel and incidental expenses of approximately $3,800 and $2,600,
respectively.
There were four regular meetings of the Fund's Board of Directors held
during the fiscal year ended February 28, 1993 and two regular meetings
held during the period from March 1, 1993 through August 31, 1993. The
Board of Directors presently has an Audit Committee, the members of which
are Messrs. Davis, Owens, Jr., Schultz, Stahl, Stoneburn and Wellington,
the Fund's non-interested Directors. The Audit Committee met twice during
the fiscal year ended February 28, 1993 and twice during the period from
March 1, 1993 through August 31, 1993. The Audit Committee makes
recommendations to the full Board with respect to the engagement of
independent accountants and reviews
6
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with the independent accountants the plan and results of the audit
engagement and matters having a material effect upon the Fund's financial
operations. The Board also has a Nominating Committee, comprised of the
Fund's non-interested Directors, which selects and proposes candidates for
election to the Board of Directors. The Nominating Committee met once
during the fiscal year ended February 28, 1993 and once during the period
from March 1, 1993 through August 31, 1993. The Nominating Committee does
not consider nominees recommended by shareholders to fill vacancies on the
Board.
During the fiscal year ended February 28, 1993, Robert H. Wellington
attended fewer than 75% of the aggregate of the total number of meetings
of the Board of Directors and any committees thereof of which such
Director was a member. During the period from March 1, 1993 through August
31, 1993, no Director attended fewer than 75% of the aggregate of the
total number of meetings of the Board of Directors and any committees
thereof of which such Director was a member.
The executive officers of the Fund, other than as shown above, are:
David W. Drasnin, Vice President, having held office since June 11, 1985;
S. Jane Rose, Secretary, having held office since September 25, 1984;
Robert F. Gunia, Vice President, and Susan C. Cot\A e, Treasurer and
Principal Financial and Accounting Officer, both having held office since
December 15, 1987; and Deborah A. Docs, Assistant Secretary, having held
office since July 26, 1989. Mr. Drasnin is 57 years old and is currently
Vice President and Branch Manager of Prudential Securities. Mr. Gunia is
47 years old and is currently Chief Administrative Officer (since July
1990), Director, Executive Vice President, Treasurer and Chief Financial
Officer of PMF, Senior Vice President of Prudential Securities, Vice
President and Director (since May 1989) of the Asia Pacific Fund, Inc. Ms.
Cot\A e is 39 years old and is Senior Vice President (since 1989) of PMF
and a Senior Vice President of Prudential Securities (since January 1992).
Prior thereto, she was Vice President (January 1986-December 1991) of
Prudential Securities. Ms. Rose is 48 years old and is Senior Vice
President (since January 1991) and Senior Counsel of PMF and a Senior Vice
President and Senior Counsel of Prudential Securities (since July 1992).
Prior thereto, she was First Vice President (June 1987-December 1990) of
PMF and Vice President and Associate General Counsel of Prudential
Securities. Ms. Docs is 36 years old and is Vice President and Associate
General Counsel (since January 1993) of PMF and Vice President and
Associate General Counsel (since January 1993) of Prudential Securities.
She was formerly Associate Vice President (January 1990-December 1992);
Assistant Vice President (January 1989-December 1989); and Assistant
General Counsel (November 1991-December 1992) of PMF. The executive
officers of the Fund are elected annually by the Board of Directors.
Required Vote
Directors must be elected by a vote of a plurality of the
shares present at the meeting in person or by proxy and entitled to vote
thereupon, provided that a quorum is present.
7
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MANAGEMENT OF THE FUND
The Manager
Prudential Mutual Fund Management, Inc. (PMF or the Manager),
One Seaport Plaza, New York, New York 10292, serves as the Fund's Manager
under a management agreement dated as of January 22, 1990 (the Management
Agreement).
The Management Agreement was last approved by the Board of Directors
of the Fund, including a majority of the Directors who are not parties to
such contract or interested persons of such parties (as defined in the
Investment Company Act) on May 12, 1993 and was approved by shareholders
on January 11, 1990.
Terms of the Management Agreement
Pursuant to the Management Agreement, PMF, subject to the
supervision of the Fund's Board of Directors and in conformity with the
stated policies of the Fund, is responsible for managing or providing for
the management of the investment of the Fund's assets. In this regard, PMF
provides supervision of the Fund's investments, furnishes a continuous
investment program for the Fund's portfolio and places purchase and sale
orders for portfolio securities of the Fund and other investments. Greg A.
Smith Asset Management Corporation (the Subadviser) provides such services
pursuant to a subadvisory agreement (the Subadvisory Agreement) with PMF.
PMF also administers the Fund's corporate affairs, subject to the
supervision of the Fund's Board of Directors, and, in connection
therewith, furnishes the Fund with office facilities, together with those
ordinary clerical and bookkeeping services which are not being furnished
by the Fund's Transfer and Dividend Disbursing Agent and Custodian.
PMF has authorized any of its directors, officers and employees who
have been elected as Directors or officers of the Fund to serve in the
capacities in which they have been elected. All services furnished by PMF
under the Management Agreement may be furnished by any such directors,
officers or employees of PMF. In connection with its administration of the
corporate affairs of the Fund, PMF bears the following expenses:
(a) the salaries and expenses of all personnel of the Fund and PMF,
except the fees and expenses of Directors not affiliated with PMF or
the Fund's investment adviser;
(b) all expenses incurred by PMF or by the Fund in connection with
administering the ordinary course of the Fund's business, other than
those assumed by the Fund, as described below; and
(c) the costs and expenses payable to the Subadviser pursuant to
the Subadvisory Agreement.
The Fund pays PMF for the services performed and the facilities
furnished by it a fee at an annual rate of .625 of 1% of the first $500
million of the Fund's average daily net assets, .55 of 1% of the next $500
million of the Fund's average daily net assets, and .50 of 1% of such
amounts in excess of $1 billion of the Fund's average daily net assets.
This fee is computed daily and paid monthly. For the fiscal year ended
February 28, 1993, PMF received a management fee of $1,564,820. For the
six month period ended August 31, 1993, PMF received a management fee of
$727,414.
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<PAGE>
The Management Agreement provides that, if the expenses of the Fund
(including the fees of PMF, but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses
and other extraordinary expenses not incurred in the ordinary course of
the Fund's business) for any fiscal year exceed the lowest applicable
annual expense limitation established and enforced pursuant to the
statutes or regulations of any jurisdiction in which shares of the Fund
are then qualified for offer and sale, the compensation due PMF will be
reduced by the amount of such excess, or, if such reduction exceeds the
compensation payable to PMF, PMF will pay the Fund the amount of such
reduction which exceeds the amount of such compensation. Any such
reductions or payments are subject to readjustment during the year. No
such reductions or payments were required during the fiscal year ended
February 28, 1993. The Fund believes the most restrictive of such annual
limitations is 2-1/2% of the Fund's average daily net assets up to $30
million, 2% of the next $70 million of such assets and 1-1/2% of such
assets in excess of $100 million.
Except as indicated above, the Fund is responsible under the
Management Agreement for the payment of its expenses, including (a) the
fees payable to PMF, (b) the fees and expenses of Directors who are not
affiliated with PMF or the investment adviser, (c) the fees and certain
expenses of the Fund's Custodian and Transfer and Dividend Disbursing
Agent, including the cost of providing records of the Fund and of pricing
Fund shares, (d) the charges and expenses of the Fund's legal counsel and
independent accountants, (e) brokerage commissions and any issue or
transfer taxes chargeable to the Fund in connection with its securities
transactions, (f) all taxes and corporate fees payable by the Fund to
governmental agencies, (g) the fees of any trade association of which the
Fund may be a member, (h) the cost of any share certificates representing
shares of the Fund, (i) the cost of fidelity and liability insurance, (j)
the fees and expenses involved in registering and maintaining registration
of the Fund and of its shares with the Securities and Exchange Commission
and registering the Fund as a broker or dealer and qualifying its shares
under state securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for such purposes, (k)
allocable communications expenses with respect to investor services and
all expenses of shareholders' and Board of Directors' meetings and of
preparing, printing and mailing prospectuses and reports to shareholders,
(l) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business and
(m) distribution fees.
The Management Agreement provides that PMF will not be liable to the
Fund for any error of judgment by PMF or for any loss suffered by the Fund
in connection with the matters to which the Management Agreement relates
except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Management
Agreement also provides that it will terminate automatically if assigned
and that it may be terminated without penalty by the Board of Directors of
the Fund, by vote of a majority of the Fund's outstanding voting
securities (as defined in the Investment Company Act) or by the Manager,
upon not more than 60 days' nor less than 30 days' written notice.
9
<PAGE>
Information about PMF
PMF, a subsidiary of Prudential Securities and an indirect,
wholly-owned subsidiary of Prudential, was organized in May 1987 under the
laws of the State of Delaware. Prudential's address is Prudential Plaza,
Newark, New Jersey 07102. PMF acts as manager for the following investment
companies:
Open-End Management Investment Companies: Command Government Fund,
Command Money Fund, Command Tax-Free Fund, Prudential Adjustable Rate
Securities Fund, Inc., Prudential California Municipal Fund, Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Global Fund, Inc., Prudential-Bache Global Genesis Fund, Inc.
(d/b/a Prudential Global Genesis Fund), Prudential-Bache Global Natural
Resources Fund, Inc. (d/b/a Prudential Global Natural Resources Fund),
Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund), Prudential-
Bache Government Plus Fund, Inc. (d/b/a Prudential Government Plus Fund),
Prudential Government Securities Trust, Prudential Growth Fund, Inc.,
Prudential-Bache Growth Opportunity Fund, Inc. (d/b/a Prudential Growth
Opportunity Fund), Prudential-Bache High Yield Fund, Inc. (d/b/a
Prudential High Yield Fund), Prudential lncomeVertible(R) Fund, Inc.,
Prudential-Bache MoneyMart Assets Fund, Inc. (d/b/a Prudential MoneyMart
Assets), Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond
Fund, Prudential Municipal Series Fund, Prudential-Bache National
Municipals Fund, Inc. (d/b/a Prudential National Municipals Fund),
Prudential Pacific Growth Fund, Inc., Prudential Short-Term Global Income
Fund, Prudential-Bache Special Money Market Fund, Inc. (d/b/a Prudential
Special Money Market Fund), Prudential-Bache Structured Maturity Fund,
Inc. (d/b/a Prudential Structured Maturity Fund), Prudential-Bache Tax-
Free Money Fund, Inc. (d/b/a Prudential Tax-Free Money Fund), Prudential
U.S. Government Fund, Prudential-Bache Utility Fund, Inc. (d/b/a
Prudential Utility Fund), Prudential Institutional Liquidity Portfolio,
Inc., Prudential Intermediate Global Income Fund, Inc., Global Utility
Fund, Inc., Nicholas-Applegate Fund, Inc. and The BlackRock Government
Income Trust.
