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:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to \P 240.14a-11(c) or \P 240.14a-12
PRUDENTIAL GROWTH FUND, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PRUDENTIAL GROWTH FUND, INC.
- -------------------------------------------------------------------------------
(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.
<PAGE>
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
June 23, 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 March 31, 1994 are entitled to notice of and to vote at this
Meeting or any adjournment thereof.
S. Jane Rose
Secretary
Dated: April 18, 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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<PAGE>
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 June 23, 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 March 31, 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 13,593,205 shares of
Common Stock outstanding and entitled to vote, consisting of 281,512 Class
A shares and 13,311,693 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 April 22, 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 March 31, 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 A. 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 Messrs.
Redeker and 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.
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
2
<PAGE>
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 March 31, 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. McQuade (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
3
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Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund March 31, 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), Director of Prudential Director 1,000
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.,
4
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Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund March 31, 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.,
5
<PAGE>
Shares of
Name, age, business Common Stock
experience during the past Position owned at
five years and directorships with Fund March 31, 1994
---------------------------- --------- ----------------
Prudential Intermediate Global Income Fund, Inc.
and Prudential Special Money Market Fund.
Robert H. Wellington (71), Retired (since January Director -0-
1994); formerly Chairman and Chief Executive
Officer, AMSTED Industries, Incorporated
(diversified manufacturer of railroad,
construction and industrial products) (December
1988-December 1993); Director of Prudential
Growth Fund, Inc., Prudential Intermediate
Global Income Fund, Inc. and Prudential
MoneyMart Assets.
- ------------------
*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
3,792 shares of the Fund at March 31, 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,
1994, the Fund paid Directors' fees of approximately $48,750 and travel and
incidental expenses of approximately $6,300.
There were four regular meetings of the Fund's Board of Directors held
during the fiscal year ended February 28, 1994. 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, 1994. The Audit Committee makes recommendations to
the full Board with respect to the engagement of independent accountants
and reviews 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.
6
<PAGE>
The Nominating Committee met twice during the fiscal year ended
February 28, 1994. The Nominating Committee does not consider nominees
recommended by shareholders to fill vacancies on the Board.
During the fiscal year ended February 28, 1994, Richard A. Redeker
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. Cote, 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 a
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 and a Senior Vice President of Prudential Securities. He is also a
Vice President and Director (since May 1989) of the Asia Pacific Fund, Inc.
Ms. Cote is 39 years old and is a Senior Vice President (since 1989) of
PMF and a Senior Vice President of Prudential Securities (since January
1992). Prior thereto, she was a Vice President (January 1986-December 1991)
of Prudential Securities. Ms. Rose is 48 years old and is a 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 a First Vice President (June 1987-December 1990) of
PMF and a Vice President and Associate General Counsel of Prudential
Securities. Ms. Docs is 36 years old and is a Vice President and Associate
General Counsel (since January 1993) of PMF and a 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.
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.
7
<PAGE>
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, 1994, PMF received a management fee of $1,388,821, of which
$833,292 was paid to Greg A. Smith Asset Management Corporation.
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
8
<PAGE>
payments were required during the fiscal year ended February 28, 1994.
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
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.
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
9
<PAGE>
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
- ---------------- ----------------- ---------------------
Brendan D. Boyle ........ Executive Vice Executive Vice President
President and and Director of
Director of Marketing, PMF
Marketing
John D. Brookmeyer, Jr. . Director Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, Prudential
Investment Corporation
(PIC)
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.
10
<PAGE>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
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; President,
Newark, NJ 07102 Director and Chief
Investment Officer, PIC
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
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
11
<PAGE>
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 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, 1994, PMF paid Subadvisory fees
of $833,292 to the Subadviser.
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
12
<PAGE>
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 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.
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-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 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.
Mr. Smith is recognized in the financial community as a leading asset
allocator. Since 1983, he has been named by Institutional Investor Magazine
as a member of its All-America Research Team. He is also responsible for
Prudential Securities receiving the top ranking for asset allocation among
twelve brokerage firms for the five-year period ended March 31, 1994 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 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.
13
<PAGE>
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, 1994, PMFD received payments of
$8,690 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 February 28, 1994, PMFD also received $44,200 in initial
sales charges.
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, 1994, Prudential Securities
received $2,180,398 from the Fund under the Class B Plan and spent
approximately $1,037,200 in distributing the Fund's Class B shares. It is
estimated that of the latter amount approximately 1.0% ($10,600) was spent
on printing and mailing of prospectuses to other than current shareholders
during the fiscal year ended February 28, 1994; 13.4% ($138,800) 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,
14
<PAGE>
1994; 4.8% ($49,900) in interest and/or carrying charges during the
fiscal year ended February 28, 1994 ; 80.8% ($837,900) during the fiscal
year ended February 28, 1994, on the aggregate of (i) payments of
commissions to financial advisers (49.5% or $513,700) during the fiscal year
ended February 28, 1994 and (ii) an allocation of overhead and other branch
office distribution-related expenses ($324,200 or 31.3%). 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, 1994, Prudential Securities received
approximately $249,900 in contingent deferred sales charges. As of
February 28, 1994, the aggregate amounts of unreimbursed distribution
expenses for the Fund's Class B shares were approximately $757,900.