Closed-End Management Investment Companies: The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Income Fund,
Inc.
The consolidated statement of financial condition of PMF and
subsidiaries as of December 31, 1993 is set forth as Exhibit A to this
Proxy Statement.
Certain information regarding the directors and principal executive
officers of PMF is set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, New York 10292.
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
Maureen Behning-Doyle ... Executive Vice Executive Vice President,
President PMF; Senior Vice
President, Prudential
Securities
John D. Brookmeyer, Jr. . Director Senior Vice President,
Two Gateway Center Prudential
Newark, NJ 07102
10
<PAGE>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
Susan C. Cote ........... Senior Vice President Senior Vice President,
PMF; Senior Vice
President, Prudential
Securities
Fred A. Fiandaca ........ Executive Vice Executive Vice President,
Raritan Plaza One President, Chief Chief Operating Officer
Edison, NJ 08847 Operating Officer and Director, PMF;
and Director Chairman, Chief Oper-
ating Officer and
Director, Prudential
Mutual Fund Services,
Inc.
Stephen P. Fisher ....... Senior Vice President Senior Vice President,
PMF; Senior Vice Presi-
dent, Prudential
Securities
Frank W. Giordano ....... Executive Vice Executive Vice President,
President, General General Counsel and
Counsel and Secretary, PMF; Senior
Secretary Vice President, Pruden-
tial Securities
Robert F. Gunia ......... Executive Vice Executive Vice President,
President, Chief Chief Financial and
Financial and Administrative Officer,
Administrative Treasurer and Director,
Officer, Treasurer PMF; Senior Vice Presi-
and Director dent, Prudential Securities
Eugene B. Heimberg ...... Director Senior Vice President,
Prudential Plaza Prudential
Newark, NJ 07102
Lawrence C. McQuade ..... Vice Chairman Vice Chairman, PMF
Leland B. Paton ......... Director Executive Vice President
and Director, Prudential
Securities; Director,
PSG
Richard A. Redeker ...... President, Chief President, Chief Executive
Executive Officer Officer and Director,
and Director PMF; Executive Vice
President, Director and
Member of the
Operating Committee,
Prudential Securities;
Director, PSG
11
<PAGE>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
S. Jane Rose ............ Senior Vice President, Senior Vice President,
Senior Counsel and Senior Counsel and
Assistant Secretary Assistant Secretary,
PMF; Senior Vice
president and Senior
Counsel, Prudential
Securities
Donald G. Southwell ..... Director Senior Vice President,
213 Washington Street Prudential; Director,
Newark, NJ 07102 PSG
The Subadviser
Investment advisory services have been provided to the Fund by PMF
through Greg A. Smith Asset Management Corporation (the Subadviser)
pursuant to the Subadvisory Agreement since August 1, 1991. On May 12,
1993, the Board of Directors of the Fund, including a majority of the
Directors who are not interested persons (as defined in the Investment
Company Act) last approved the Subadvisory Agreement. A majority of the
outstanding voting securities (as defined in the Investment Company Act) of
the Fund approved the Subadvisory Agreement on October 24, 1991.
Terms of the Subadvisory Agreement
Pursuant to the Subadvisory Agreement, Greg A. Smith Asset
Management Corporation subject to the supervision of PMF and the Board of
Directors and in conformity with the stated policies of the Fund,
furnishes investment advisory services in connection with the management
of the Fund. The Subadviser keeps certain books and records required to be
maintained pursuant to the Investment Company Act. PMF continues to have
responsibility for all investment advisory services pursuant to the
Management Agreement and supervises the Subadviser's performance of such
services.
Pursuant to the Subadvisory Agreement, PMF compensates the Subadviser
for its services thereunder at an annual rate of .375 of 1% of the Fund's
average daily net assets up to $500 million, .35 of 1% of such amounts
between $500 million and $1 billion and .30 of 1% of such amounts in
excess of $1 billion. The fee is computed daily and payable monthly. The
Subadvisory Agreement also provides that, in the event the expenses of the
Fund (including the fees of the Manager, but excluding interest, taxes,
brokerage commissions, distribution fees and litigation and
indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the Fund's business) for any fiscal year exceed the
lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the
Fund's shares are qualified for offer and sale, the compensation due the
Subadviser will be reduced by 60% of the amount of such excess. The Fund
believes the most restrictive of such annual limitations is 2-1/2% of the
Fund's average daily net assets up to $30 million, 2% of the next $70
million of such assets and 1-1/2% of such assets in excess of $100
million. The fees paid by the Fund to PMF under the Management Agreement
with PMF
12
<PAGE>
are not affected by this arrangement. The investment advisory services of
the Subadviser to the Fund are not exclusive under the terms of the
Subadvisory Agreement and the Subadviser is free to, and does, render
investment advisory services to others.
For the fiscal year ended February 28, 1993 and the six-month period
ended August 31, 1993, PMF paid Subadvisory fees of $938,892 and $436,448,
respectively, to the Subadvisor.
The Subadviser has authorized its directors, officers and employees
who may be elected as Directors or officers of the Fund to serve in the
capacities in which they have been elected. Services furnished by the
Subadviser under the Subadvisory Agreement may be furnished by any such
directors, officers or employees of the Subadviser. The Subadvisory
Agreement provides that the Subadviser shall not be liable for any error
of judgment or for any loss suffered by the Fund or PMF in connection with
the matters to which the Subadvisory 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 duty. The Subadvisory Agreement provides that it shall
terminate automatically if assigned and that it may be terminated without
penalty by either party upon not more than 60 days' nor less than 30 days'
written notice. In addition, the Smith Subadvisory Agreement will continue
in effect for a period of more than two years from the date of execution
only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act.
As a consultant to Prudential Securities, the Subadviser prepares
Prudential Securities' Market and Economic Outlook.
Information about Greg A. Smith Asset Management Corporation
Greg A. Smith Asset Management Corporation is a corporation
organized under the laws of the State of Delaware. Its principal offices
are located at One Seaport Plaza, New York, New York, 10292.
The statement of financial condition of Greg A. Smith Asset Management
Corporation is set forth as Exhibit B to this Proxy Statement.
Certain information regarding the directors and principal executive
officers of Greg A. Smith Asset Management Corporation is set forth
below.
Position Principal
Name with Subadviser Occupation
---- --------------- ----------
Gregory A. Smith ............ President Investment Adviser
Marcella Anne Merone Smith .. Vice President Investment Adviser
Prudential Securities currently provides Greg A. Smith Asset
Management Corporation with office space. Additionally, Prudential
Securities or PMF employees may from time-to-time assist or perform
administrative duties on behalf of the Subadviser.
Greg A. Smith is the principal stockholder of Greg A. Smith Asset
Management Corporation and is the principal portfolio manager and has
responsibility for the day-to-
13
<PAGE>
day management of the Fund's portfolio. Mr. Smith has managed the Fund's
portfolio since August 1, 1991 and from its inception in 1983 until
September 1987. Greg A. Smith is also a consultant to Prudential
Securities Incorporated (PSI) and has acted as Prudential Securities'
Chief Investment Strategist since 1982. He also acts as a consultant to
The Prudential Investment Corporation on two open-end funds managed by
PMF.
The Distributors
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport
Plaza, New York, New York 10292, acts as the distributor of the Class A
shares of the Fund. Prudential Securities, One Seaport Plaza, New York,
New York 10292, acts as the distributor of the Class B shares of the
Fund.
Under separate Distribution and Service Plans (the Class A Plan and
the Class B Plan, collectively, the Plans) adopted by the Fund under Rule
12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively, the Distributor) incur the expenses of distributing the
Fund's Class A and Class B shares, respectively.
The Plans were last approved by the Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and
who have no direct or indirect financial interest in the operation of the
Class A or Class B Plan or in any agreement related to either Plan (the
Rule 12b-1 Directors), on May 12, 1993. The Class A Plan was approved by
the Class A shareholders on December 19, 1990. The Class B Plan was
approved by shareholders of the Fund (the Class B shareholders) on January
11, 1990.
The Plans are proposed to be amended as set forth in Proposals No. 3
and 4 below.
Class A Plan. Under the Class A Plan, the Fund reimburses PMFD for its
distribution-related expenses with respect to Class A shares at an annual
rate of up to .30 of 1% of the average daily net assets of the Class A
shares. The Class A Plan provides that (i) up to .25 of 1% of the average
daily net assets of the Class A shares may be used for personal service
and/or the maintenance of shareholder accounts (service fee) and (ii) total
distribution fees (including the service fee of .25 of 1%) may not exceed
.30 of 1% of the average daily net assets of the Class A shares. PMFD has
advised the Fund that distribution-related expenses of the Fund will not
exceed .25 of 1% of the average daily net assets of the Class A shares for
the fiscal year ending February 28, 1995.
For the fiscal year ended February 28, 1993 and the six-month period
ended August 31, 1993 PMFD received payments of $8,353 and $4,260,
respectively under the Class A Plan representing .20 of 1% of the average
daily net assets of the Class A shares as reimbursement of expenses related
to the distribution of Class A shares. This amount was primarily expended
on commission credits to Prudential Securities and Pruco Securities
Corporation, an affiliated broker-dealer (Prusec), for payment to financial
advisers and other salespersons who sell Class A shares. For the fiscal
year ended Feburary 28, 1993, and the six-month period ended August 31,
1993, PMFD also received $49,500 and $19,300, in initial sales charges.
14
<PAGE>
Class B Plan. Under the Class B Plan, the Fund reimburses Prudential
Securities for its distribution-related expenses with respect to Class B
shares at an annual rate of up to 1% of the average daily net assets of the
Class B shares. The Class B Plan also provides for the payment of a service
fee to Prudential Securities at a rate not to exceed .25 of 1% of the
average daily net assets of Class B shares. The aggregate distribution fee
for Class B shares (asset-based sales charge plus service fee) will not
exceed 1% of average daily net assets of the Class B shares.
For the fiscal year ended February 28, 1993 and the six-month period
ended August 31, 1993, Prudential Securities received $2,461,945 and
$1,142,560, respectively, from the Fund under the Class B Plan and spent
approximately $1,065,400 and $501,600, respectively, in distributing the
Fund's Class B shares. It is estimated that of the latter amount
approximately .8% ($9,000) and .4% ($2,300) was spent on printing and
mailing of prospectuses to other than current shareholders during the
fiscal year ended February 28, 1993 and during the six-month period ended
August 31, 1993, respectively; 14.9% ($158,700) and 17.8% ($89,400) on
compensation to Prusec, for commissions to its financial advisers and
other expenses, including an allocation of overhead and other branch
office distribution-related expenses, incurred by it for distribution of
Fund shares during the fiscal year ended February 28, 1993 and during the
six-month period ended August 31, 1993, respectively; 11.3% ($119,900) and
6.1% ($30,400) in interest and/or carrying charges during the fiscal year
ended February 28, 1993 and during the six-month period ended August 31,
1993, respectively; 73.0% ($777,800) and 75.7% ($379,500) during the
fiscal year ended February 28, 1993 and during the six-month period ended
August 31, 1993, respectively, on the aggregate of (i) payments of
commissions to financial advisers 33.5% ($356,600) during the fiscal year
ended February 28, 1993 and 23.1% ($115,500) during the six-month period
ended August 31, 1993) and (ii) an allocation of overhead and other
branch office distribution-related expenses 39.5% ($421,200) during the
fiscal year ended February 28, 1993 and 52.6% ($264,000) during the six-
month period ended August 31, 1993). The term "overhead and other branch
office distribution-related expenses" represents (a) the expenses of
operating Prudential Securities branch offices in connection with the sale
of Fund shares, including lease costs, the salaries and employee benefits
of operations and sales support personnel, utility costs, communications
costs and the costs of stationery and supplies, (b) the costs of client
sales seminars, (c) expenses of mutual fund sales coordinators to promote
the sale of Fund shares and (d) other incidental expenses relating to
branch promotion of Fund sales.
Prudential Securities also receives the proceeds of contingent
deferred sales charges paid by holders of Class B shares upon certain
redemptions of Class B shares. Under the current Class B Plan, the amount
of distribution expenses reimbursable by Class B shares of the Fund is
reduced by the amount of such contingent deferred sales charges. For the
fiscal year ended February 28, 1993 and the six month period ended August
31, 1993, Prudential Securities received approximately $387,400 and
$123,500, respectively, in contingent deferred sales charges. As of
February 28, 1993 and August 31, 1993, the aggregate amounts of
unreimbursed distribution expenses for the Fund's Class B shares were
approximately $2,151,000 and $1,492,000, respectively.
15
<PAGE>
The Class A and Class B Plans continue in effect from year to year,
provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Rule 12b-
1 Directors, cast in person at a meeting called for the purpose of voting
on such continuance. The Class A and Class B Plans may each be terminated
at any time, without penalty, by the vote of a majority of the Directors
who are not interested persons or by the vote of the holders of a majority
of the outstanding shares of the applicable class on not more than 30
days' written notice to any other party to the Plans. Neither Plan may be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable
class, and all material amendments are required to be approved by the
Board of Directors in the manner described above. Each Plan will
automatically terminate in the event of its assignment. The Fund will not
be contractually obligated to pay expenses incurred under either the Class
A Plan or the Class B Plan if it is terminated or not continued. In the
event of termination or noncontinuation of the Class B Plan, the Board of
Directors may consider the appropriateness of having the Fund reimburse
Prudential Securities for the outstanding carry forward amounts plus
interest thereon.
Pursuant to each Plan, the Board of Directors reviews at least
quarterly a written report of the distribution expenses incurred on behalf
of the Class A and Class B shares of the Fund by PMFD and Prudential
Securities respectively. The report includes an itemization of the
distribution expenses and the purposes of such expenditures. In addition,
as long as the Plans remain in effect, the selection and nomination of
Rule 12b-1 Directors who are not interested persons of the Fund shall be
committed to the Rule 12b-1 Directors.
Pursuant to each Distribution Agreement, the Fund has agreed to
indemnify PMFD and Prudential Securities to the extent permitted by
applicable law against certain liabilities under the Securities Act. Each
Distribution Agreement was last approved by the Board of Directors,
including a majority of the Rule 12b-1 Directors, on May 12, 1993.
Portfolio Transactions
The Manager is responsible for decisions to buy and sell
securities for the Fund, the selection of brokers and dealers to effect
the transactions and the negotiation of brokerage commissions, if any. For
purposes of this section, the term "Manager" includes the "Subadviser."
Purchases and sales of securities on a national securities exchange are
effected through brokers who charge a negotiated commission for their
services. On a foreign securities exchange, commissions may be fixed.
Orders may be directed to any broker including, to the extent and in the
manner permitted by applicable law, Prudential Securities.
In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or
discount. On occasion, certain money market instruments may be purchased
directly from an issuer, in which case no commissions or discounts are
paid. The Fund will not deal with Prudential
16
<PAGE>
Securities (or any affiliates) in any transaction in which Prudential
Securities acts as principal. Thus, it will not deal in the over-the-
counter market with Prudential Securities (or any affiliates) acting as
market maker, and it will not execute a negotiated trade with Prudential
Securities if execution involves Prudential Securities (or any affiliates)
acting as principal with respect to any part of the Fund's order.
Portfolio securities may not be purchased from any underwriting or
selling syndicate of which Prudential Securities, during the existence of
the syndicate, is a principal underwriter (as defined in the Investment
Company Act), except in accordance with rules of the Securities and
Exchange Commission. This limitation, in the opinion of the Fund, will not
significantly affect the Fund's ability to pursue its present investment
objective. However, in the future in other circumstances, the Fund may be
at a disadvantage because of this limitation in comparison to other funds
with similar objectives but not subject to such limitations. In placing
orders for portfolio securities of the Fund, the Manager is required to
give primary consideration to obtaining the most favorable price and
efficient execution. Commission rates are established pursuant to
negotiations with the broker, dealer, or futures commission merchant based
on the quality and quantity of execution services provided by the broker,
dealer, or futures commission merchant in the light of generally
prevailing rates. The Manager's policy is to pay higher commissions to
brokers, other than Prudential Securities, for particular transactions
than might be charged if a different broker had been selected, on
occasions when, in the Manager's opinion, this policy furthers the
objective of obtaining best price and execution. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by
the Fund's Board of Directors.
Subject to the above considerations, Prudential Securities may act as a
broker for the Fund. In order for Prudential Securities, or any affililate,
to effect any portfolio transactions for the Fund, the commissions, fees or
other remuneration received by Prudential Securities must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow Prudential Securities, or any
affililate, to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Board of Directors of the Fund,
including a majority of the Rule 12b-1 Directors, has adopted procedures
which are reasonably designed to provide that any commissions, fees or
other remuneration paid to Prudential Securities, or any affililate, are
consistent with the foregoing standard. In accordance with Section 11(a) of
the Securities Exchange Act of 1934, Prudential Securities may not retain
compensation for effecting transactions on a national securities exchange
for the Fund unless the Fund has expressly authorized the retention of such
compensation. Section 11(a) provides that Prudential Securities must
furnish to the Fund at least annually a statement setting forth the total
amount of all compensation retained by Prudential Securities from
transactions effected for the Fund during the applicable period. Brokerage
transactions with Prudential Securities, or any affiliate, are also subject
to such fiduciary standards as may be imposed upon Prudential Securities,
or such affililate, by applicable law.
17
<PAGE>
The table below shows certain information regarding the payment of
commissions by the Fund, including the amount of such commissions paid to
Prudential Securities, for the year ended February 28, 1993 and the six-
month period ended August 31, 1993.
Six-month
Year ended period ended
February 28, 1993 December 31, 1993
----------------- -----------------
Total brokerage commissions paid by
the Fund ............................. $550,800 $476,992
Total brokerage commissions paid to
Prudential Securities ................ $ 79,650 $ 23,040
Percentage of total brokerage
commissions paid to Prudential
Securities ........................... 14.4% 4.8%
The Fund effected approximately 14.5% and 5.4% of the total dollar
amount of its transactions involving the payment of commissions to
Prudential Securities during the fiscal year ended February 28, 1993 and
for the six-month period ended August 31, 1993, respectively.
APPROVAL OF A PROPOSAL TO AMEND
THE FUND'S ARTICLES OF INCORPORATION
TO PERMIT THE IMPLEMENTATION OF A CONVERSION FEATURE
(For consideration by Class A and Class B shareholders voting jointly)
(Proposal No. 2)
The Board of Directors is recommending that shareholders approve an
amendment to the Fund's Articles of Incorporation to permit the
implementation of a conversion feature for Class B shares. The conversion
feature is authorized pursuant to an exemptive order of the SEC (the SEC
Order) and would provide for the automatic conversion of Class B shares to
Class A shares at relative net asset value approximately seven years after
purchase. Class A shares are subject to a lower annual distribution and
service fee than Class B shares and conversions would occur without the
imposition of any additional sales charge. A description of the conversion
feature is set forth in greater detail below. Amendment of the Articles of
Incorporation requires approval by a majority of the Fund's outstanding
shares.
The Classes of Shares
The Fund currently offers two classes of shares, designated as Class A
and Class B shares pursuant to the Alternative Purchase Plan, in reliance
upon the SEC Order. Class A shares are currently offered with an initial
sales charge of up to 5.25% of the offering price and are subject to an
annual distribution and service fee of up to .30 of 1% of the average daily
net assets of the Class A shares pursuant to a Rule 12b-1 plan. This fee
is currently charged at a rate of .20 of 1% of the average daily net assets
of the Class A shares and
18
<PAGE>
PMFD has agreed to so limit its fee under the Class A Plan for the fiscal
year ending February 28, 1995. Class B shares are currently offered
without an initial sales charge but are subject to a contingent deferred
sales charge or CDSC (declining from 5% to zero of the lesser of the
amount invested or the redemption proceeds) on certain redemptions
generally made within six years of purchase and to an annual distribution
and service fee pursuant to a Rule 12b-1 plan of up to 1% of the average
daily net assets of Class B shares.
In accordance with the SEC Order, the Board of Directors may, among
other things, authorize the creation of additional classes of shares from
time to time. The Board of Directors has approved the offering of a new
class of shares, to be designated Class C shares, which will be offered
simultaneously with the offering of Class B shares with the proposed
conversion feature. Class C shares will be offered without either an
initial or a deferred sales charge but will be subject to an annual
distribution and service fee not to exceed 1% of the average daily net
assets of the Class C shares. If the proposed conversion feature for Class
B shares is not approved, Class C shares will not be offered.
The Proposed Conversion Feature
On May 12, l993, the Fund's Board of Directors, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act), approved an amendment to the
Fund's Articles of Incorporation to permit the implementation of a
conversion feature for the Fund's Class B shares. A copy of the proposed
amendment to the Fund's Articles of Incorporation is attached hereto as
Exhibit B.