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 Rule 12b-1
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.
15
<PAGE>
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 Securities (or any affiliate)
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 affiliate) acting as market maker, and it will not execute a
negotiated trade with Prudential Securities if execution involves
Prudential Securities (or any affiliate) 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 SEC. 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.
16
<PAGE>
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 Directors who are not interested persons of the
Fund, 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.
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, 1994.
Year ended
February 28, 1994
-----------------
Total brokerage commissions paid by
the Fund ................................... $916,600
Total brokerage commissions paid to
Prudential Securities ...................... 31,000
Percentage of total brokerage
commissions paid to Prudential
Securities ................................. 3.4%
The Fund effected approximately 3.8% of the total dollar amount of its
transactions involving the payment of commissions to Prudential Securities
during the fiscal year ended February 28, 1994. Of the total brokerage
commissions paid during the fiscal year ended February 28, 1994, $885,600
(or 96.6%) were paid to firms which provided research, statistical or other
services to the Subadviser. The Subadviser has not separately identified
the portion of such brokerage commissions which relates to the provision of
such research, statistical or other services.
17
<PAGE>
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 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. It is anticipated that Class C shares will be offered
without an initial 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 and, subject to approval by the Board of
Directors, a 1% CDSC on certain redemptions made within one year of
purchase. 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),
18
<PAGE>
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 C.
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 purchase. 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 to (b) the total amount paid for all Class B
shares purchased and then held in a shareholder's account (ii) multiplied
by the total number of Class B shares then held in such 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 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 (47.62%) multiplied by
200 shares equals 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
19
<PAGE>
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
shares 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.
The Fund has obtained an opinion of counsel to the effect that the
conversion of Class B shares into Class A shares does not constitute a
taxable event for U.S. income tax purposes. However, such opinion is not
binding on the Internal Revenue Service.
If approved by shareholders, the conversion feature may be subject to
the continuing availability of opinions of counsel or rulings of the
Internal Revenue Service (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. The
conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended,
Class B shares of the Fund will continue to be subject, possibly
indefinitely, to their higher annual distribution and service fee.
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 will continue to
be subject, possibly indefinitely, to their higher annual distribution and
service fee.
THE BOARD OF DIRECTORS 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
20
<PAGE>
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 above), 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 benefit the Fund's Class A shareholders. A copy of the Proposed
Class A Plan is attached hereto as Exhibit D.
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
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<PAGE>
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 Fund. For each of the fiscal years ended February 28/29,
1992, 1993 and 1994, PMFD received payment of $4,252, $8,353 and $8,690,
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 .20 of 1% for the fiscal year ended
February 28, 1992 and to .25 of 1% for the fiscal years ended February 28,
1993 and 1994, 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%.
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.
22
<PAGE>
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.
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 voting 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 voting 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.
23
<PAGE>
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 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 Activities 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
24
<PAGE>
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 the
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 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
25
<PAGE>
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, 1992, 1993 and 1994,
Prudential Securities received $2,702,106, $2,461,945 and $2,180,300,
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 $1,660,700, $1,065,400 and
$1,037,200, 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 28/29, 1992, 1993 and 1994.
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 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 for 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.
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.
26
<PAGE>
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 as 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 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 and the Fund's portfolio manager, Greg A.Smith. See
"Management of the Fund--the Subadviser" above.
The Fund seeks a high total return by allocating its assets among
equity securities, fixed-income securities and cash based on the
Subadviser's strategic evaluation of current market and economic
conditions.
The Board of Director believes that adoption of Proposal No. 5 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
27
<PAGE>
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.
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 and
presented at the 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: April 18, 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.
28
<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 is
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 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. 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 pursuant to which
the Fund will employ the Distributor to distribute Class A shares issued by
the Fund (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 of the Fund, including a majority
of those Directors 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), 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 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. The allocation of distribution
expenses among classes will be subject to the review of the Board of
Directors.
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;
(c) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund
prospectuses, statements
D-2
<PAGE>
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 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 the Board 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 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 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 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 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 of the Fund and a
majority of the Rule
D-3
<PAGE>
12b-1 Directors by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Rule 12b-1 Directors
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 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 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. The allocation of distribution
expenses among classes will be subject to the review of the Board of
Directors.
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 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:
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 March 31, 1994 at the
Special Meeting of Shareholders to be held on
June 23, 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 March 31, 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 March 31, 1994 at the
Special Meeting of Shareholders to be held on
June 23, 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 March 31, 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.