If this proposal is approved, it is currently contemplated that
conversions of Class B shares to Class A shares will occur on a quarterly
basis approximately seven years from the purchase of Class B shares. The
first conversion is currently anticipated to occur in or about January
1995. Conversions will be effected automatically at relative net asset
value without the imposition of any additional sales charge. Class B
shareholders will benefit from the conversion feature because they will
thereafter be subject to the lower annual distribution and service fee
applicable to Class A shares.
Since the Fund tracks amounts paid rather than the number of shares
bought on each purchase of Class B shares, it is currently anticipated
that the number of Class B shares eligible to convert to Class A shares
(excluding shares acquired through the automatic reinvestment of dividends
and other distributions) (the Eligible Shares) will be determined on each
conversion date in accordance with the following formula: (i) the ratio of
(a) the amounts paid for Class B shares purchased at least seven years
prior to the conversion date (b) to the total amount paid for all Class B
shares purchased and then held in such shareholder's account (ii)
multiplied by the total number of Class B shares then held in a
shareholder's account. Each time any Eligible Shares in a shareholder's
account convert to Class A shares, all shares or amounts representing
Class B shares then in such account that were acquired through the
automatic reinvestment of dividends and other distributions will convert
to Class A shares.
For purposes of determining the number of Eligible Shares, if the
Class B shares in a shareholder's account on any conversion date are the
result of multiple purchases at different net asset values per share, the
number of Eligible Shares calculated as described
19
<PAGE>
above will generally be either more or less than the number of shares
actually purchased approximately seven years before such conversion date.
For example, if 100 shares were initially purchased at $10 per share (for
a total of $1,000) and a second purchase of 100 shares was subsequently
made at $11 per share (for a total of $1,100), 95.24 shares would convert
approximately seven years from the initial purchase (i.e., $1,000 divided
by $2,100 or 47.62% multiplied by 200 shares or 95.24 shares). The Manager
reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to
shareholders.
If the net asset value per share of Class A is higher than that of
Class B at the time of conversion (which may be the case because of the
higher distribution and service fee applicable to Class B shares),
shareholders will receive fewer Class A shares than Class B shares
converted although the aggregate dollar value will be the same.
For purposes of calculating the applicable holding period for
conversions, all payments for purchases of Class B shares during a month
will be deemed to have been made on the last day of the month, or for
Class B shares acquired through exchange, or a series of exchanges, on the
last day of the month in which the original payment for purchases of such
Class B shares were made. For Class B shares previously exchanged for
shares of a money market fund, the time period during which such shares
were held in the money market fund will be excluded. For example, Class B
shares held in a money market fund for a period of one year will not
convert to Class A until approximately eight years from purchase. For
purposes of measuring the time period during which shares are held in a
money market fund, exchanges will be deemed to have been made on the last
day of the month. Class B shares acquired through exchange will convert to
Class A shares after expiration of the conversion period applicable to the
original purchase of such shares. As of the date of the first conversion
(which, as noted above, is currently anticipated to occur in or about
January 1995) all amounts representing Class B shares then outstanding
beyond the expiration of the applicable conversion period will
automatically convert to Class A shares together with all shares or
amounts representing Class B shares acquired through the automatic
reinvestment of dividends and distributions then held in the shareholder's
account.
Under current law, no gain or loss will be recognized by a shareholder
for U.S. income tax purposes as a result of a conversion of Class B shares
into Class A shares.
If approved by shareholders, the conversion feature will be subject to
the continuing availability of opinions of counsel (i) that the dividends
and other distributions paid on Class A and Class B shares will not
constitute "preferential dividends" under the Internal Revenue Code of
1986, as amended, and (ii) that the conversion of shares does not
constitute a taxable event.
Required Vote
The proposed amendment to the Fund's Articles of Incorporation
to implement the conversion feature requires the affirmative
vote of a majority of the Fund's outstanding shares. In the event
shareholders of the Fund do not approve the proposed amendment, the
conversion feature will not be implemented for the Fund and Class B shares
of the Fund
20
<PAGE>
will continue to be subject, possibly indefinitely, to their higher annual
distribution and service fee.
THE BOARD OF DIRECTORS RECOMMENDS RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL NO. 2.
APPROVAL OF AMENDED AND RESTATED CLASS A DISTRIBUTION AND
SERVICE PLAN
(For consideration by Class A and Class B shareholders voting separately)
(Proposal No. 3)
On May 12, 1993, the Fund's Board of Directors approved an amended and
restated Class A Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act and an amended and restated Distribution
Agreement with PMFD for Class A shares of the Fund (the Proposed Class A
Plan and the Proposed Class A Distribution Agreement, respectively) and
recommends submission of the Proposed Class A Plan to the Fund's Class A
shareholders for approval or disapproval at this Special Meeting of
Shareholders. As contemplated by the SEC Order (previously defined under
Proposal No. 2), the Proposed Class A Plan is also being submitted for
approval by Class B shareholders because, subject to approval of proposal
No. 2, Class B shares will automatically convert to Class A shares
approximately seven years after purchase. The Proposed Class A Distribution
Agreement does not require and is not being submitted for shareholder
approval.
The purpose of the Proposed Class A Plan is to compensate PMFD, the
distributor of the Fund's Class A shares, for providing distribution
assistance to broker-dealers, including Prudential Securities and Prusec,
affiliated broker-dealers, and other qualified broker-dealers, if any,
whose customers invest in Class A shares of the Fund and to defray the
costs and expenses, including the payment of account servicing fees, of the
services provided and activities undertaken to distribute Class A shares
(Distribution Activities).
The Board of Directors previously adopted a plan of distribution for
the Fund's Class A shares pursuant to Rule 12b-1 under the Investment
Company Act which was approved by shareholders on December 19, 1990 and
last approved by the Board of Directors on May 12, 1993 (the Existing
Class A Plan). Shareholders of the Fund's Class A and Class B shares are
being asked to approve amendments to the Existing Class A Plan that change
it from a reimbursement type plan to a compensation type plan. The
amendments do not change the maximum annual fee that may be paid to PMFD
under the Existing Class A Plan, although the possibility exists that
expenses incurred by PMFD and for which it is entitled to be reimbursed
under the Existing Class A Plan may be less than the fee PMFD will receive
under the Proposed Class A Plan. The amendments are being proposed to
facilitate administration and accounting. The Board of Directors believes
that the proposed Class A Plan is in the best interest of the Fund and is
reasonably likely to continue to benefit the Fund's Class A shareholders.
A copy of the Proposed Class A Plan is attached hereto as Exhibit D.
21
<PAGE>
The Existing Class A Plan
Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
incurred for Distribution Activities at an annual rate of up to .30 of 1%
of the average daily net assets of the Class A shares (up to .25 of 1% of
which may constitute a service fee for the servicing and maintenance of
shareholder accounts). Article III, Section 26 of the NASD Rules of Fair
Practice (the NASD Rules) places an annual limit of .25 of 1% on fees that
may be imposed for the provision of personal service and/or the maintenance
of shareholder accounts (service fees) and an annual limit of .75 of 1% on
asset-based sales charges (as defined in the NASD Rules). Subject to these
limits, the Fund may impose any combination of service fees and asset-based
sales charges under both the Existing Class A Plan and the Proposed Class A
Plan; provided that the total fees do not exceed .30 of 1% per annum of the
average daily net assets of the Class A shares.
The Existing Class A Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class A shares of the Fund. In addition, all
material amendments thereof must be approved by vote of a majority of the
Directors, including a majority of the Rule 12b-1 Directors, cast in person
at a meeting called for the purpose of voting on the Plan. So long as the
Existing Class A Plan is in effect, the selection and nomination of Rule
12b-1 Directors will be committed to the discretion of the Rule 12b-1
Directors.
The Existing Class A Plan may be terminated at any time without payment
of any penalty by the vote of a majority of the Rule 12b-1 Directors or by
the vote of a majority of the outstanding Class A shares of the Fund (as
defined in the Investment Company Act) on written notice to any other party
to such plan and will automatically terminate in the event of its
assignment (as defined in the Investment Company Act). For a more detailed
description of the Existing Class A Plan, see "Management of the Fund-The
Distributors-Class A Plan."
The Proposed Class A Plan
The Proposed Class A Plan amends the Existing Class A Plan in one
material respect. Under the Existing Class A Plan, the Fund reimburses PMFD
for expenses actually incurred for Distribution Activities up to a maximum
of .30 of 1% per annum of the average daily net assets of the Class A
shares. The Proposed Class A Plan authorizes the Fund to pay PMFD the same
maximum annual fee as compensation for its Distribution Activities
regardless of the expenses incurred by PMFD for Distribution Activities.
The Distributor may, however, as it currently does, voluntarily agree to
limit its fee to an amount less than the maximum annual fee. In contrast to
the Existing Class A Plan, the amounts payable by the Fund under the
Proposed Class A Plan would not be directly related to the expenses
actually incurred by PMFD for its Distribution Activities. Consequently, if
PMFD's expenses for Distribution Activities are less than the distribution
and service fees it receives under the Proposed Class A Plan, it will
retain its full fees and realize a profit.
Since inception of the Existing Class A Plan, the reimbursable expenses
incurred thereunder by PMFD have generally equalled or exceeded the amount
reimbursed by the
22
<PAGE>
Fund. For each of the fiscal years ended February 28/29, 1991, 1992 and
1993, PMFD received payment of $1,410, $4,252 and $8,353, respectively
under the Existing Class A Plan representing .20% of the average daily net
assets of the Class A shares as reimbursement of expenses incurred for
Distribution Activities. Although PMFD agreed to limit its fees under the
Existing Class A Plan to [.25] of 1% for the fiscal years ended, February
28/29, 1991, 1992 and 1993, it in fact further limited its fee to [.20] of 1%
even though its direct and indirect reimbursable distribution expenses
exceeded such amount. PMFD believes that it would have similarly limited
its fee had the Proposed Class A Plan been in effect during the past three
fiscal years, although it could have assessed the maximum annual fee of
.30 of 1%. Since the maximum annual fee under the Existing Class A Plan is
the same as under the Proposed Class A Plan, PMFD would have received the
same annual fee under the Proposed Class A Plan as it did under the
Existing Class A Plan for the fiscal years ended February 28/29, 1991, 1992
and 1993. Regardless of which plan will be in effect, the Distributor has
voluntarily agreed to limit its fees for Distribution Activities to no
more than [.25] of 1% of the average daily net assets of the Class A
shares for the fiscal year ending February 28, 1995. Other expenses
incurred by PMFD for Distribution Activities have been, and will continue
to be, paid from the proceeds of initial sales charges.
Among the major perceived benefits of a compensation type plan, such as
the Proposed Class A Plan, over a reimbursement type plan, such as the
Existing Class A Plan, is the facilitation of administration and
accounting. Under reimbursement plans, all expenses must be specifically
accounted for by the Distributor and attributed to the specific class of
shares of a fund in order to qualify for reimbursement. Although the
Proposed Class A Plan will continue to require quarterly reporting to the
Board of Directors of the amounts accrued and paid under the Plan and of
the expenses actually borne by the Distributor, there will be no need to
match specific expenses to reimbursements as under the Existing Class A
Plan. Thus, the accounting for the Proposed Class A Plan would be
simplified and the timing of when expenditures are to be made by the
Distributor would not be an issue. These considerations, combined with the
reasonable likelihood, although there is no assurance, that the per annum
payment rate under the Proposed Class A Plan, will not exceed the expenses
incurred by PMFD for Distribution Activities, suggest that the costs and
efforts associated with a reimbursement plan are unwarranted.
In considering whether to approve the Proposed Class A Plan, the
Directors reviewed, among other things, the nature and scope of the
services to be provided by PMFD, the purchase options available to
investors under the Alternative Purchase Plan, the amount of expenditures
under the Existing Class A Plan, the relationship of such expenditures to
the overall cost structure of the Fund, and comparative data with respect
to distribution arrangements adopted by other investment companies. Based
upon such review, the Directors, including a majority of the Rule 12b-1
Directors, determined that there is a reasonable likelihood that the
Proposed Class A Plan will benefit the Fund and its Class A shareholders.
If approved by shareholders, the Proposed Class A Plan will continue
in effect from year to year, provided such continuance is approved at
least annually by vote of a majority of the Board of Directors, including
a majority of the Rule 12b-1 Directors.
23
<PAGE>
Required Vote
If Proposal No. 2 is approved by shareholders, the Proposed
Class A Plan will require the approval of a majority of the Fund's
outstanding Class A shares and Class B shares (as defined in the
Investment Company Act) voting separately. If Proposal No. 2 is not
approved by shareholders, the Proposed Class A Plan will only require the
approval of a majority of the Fund's outstanding Class A shares. Under the
Investment Company Act, a majority of a class' outstanding voting shares
is defined as the lesser of (i) 67% of a class' outstanding shares
represented at a meeting at which more than 50% of the outstanding shares
of the class are present in person or represented by proxy, or (ii) more
than 50% of a class' outstanding shares. If the Proposed Class A Plan is
not approved as described above, the Existing Class A Plan will continue
in its present form.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO. 3.
APPROVAL OF AMENDED AND RESTATED CLASS B DISTRIBUTION AND
SERVICE PLAN
(For consideration by Class B shareholders only)
(Proposal No. 4)
On May 12, 1993, the Fund's Board of Directors approved an amended and
restated Class B Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act and an amended and restated Class B Distribution
Agreement with Prudential Securities for Class B shares of the Fund (the
Proposed Class B Plan and the Proposed Class B Distribution Agreement,
respectively) and recommends submission of the Proposed Class B Plan to the
Fund's Class B shareholders for approval or disapproval at this Special
Meeting of Shareholders. The Proposed Class B Distribution Agreement does
not require and is not being submitted for shareholder approval.
The purpose of the Proposed Class B Plan is to compensate Prudential
Securities, the Distributor of the Fund's Class B shares, for providing
distribution assistance to broker-dealers, including Prusec, an affiliated
broker-dealer, and other qualified broker-dealers,if any, whose customers
invest in Class B shares of the Fund and to defray the costs and expenses
including the payment of account servicing fees of the services provided
and activities undertaken to distribute Class B shares (Distribution
Activities).
The Board of Directors previously adopted a plan of distribution for
the Fund's Class B shares pursuant to Rule 12b-1 under the Investment
Company Act which was approved by shareholders on January 11, 1990 and
last approved by the Board of Directors on May 12, 1993 (the Existing
Class B Plan). Shareholders of the Fund's Class B shares are being asked
to approve amendments to the Existing Class B Plan that change it from a
reimbursement type plan to a compensation type plan. The amendments do not
change the maximum annual fee that may be paid to Prudential Securities
under the Existing Class B Plan, although the possibility exists that
expenses incurred by Prudential Securities and for which it is entitled to
be reimbursed under the Existing Class B Plan may be less than
24
<PAGE>
the fee Prudential Securities will receive under the Proposed Class B
Plan. The amendments are being proposed to facilitate administration and
accounting. The Board of Directors believes that the Proposed Class B Plan
is in the best interest of the Fund and is reasonably likely to continue
to benefit the Fund's Class B shareholders. A copy of the Proposed Class B
Plan is attached hereto as Exhibit E.
The Existing Class B Plan
Under the Existing Class B Plan, the Fund reimburses Prudential
Securities for expenses incurred for distribution-related expenses with
respect to Class B shares at an annual rate of up to 1% of the average
daily net assets of the Class B shares (up to .25% of 1% of which may
constitute a service fee for the servicing and maintenance of shareholder
accounts). Amounts reimbursable under the plan that are not paid because
they exceed the maximum fee payable thereunder are carried forward and may
be recovered in future years by Prudential Securities from asset-based
sales charges imposed on Class B shares, to the extent such charges do not
exceed .75 of 1% per annum of the average daily net assets of the Class B
shares, and from contingent deferred sales charges received from certain
redeeming shareholders, subject to the limitations of Article III, Section
26 of the NASD Rules. The NASD Rules place an annual limit of .75 of 1% on
asset-based sales charges (as defined in the NASD Rules) and an annual
limit of .25 of 1% on fees that may be imposed for the provision of
personal service and/or the maintenance of shareholder accounts (service
fees). Subject to these limits, the Fund may impose any combination of
service fees and asset-based sales charges under both the Existing Class B
Plan and the Proposed Class B Plan; provided that the total fees do not
exceed 1% per annum of the average daily net assets of the Class B shares.
Pursuant to the NASD Rules, the aggregate deferred sales charges and
asset-based sales charges on Class B shares of the Fund may not, subject to
certain exclusions, exceed 6.25% of total gross sales of Class B shares.
The Existing Class B Plan may not be amended to increase materially
the amount to be spent for the services described therein without approval
by a majority of the holders of the Class B shares of the Fund. In
addition, all material amendments thereof must be approved by vote of a
majority of the Directors, including a majority of the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on
the plan. So long as the Existing Class B Plan is in effect, the selection
and nomination of Rule 12b-1 Directors will be committed to the discretion
of the Rule 12b-1 Directors.
The Existing Class B Plan may be terminated at any time without
payment of any penalty by the vote of a majority of the Rule 12b-1
Directors or by the vote of a majority of the outstanding Class B shares
of the Fund (as defined in the Investment Company Act) on written notice
to any other party to such plan and will automatically terminate in the
event of its assignment (as defined in the Investment Company Act). For a
more detailed description of the Existing Class B Plan, see "Management of
the Fund-The Distributors-Class B Plan."
The Proposed Class B Plan
The Proposed Class B Plan amends the Existing Class B Plan in
one material respect. Under the Existing Class B Plan, the Fund reimburses
Prudential Securities for expenses
25
<PAGE>
actually incurred for Distribution Activities up to a maximum of 1% per
annum of the average daily net assets of the Class B shares. The Proposed
Class B Plan authorizes the Fund to pay Prudential Securities the same
maximum annual fee as compensation for its Distribution Activities
regardless of the expenses incurred by Prudential Securities for
Distribution Activities. In contrast to the Existing Class B Plan, the
amounts payable by the Fund under the Proposed Class B Plan would not be
directly related to the expenses actually incurred by Prudential
Securities for its Distribution Activities. Consequently, if Prudential
Securities' expenses are less than its distribution and service fees, it
will retain its full fees and realize a profit. However, if Prudential
Securities' expenses exceed the distribution and service fees received
under the Proposed Class B Plan, it will no longer carry forward such
amounts for reimbursement in future years.
Since inception of the Existing Class B Plan, the cumulative
reimbursable expenses incurred thereunder by Prudential Securities have
exceeded the amounts reimbursed by the Fund. As of December 31, 1993, the
aggregate amount of distribution expenses incurred and not yet reimbursed
by the Fund or recovered through contingent deferred sales charges was
approximately $982,900.
For the fiscal years ended February 28/29, 1991, 1992 and 1993,
Prudential Securities received $2,910,279, $2,702,106 and $2,461,945,
respectively, from the Fund under the Existing Class B Plan, representing
1.00%, 1.00% and 1.00%, respectively, of the average daily net assets of
the Class B shares, and spent approximately $1,260,800, $1,660,700 and
$1,065,400, respectively, for Distribution Activities. Since the maximum
annual fee under the Existing Class B Plan is the same as under the
Proposed Class B Plan, Prudential Securities would have received the same
annual fee under the Proposed Class B Plan as it did under the Existing
Class B Plan for the fiscal years ended February 28, 1991, 1992 and 1993.
Among the major perceived benefits of a compensation type plan, such
as the Proposed Class B Plan, over a reimbursement type plan, such as the
Existing Class B Plan, is the facilitation of administration and
accounting. Under reimbursement plans, all expenses must be specifically
accounted for by the Distributor and attributed to the specific class of
shares of a fund in order to qualify for reimbursement. Although the
Proposed Class B Plan will continue to require quarterly reporting to the
Board of Directors of the amounts accrued and paid under the Plan and of
the expenses actually borne by the Distributor, there will be no need to
match specific expenses to reimbursements and no carrying forward of such
amounts, as under the Existing Class B Plan. Thus, the accounting for the
Proposed Class B Plan would be simplified and the timing of when
expenditures are to be made by the Distributor ordinarily would not be an
issue. Currently, because the Existing Class B Plan is a reimbursement
plan, the Distributor retains an independent expert to perform a study
of its methodology determining and substantiating which of its expenses
should properly be allocated to the Fund's Class B shares for
reimbursement, the cost of which is borne by the Fund and other Funds for
which Prudential Securities serves as distributor. These considerations,
combined with the fact that the cumulative expenses incurred by Prudential
Securities for Distribution Activities have exceeded the amounts
reimbursed by the Fund under the Existing Class B Plan, suggest that the
costs and efforts associated with a reimbursement plan are unwarranted.
26
<PAGE>
In considering whether to approve the Proposed Class B Plan, the
Directors reviewed, among other things, the nature and scope of the
services to be provided by Prudential Securities, the purchase options
available to investors under the Alternative Purchase Plan, the amount of
expenditures under the Existing Class B Plan, the relationship of such
expenditures to the overall cost structure of the Fund, and comparative
data with respect to distribution arrangements adopted by other investment
companies. Based upon such review, the Directors, including a majority of
the Rule 12b-1 Directors, determined that there is a reasonable likelihood
that the Proposed Class B Plan will benefit the Fund and its Class B
shareholders.
If approved by Class B shareholders, the Proposed Class B Plan will
continue in effect from year to year, provided such continuance is
approved at least annually by vote of a majority of the Board of
Directors, including a majority of the Rule 12b-1 Directors.
Required Vote
The Proposed Class B Plan requires the approval of a majority
of the Fund's outstanding Class B shares as defined in the Investment
Company Act and described under Proposal No. 3. If the Proposed Class B
Plan is not approved, the Existing Class B Plan will continue in its
present form.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO. 4.
APPROVAL OF AN AMENDMENT OF ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE FUND
(Proposal No. 5)
The Board of Directors proposes that the Fund's name be changed from
Prudential Growth Fund, Inc. to Prudential Strategist Fund, Inc. and that
the Articles of Incorporation of the Fund be amended to effect the name
change.
The Board of Directors considered the proposed name change from
"Prudential Growth Fund, Inc." to "Prudential Strategist Fund, Inc."
Management of the Fund expressed its opinion that the proposed name,
"Prudential Strategist Fund, Inc.", more accurately reflects the
investment philosophy of the Fund's portfolio manager, Greg A.Smith.
Greg A. Smith, the president and principal stockholder of the
Subadviser, is the portfolio manager of the Fund and has responsibility
for the day-to-day management of the Fund's portfolio. Mr. Smith has
managed the Fund's portfolio since August 1, 1991 and from its inception
in 1983 until September 1987. Greg A. Smith is also a consultant to
Prudential Securities and has acted as Prudential Securities' Chief
Investment Strategist since 1982. He also acts as a consultant to The
Prudential Investment Corporation on two open-end funds managed by the
Manager. Prudential Securities provides office facilities to the
Subadviser.
27
<PAGE>
Mr. Smith is recognized in the financial community as a leading asset
allocator. For the last ten years, he has been named by Institutional
Investor Magazine as a member of its All-America Research Team and, in
1992, was ranked number 1 for portfolio strategy. He is also responsible
for Prudential Securities receiving the top ranking for asset allocation
for the entire five year period ended December 31, 1992 in a continuing
survey conducted by The Wall Street Journal and Wilshire Associates.
As a consultant to PSI, the Subadviser currently prepares PSI's Market
and Economic Outlook.
The Board of Director believes that adoption of Proposal No. 6 is in
the best interest of the Fund and its shareholders.
Required Vote
The name change must be approved by the holders of a majority of the
Fund's shares of common stock in accordance with the Fund's Articles of
Incorporation. The name change will be effected as soon as is practicable
after shareholder approval. If this proposal is not approved, the Board of
Directors will consider whether it is appropriate for the Fund to continue
to do business under the name Prudential Growth Fund, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO. 5.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
(Proposal No. 6)
The Board of Directors of the Fund, including Directors who are not
interested persons of the Fund, has selected Price Waterhouse as
independent accountants for the Fund for the fiscal year ending February
28, 1995. The ratification of the selection of independent accountants is
to be voted upon at the Meeting and it is intended that the persons named
in the accompanying Proxy will vote for Price Waterhouse. No representative
of Price Waterhouse is expected to be present at the Meeting of
Shareholders.
The policy of the Board of Directors regarding engaging independent
accountants' services is that management may engage the Fund's principal
independent accountants to perform any service(s) normally provided by
independent accounting firms, provided that such service(s) meet(s) any
and all of the independence requirements of the American Institute of
Certified Public Accountants and the SEC. In accordance with this policy,
the Audit Committee reviews and approves all services provided by the
independent public accountants prior to their being rendered. The Board of
Directors of the Fund receives a report from its Audit Committee relating
to all services after they have been performed by the Fund's independent
accountants.
Required Vote
The affirmative vote of a majority of the shares present, in person or
by proxy, at the Meeting is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO. 6.
28
<PAGE>
OTHER MATTERS
No business other than as set forth herein is expected to come before
the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment of the Meeting, the
persons named in the enclosed proxy will vote thereon according to their
best judgment in the interests of the Fund.
SHAREHOLDER PROPOSALS
The Fund is not required to hold annual meetings of shareholders and
the Board of Directors currently does not intend to hold such meetings
unless shareholder action is required in accordance with the Investment
Company Act or the Fund's By-laws. A shareholder proposal intended to be
presented at any meeting of shareholders of the Fund hereinafter called
must be received by the Fund a reasonable time before the Board of
Directors' solicitation relating thereto is made in order to be included in
the Fund's proxy statement and form of proxy relating to that meeting. The
mere submission of a proposal by a shareholder does not guarantee that such
proposal will be included in the proxy statement because certain rules
under the Federal securities laws must be complied with before inclusion of
the proposal is required.
S. Jane Rose
Secretary
Dated: , 1994
Shareholders who do not expect to be present at the Meeting and who wish to
have their shares voted are requested to date and sign the enclosed proxy and
return it in the enclosed envelope. No postage is required if mailed in the
United States.
29
<PAGE>
Exhibit A
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
ASSETS
Cash and short-term investments ............................... $42,667,507
Loan to affiliate ............................................. 85,000,000
Management, administration and other fees receivable .......... 17,897,292
Transfer agency and fiduciary fees receivable ................. 3,744,874
Furniture, equipment and leasehold improvements, net .......... 10,495,702
Other assets .................................................. 4,676,430
------------
$164,481,805
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to affiliates ............................................. $48,794,366
Accounts payable and accrued expenses ......................... 11,208,209
Income taxes payable to affiliate - net ....................... 2,937,828
------------
62,940,403
------------
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Class A common stock, $1 par value (1,000
shares authorized, 850 shares outstanding) .................... 850
Class B common stock, $1 par value (1,000
shares authorized, 150 shares outstanding) .................... 150
Additional paid-in capital .................................... 24,999,000
Retained earnings ............................................. 76,541,402
------------
101,541,402
------------
$164,481,805
============
See notes to consolidated statement of financial condition.
A-1
<PAGE>
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
December 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prudential Mutual Fund Management, Inc. ("PMF") and subsidiaries (the
"Company"), an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America (the "Prudential"), were created to operate
as the manager, distributor and/or transfer agent for investment companies.
Principles of Consolidation
The consolidated financial statement includes the accounts of PMF and
its wholly-owned subsidiaries, Prudential Mutual Fund Services, Inc.
("PMFS") and Prudential Mutual Fund Distributors, Inc. ("PMFD"). All
intercompany profits, transactions and balances have been eliminated.
Income Taxes
The Company is a member of a group of affiliated companies which join in
filing a consolidated Federal income tax return. Pursuant to a tax
allocation agreement, tax expense is determined for individual
profitable companies on a separate return basis. Profit members pay this
amount to an affiliated company which in turn apportions the payment
among the loss members in proportion to their losses. In January 1993,
the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). The adoption of SFAS 109 did
not have a material effect on the Company's financial position.
2. SHORT-TERM INVESTMENTS
At December 31, 1993, the Company had invested $35,411,571 in several
money market funds which PMF manages.
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the
following:
Furniture ............................................ $6,481,799
Equipment ............................................ 9,181,984
Leasehold improvements ............................... 3,407,213
-----------
19,070,996
Less accumulated depreciation and amortization ....... 8,575,294
-----------
$10,495,702
===========
4. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company participates in a
variety of financial and administrative transactions with affiliates.
A-2
<PAGE>
The loan to affiliate bears interest at 3.45 percent at December 31,
1993 and is due on demand.
The caption "Due to affiliates" includes $18,241,795 at December 31,
1993 for reimbursement of employee compensation and benefits, and other
administrative and operating expenses. This amount is
noninterest-bearing and payable on demand.
The Company has entered into subadvisory agreements with The Prudential
Investment Corporation ("PIC"), a wholly-owned subsidiary of Prudential.
Under these agreements, PIC furnishes investment advisory services to
substantially all the funds for which the Company acts as Manager. At
December 31, 1993 there were unpaid fees due to PIC of $23,926,277,
included in the caption "Due to affiliates."
Distribution expenses include commissions and account servicing fees
paid to, or on account of, financial advisors of Prudential Securities
Incorporated ("Prudential Securities") and Pruco Securities Corporation
("PruSec"), affiliated broker-dealers and indirect wholly-owned
subsidiaries of Prudential, advertising expenses, the cost of printing
and mailing prospectuses to potential investors, and indirect and
overhead costs of Prudential Securities and PruSec, including lease,
utility, communications and sales promotion expenses. At December 31,
1993 there were unpaid distribution expenses of approximately
$6,626,000, included in the caption "Due to affiliates."
5. CAPITAL
PMFD is subject to the SEC Uniform Net Capital Rule (Rule 15c3- 1),
which requires the maintenance of minimum net capital and requires that
the ratio of aggregate indebtedness to net capital, both as defined,
shall not exceed 15 to 1. At December 31, 1993, PMFD had net capital of
$2,308,981, which was $1,859,405 in excess of its required net capital
of $449,576. PMFD had a ratio of aggregate indebtedness to net capital
of 2.9 to 1.
6. COMMITMENTS
The Company leases office space under operating leases expiring in 2003.
The leases are subject to escalation based upon certain costs incurred
by the lessor. Future minimum rentals, as of December 31, 1993, under
the leases, are as follows:
Year Minimum Rental
1994 $2,738,000
1995 2,865,000
1996 3,375,000
1997 3,385,000
1998 3,230,000
Thereafter 13,800,000
-----------
$29,393,000
===========
A-3
<PAGE>
7. PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has two defined benefit pension plans (the "Plans")
sponsored by the Prudential and Prudential Securities. The Plans cover
substantially all of the Company's employees. The funding policy is to
contribute annually the amount necessary to satisfy the Internal Revenue
Service funding standards. In addition, the Company has two defined
benefit plans for key executives, the Supplemental Retirement Plan (SRP)
for which estimated pension costs are currently accrued but not funded.
The Company provides certain health care and life insurance benefits for
eligible retired employees. Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
106"). SFAS 106 changed the practice of accounting for postretirement
benefits on a cash basis to an accrual basis, whereby employers record
the projected future cost of providing such postretirement benefits as
employees render services instead of when benefits are paid. This new
accounting method has no effect on the Company's cash outlays for these
retirement benefits. The adoption of SFAS 106 did not materially impact
the Company's financial position.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," ("SFAS 112") which is effective for fiscal
years beginning after December 15, 1993. Although several benefits are
fully insured which result in no SFAS 112 obligation, the Company
currently has an obligation and resulting expense under SFAS 112 for
medical benefits provided under long-term disability. The Company will
adopt SFAS 112 on January 1, 1994. Management believes that
implementation will have no material effect on the Company's financial
position.
8. CONTINGENCY
On October 12, 1993, a purported class action lawsuit was instituted
against PMF, et al and certain current and former directors of a fund
managed by PMF. The plaintiffs seek damages in an unspecified amount for
excessive management and distribution fees they allege were incurred by
them. Although the outcome of this litigation cannot be predicted at
this time, the defendants believe they have meritorious defenses to the
claims asserted in the complaint and intend to defend this action
vigorously. In any case, management does not believe that the outcome of
this action is likely to have a material adverse effect on the Company's
financial position.
A-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Prudential Mutual Fund Management, Inc.:
We have audited the accompanying consolidated statement of financial
condition of Prudential Mutual Fund Management, Inc. and subsidiaries as
of December 31, 1993. This consolidated financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this consolidated financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statement is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated statement of financial condition. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, such consolidated statement of financial condition
presents fairly, in all material respects, the financial position of
Prudential Mutual Fund Management, Inc. and subsidiaries at December 31,
1993 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
New York, New York
January 26, 1994
A-5
<PAGE>
Exhibit B
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Greg A. Smith Asset Management Corporation
We have audited the accompanying statement of financial condition of
Greg A. Smith Asset Management Corporation as of December 31, 1993. The
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial
condition is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
statement of financial condition. An audit also includes assessing the
accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the financial position of Greg
A. Smith Asset Management Corporation at December 31, 1993, in conformity
with generally accepted accounting principles.
NOBLE, SPEER & FULVIO
New York, New York
February 16, 1994
B-1
<PAGE>
GREG A. SMITH ASSET MANAGEMENT CORPORATION
STATEMENT OF FINANICAL CONDITION
DECEMBER 31, 1993
ASSETS
Cash .......................................................... $121,700
--------
Mutual Fund Fees Receivable (Note 1) .......................... 64,550
Equipment (Net of Depreciation) (Note 2) ...................... 1,422
Organization Cost-Less Amortization (Note 2) .................. 10,236
TOTAL ASSETS ............................................. $197,908
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Taxes Payable (Note 3) ...................................... 738
Accrued Expenses Payable .................................... 7,558
--------
Total Liabilities ........................................ 8,296
Stockholders' Equity:
Common Stock, 100 Shares Issued, 1000
Authorized, .01 Par Value ........................ $ 1
Additional Paid-in Capital ......................... 9,999
Retained Earnings .................................. 179,612
--------
Total Stockholders' Equity ............................... 189,612
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................................... $197,908
========
See the accompanying Accountants' Report.
The accompanying notes are an integral part hereof.
B-2
<PAGE>
GREG A. SMITH ASSET MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 1993
NOTE 1-ORGANIZATION
Greg A. Smith Asset Management Corporation (the Company) was
incorporated in the State of Delaware on June 14, 1991, and was qualified
to do business in New York State on June 26, 1991.
The Company is registered as an investment advisor with the Securities
and Exchange Commission under the Investment Advisors Act of 1940.
As of August 1, 1991, the Company entered into a subadvisory agreement
with Prudential Mutual Fund Management, Inc. to provide investment
advisory services to Prudential Growth Fund, Inc.
NOTE 2-SIGNIFICANT ACCOUNTING POLICIES
Costs incurred in the organization of the Company have been capitalized
and are being amortized using the straight-line method over a period of
sixty months beginning with the commencement of operations of the Company.
Depreciation is provided for on an accelerated method, using an
estimated useful life of five years.
NOTE 3-INCOME TAXES
The Company and its shareholders have elected to be treated as an
S-Corporation for Federal and New York State purposes. As a result, the
Company is not subject to Federal income taxes. Accordingly the
shareholders report the Company's income or loss on their personal income
tax returns.
The Company reports its income for tax purposes on a cash basis.
Therefore, for New York City Corporation tax, the Company has a deferred
tax liability of $5,200 which results from timing differences.
See the accompanying Accountant's Report.
B-3
<PAGE>
Exhibit C
FORM OF AMENDMENT TO ARTICLES OF INCORPORATION
Article V, Section 1 of the Fund's Articles of Incorporation are
proposed to be amended and restated as follows:
Article V
COMMON STOCK
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is 500 million shares of the par
value of $.01 per share and of the aggregate par value of $5,000,000 to be
divided initially into three classes, consisting of 166,666,666 shares of
Class A Common Stock, 166,666,666 shares of Class B Common Stock and
166,666,668 of Class C Common Stock.
(a) Each share of Class A, Class B and Class C Common Stock of the
Corporation shall represent the same interest in the Corporation and
have identical voting, dividend, liquidation and other rights except
that (i) Expenses related to the distribution of each class of shares
shall be borne solely by such class; (ii) The bearing of such expenses
solely by shares of each class shall be appropriately reflected (in the
manner determined by the Board of Directors) in the net asset value,
dividends, distribution and liquidation rights of the shares of such
class; (iii) The Class A Common Stock shall be subject to a front-end
sales load and a Rule 12b-1 distribution fee as determined by the Board
of Directors from time to time; (iv) The Class B Common Stock shall be
subject to a contingent deferred sales charge and a Rule 12b-1
distribution fee as determined by the Board of Directors from time to
time; and (v) The Class C Common Stock shall not be subject to either
an initial or a contingent deferred sales charge but shall be subject
to a Rule 12b-1 distribution fee as determined by the Board of
Directors from time to time. All shares of each particular class shall
represent an equal proportionate interest in that class, and each share
of any particular class shall be equal to each other share of that
class.
(b) Each share of the Class B Common Stock of the Corporation shall
be converted automatically, and without any action or choice on the
part of the holder thereof, into shares (including fractions thereof)
of the Class A Common Stock of the Corporation (computed in the manner
hereinafter described), at the applicable net asset value of each
Class, at the time of the calculation of the net asset value of such
Class B Common Stock at such times, which may vary between shares
orginally issued for cash and shares purchased through the automatic
reinvestment of dividends and distributions with respect to Class B
Common Stock (each "Conversion Date"), determined by the Board of
Directors in accordance with applicable laws, rules, regulations and
interpretations of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. and pursuant to such
procedures as may be established from time to time by the Board of
Directors and disclosed in the Corporation's then current prospectus
for such Class A and Class B Common Stock.
(c) The number of shares of the Class A Common Stock of the
Corporation into which a share of the Class B Common Stock is converted
pursuant to Paragraph
C-1
<PAGE>
(l)(b) hereof shall equal the number (including for this purpose
fractions of a share) obtained by dividing the net asset value per
share of the Class B Common Stock for purposes of sales and redemptions
thereof at the time of the calculation of the net asset value on the
Conversion Date by the net asset value per share of the Class A Common
Stock for purposes of sales and redemptions thereof at the time of the
calculation of the net asset value on the Conversion Date.
(d) On the Conversion Date, the shares of the Class B Common Stock
of the Corporation converted into shares of the Class A Common Stock
will cease to accrue dividends and will no longer be outstanding and
the rights of the holders thereof will cease (except the right to
receive declared but unpaid dividends to the Conversion Date).
(e) The Board of Directors shall have full power and authority to
adopt such other terms and conditions concerning the conversion of
shares of the Class B Common Stock to shares of the Class A Common
Stock as they deem appropriate; provided such terms and conditions are
not inconsistent with the terms contained in this Section 1 and subject
to any restrictions or requirements under the Investment Company Act of
1940 and the rules, regulations and interpretations thereof promulgated
or issued by the Securities and Exchange Commission, any conditions or
limitations contained in an order issued by the Securities and Exchange
Commission applicable to the Corporation, or any restrictions or
requirements under the Internal Revenue Code of 1986, as amended, and
the rules, regulations and interpretations promulgated or issued
thereunder.
C-2
<PAGE>
Exhibit D
PRUDENTIAL GROWTH FUND, INC.
Distribution and Service Plan
(Class A Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section
26 of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (NASD) has been adopted by Prudential Growth Fund, Inc. (the
Fund) and by Prudential Mutual Fund Distributors, Inc., the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will employ the Distributor to
distribute Class A shares issued by the Fund (Class A shares). Under the
Distribution Agreement, the Distributor will be entitled to receive
payments from investors of front-end sales charges with respect to the sale
of Class A shares. Under the Plan, the Fund intends to pay to the
Distributor, as compensation for its services, a distribution and service
fee with respect to Class A shares.
A majority of the Board of Directors or Trustees of the Fund, including
a majority of those Directors or Trustees who are not "interested persons"
of the Fund (as defined in the Investment Company Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the Rule 12b-1 Directors or Trustees), have
determined by votes cast in person at a meeting called for the purpose of
voting on this Plan that there is a reasonable likelihood that adoption of
this Plan will benefit the Fund and its shareholders. Expenditures under
this Plan by the Fund for Distribution Activities (defined below) are
primarily intended to result in the sale of Class A shares of the Fund
within the meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the
Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor
and/or other qualified broker-dealers and their account executives to
provide distribution assistance to their customers who are investors in the
Fund, to defray the costs and expenses associated with the preparation,
printing and distribution of prospectuses and sales literature and other
promotional and distribution activities and to provide for the servicing
and maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class A shares of
the Fund and to service shareholder accounts using all of the facilities of
the distribution networks of
D-1
<PAGE>
Prudential Securities Incorporated (Prudential Securities) and Pruco
Securities Corporation (Prusec), including sales personnel and branch
office and central support systems, and also using such other qualified
broker-dealers and financial institutions as the Distributor may select.
Services provided and activities undertaken to distribute Class A shares
of the Fund are referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of
.25 of 1% per annum of the average daily net assets of the Class A shares
(service fee). The Fund shall calculate and accrue daily amounts payable
by the Class A shares of the Fund hereunder and shall pay such amounts
monthly or at such other intervals as the Board of Directors/Trustees may
determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services
a distribution fee, together with the service fee (described in Section 2
hereof), of .30 of 1% per annum of the average daily net assets of the
Class A shares of the Fund for the performance of Distribution Activities.
The Fund shall calculate and accrue daily amounts payable by the Class A
shares of the Fund hereunder and shall pay such amounts monthly or at such
other intervals as the Board of Directors/Trustees may determine. Amounts
payable under the Plan shall be subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice.
Amounts paid to the Distributor by the Class A shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any
other class of shares of the Fund except that distribution expenses
attributable to the Fund as a whole will be allocated to the Class A
shares according to the ratio of the sales of Class A shares to the total
sales of the Fund's shares over the Fund's fiscal year or such other
allocation method approved by the Board of Directors or Trustees. The
allocation of distribution expenses among classes will be subject to the
review of the Board of Directors or Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) amounts paid to Prudential Securities for performing services under
a selected dealer agreement between Prudential Securities and the
Distributor for sale of Class A shares of the Fund, including sales
commissions and trailer commissions paid to, or on account of,
account executives and indirect and overhead costs associated with
Distribution Activities, including central office and branch
expenses;
(b) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of
Class A shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with Distribution Activities;
D-2
<PAGE>
(c) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than
current shareholders of the Fund; and
(d) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class A
shares of the Fund.
4. Ouarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors or Trustees of the Fund for review, at least quarterly, a
written report specifying in reasonable detail the amounts expended for
Distribution Activities (including payment of the service fee) and the
purposes for which such expenditures were made in compliance with the
requirements of Rule 12b-1. The Distributor will provide to the Board of
Directors or Trustees of the Fund such additional information as the Board
or Trustees shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be undertaken
by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the
Fund of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to broker-dealers
and financial institutions which have selected dealer agreements with the
Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of
a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, the Plan shall, unless
earlier terminated in accordance with its terms, continue in full force
and effect thereafter for so long as such continuance is specifically
approved at least annually by a majority of the Board of Directors or
Trustees of the Fund and a majority of the Rule 12b-1 Directors or
Trustees by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors or Trustees, or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act)
of the Class A shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3
hereof so as to increase materially the amounts payable under this Plan
unless such amendment shall be approved by the vote of a majority of the
outstanding voting securities (as defined in the Investment Company
D-3
<PAGE>
Act) of the Class A shares of the Fund. All material amendments of the
Plan shall be approved by a majority of the Board of Directors or the
Trustees of the Fund and a majority of the Rule 12b-1 Directors or
Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.
8. Rule 12b-1 Directors or Trustees
While the Plan is in effect, the selection and nomination of the Rule
12b-1 Directors shall be committed to the discretion of the Rule 12b-1
Directors.
9. Records
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not
less than six years from the date of effectiveness of the Plan, such
agreements or reports, and for at least the first two years in an easily
accessible place.
Dated:
D-4
<PAGE>
Exhibit E
PRUDENTIAL GROWTH FUND
Distribution and Service Plan
(Class B Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below
which is designed to conform to the requirements of Rule 12b-1 under the
Investment Company Act of 1940 (the Investment Company Act) and Article
III, Section 26 of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (NASD) has been adopted by Prudential Growth
Fund (the Fund), and by Prudential Securities Incorporated (Prudential
Securities), the Fund's distributor (the Distributor).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will continue to employ the
Distributor to distribute Class B shares issued by the Fund (Class B
shares). Under the Distribution Agreement, the Distributor will be
entitled to receive payments from investors of contingent deferred sales
charges imposed with respect to certain repurchases and redemptions of
Class B shares. Under the Plan, the Fund wishes to pay to the Distributor,
as compensation for its services, a distribution and service fee with
respect to Class B shares.
A majority of the Board of Directors of the Fund, including a majority
who are not "interested persons" of the Fund (as defined in the Investment
Company Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the Rule 12b-1
Directors), determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders.
Expenditures under this Plan by the Fund for Distribution Activities
(defined below) are primarily intended to result in the sale of Class B
shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor
and/or other qualified broker-dealers and their account executives to
provide distribution assistance to their customers who are investors in
the Fund, to defray the costs and expenses associated with the
preparation, printing and distribution of prospectuses, sales literature
and other promotional and distribution activities and to provide for the
servicing and maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class B shares of
the Fund and to service shareholder accounts using all of the facilities
of the Prudential Securities distribution network, including sales
personnel, branch office and central support
E-1
<PAGE>
systems, and also using such other qualified broker-dealers and financial
institutions as the Distributor may select, including Pruco Securities
Corporation (Prusec). Services provided and activities undertaken to
distribute Class B shares of the Fund are referred to herein as
"Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of
.25 of 1% per annum of the average daily net assets of the Class B shares
(service fee). The Fund shall calculate and accrue daily amounts payable
by the Class B shares of the Fund hereunder and shall pay such amounts
monthly or at such other intervals as the Board of Directors may
determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services
a distribution fee of .75 of 1% per annum of the average daily net assets
of the Class B shares of the Fund for the performance of Distribution
Activities. The Fund shall calculate and accrue daily amounts payable by
the Class B shares of the Fund hereunder and shall pay such amounts
monthly or at such other intervals as the Board of Directors may
determine. Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
Amounts paid to the Distributor by the Class B shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any
other class of shares of the Fund except that distribution expenses
attributable to the Fund as a whole will be allocated to the Class B
shares according to the ratio of the sale of Class B shares to the total
sales of the Fund's shares over the Fund's fiscal year or such other
allocation method approved by the Board of Directors or Trustees. The
allocation of distribution expenses among classes will be subject to the
review of the Board of Directors or Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of
Class B shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than
current shareholders of the Fund; and
E-2
<PAGE>
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prusec) which have entered into selected dealer agreements
with the Distributor with respect to Class B shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution
Activities (including payment of the service fee) and the purposes for
which such expenditures were made in compliance with the requirements of
Rule 12b-1. The Distributor will provide to the Board of Directors of the
Fund such additional information as they shall from time to time
reasonably request, including information about Distribution Activities
undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund of the
commissions and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and other
financial institutions which have selected dealer agreements with the
Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of
a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, the Plan shall, unless
earlier terminated in accordance with its terms, continue in full force
and effect thereafter for so long as such continuance is specifically
approved at least annually by a majority of the Board of Directors of the
Fund and a majority of the Rule 12b-1 Directors by votes cast in person at
a meeting called for the purpose of voting on the continuation of the
Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class B
shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof
so as to increase materially the amounts payable under this Plan unless
such amendment shall be approved by the vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act) of
the Class B shares of the Fund. All material amendments of the Plan shall
be approved by a majority of the Board of Directors of the Fund and a
majority of the Rule 12b-1 Directors by votes cast in person at a meeting
called for the purpose of voting on the Plan.
E-3
<PAGE>
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of the
Directors shall be committed to the discretion of the Rule 12b-1
Directors.
9. Records
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not
less than six years from the date of effectiveness of the Plan, such
agreements or reports, and for at least the first two years in an easily
accessible place.
Dated:
E-4
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY CARD PROMPTLY
USING THE ENCLOSED
ENVELOPE.
YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY
PROXY (Class A) This Proxy is solicited on behalf of the Board of Directors.
PRUDENTIAL GROWTH FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
The undersigned hereby appoints Susan C.
Cote, S. Jane Rose and Deborah A. Docs as
Proxies, each with the power of substitution,
and hereby authorizes each of them to
represent and to vote, as designated below,
all of the shares of Class A Common Stock of
Prudential Growth Fund, Inc. held of record by
the undersigned on , 1994 at the
Special Meeting of Shareholders to be held on
, 1994, or any adjournment thereof.
Your Account No.:
Your voting shares are:
This proxy when properly executed will be
voted in the manner directed herein by the
undersigned shareholder(s). If no direction
is made, this proxy will be voted for all the
proposals listed below.
1-Election of Directors
[X] [X] [X]
Approve Withhold Withhold
All All Those Listed
Nominees Nominees On Back
To withhold authority for any individual
nominee, please write name on back
of form.
John C. Davis
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Robert J. Schultz
Gerald A. Stahl
Stephen Stoneburn
Robert H. Wellington
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY CARD PROMPTLY
USING THE ENCLOSED
ENVELOPE.
For Against Abstain
2. To approve an amendment of the Fund's Articles 2 [X] [X] [X]
of Incorporation to permit a conversion feature
for Class B Shares.
3. To approve an amended and restated Class A 3 [X] [X] [X]
Distribution and Service Plan.
4. Not applicable to Class A shareholders. 4 [X] [X] [X]
5. To approve an amendment of the Fund's Articles 5 [X] [X] [X]
of Incorporation to change the name of the Fund
to "Prudential Strategist Fund, Inc."
6. To ratify the selection by the Board of 6 [X] [X] [X]
Directors of Price Waterhouse as independent
accountants for the fiscal year ending February
28, 1995.
7. To transact such other business as may 7 [X] [X] [X]
properly come before the Meeting or any
adjournment thereof.
Only shares of Common Stock of the Fund of record at the
close of business of , 1994 are entitled to
notice of and to vote at this Meeting or any adjournment
thereof.
IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
- ----------------------------------------------------------
Signature Date
- ----------------------------------------------------------
Signature (Joint Ownership)
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY CARD PROMPTLY
USING THE ENCLOSED
ENVELOPE.
YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY
PROXY (Class B) This Proxy is solicited on behalf of the Board of Directors.
PRUDENTIAL GROWTH FUND INC.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
The undersigned hereby appoints Susan C.
Cote, S. Jane Rose and Deborah A. Docs as
Proxies, each with the power of substitution,
and hereby authorizes each of them to
represent and to vote, as designated below,
all of the shares of Class B Common Stock of
Prudential Growth Fund, Inc. held of record by
the undersigned on , 1994 at the
Special Meeting of Shareholders to be held on
, 1994, or any adjournment thereof.
Your Account No.:
Your voting shares are:
This proxy when properly executed will be
voted in the manner directed herein by the
undersigned shareholder(s). If no direction
is made, this proxy will be voted for all the
proposals listed below.
1-Election of Directors
[X] [X] [X]
Approve Withhold Withhold
All All Those Listed
Nominees Nominees On Back
To withhold authority for any individual
nominee, please write name on back
of form.
John C. Davis
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Robert J. Schultz
Gerald A. Stahl
Stephen Stoneburn
Robert H. Wellington
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY CARD PROMPTLY
USING THE ENCLOSED
ENVELOPE.
For Against Abstain
2. To approve an amendment of the Fund's Articles 2 [X] [X] [X]
of Incorporation to permit a conversion feature
for Class B Shares.
3. To approve an amended and restated Class A 3 [X] [X] [X]
Distribution and Service Plan.
4. To approve an amended and restated Class B 4 [X] [X] [X]
Distribution and Service Plan.
5. To approve an amendment of the Fund's Articles 5 [X] [X] [X]
of Incorporation to change the name of the Fund
to "Prudential Strategist Fund, Inc."
6. To ratify the selection by the Board of 6 [X] [X] [X]
Directors of Price Waterhouse as independent
accountants for the fiscal year ending February
28, 1995.
7. To transact such other business as may 7 [X] [X] [X]
properly come before the Meeting or any
adjournment thereof.
Only shares of Common Stock of the Fund of record at the
close of business of , 1994 are entitled to
notice of and to vote at this Meeting or any adjournment
thereof.
IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
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Signature Date
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Signature (Joint Ownership)
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
