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002 B000000 NEW YORK
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011 C020001 NY
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<PAGE> PAGE 2
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011 C020002 NY
011 C030002 10292
012 A000001 PRUDENTIAL MUTUAL FUND SERVICES, INC
012 B000001 84-4110019
012 C010001 NEW BRUNSWICK
012 C020001 NJ
012 C030001 08906
013 A000001 DELOITTE & TOUCHE LLP
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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SIGNATURE SUSAN C. COTE'
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717819
<NAME> PRUDENTIAL GOVERNMENT INCOME FUND
<SERIES>
<NUMBER> 001
<NAME> PRUDENTIAL GOVERNMENT INCOME FUND (CLASS A)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 1,635,931,425
<INVESTMENTS-AT-VALUE> 1,635,135,108
<RECEIVABLES> 112,162,838
<ASSETS-OTHER> 180,382
<OTHER-ITEMS-ASSETS> 0
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<TOTAL-LIABILITIES> 170,397,401
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,751,208,807
<SHARES-COMMON-STOCK> 183,520,918
<SHARES-COMMON-PRIOR> 246,970,288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (173,331,563)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (796,317)
<NET-ASSETS> 1,577,080,927
<DIVIDEND-INCOME> 143,837,354
<INTEREST-INCOME> 0
<OTHER-INCOME> 71,213
<EXPENSES-NET> 29,685,017
<NET-INVESTMENT-INCOME> 114,223,550
<REALIZED-GAINS-CURRENT> (93,893,429)
<APPREC-INCREASE-CURRENT> (39,470,823)
<NET-CHANGE-FROM-OPS> (19,140,702)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (114,223,550)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79,769,541
<NUMBER-OF-SHARES-REDEEMED> (687,645,132)
<SHARES-REINVESTED> 64,092,911
<NET-CHANGE-IN-ASSETS> (677,146,932)
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717819
<NAME> PRUDENTIAL GOVERNMENT INCOME FUND
<SERIES>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 1,635,931,425
<INVESTMENTS-AT-VALUE> 1,635,135,108
<RECEIVABLES> 112,162,838
<ASSETS-OTHER> 180,382
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<SHARES-COMMON-PRIOR> 246,970,288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (173,331,563)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 1,577,080,927
<DIVIDEND-INCOME> 143,837,354
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<OTHER-INCOME> 71,213
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<NET-CHANGE-FROM-OPS> (19,140,702)
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<DISTRIBUTIONS-OF-INCOME> (114,223,550)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79,769,541
<NUMBER-OF-SHARES-REDEEMED> (687,645,132)
<SHARES-REINVESTED> 64,092,911
<NET-CHANGE-IN-ASSETS> (677,146,932)
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<ACCUMULATED-GAINS-PRIOR> (79,438,134)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> (0.53)
<PER-SHARE-DIVIDEND> (0.53)
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<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.60
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717819
<NAME> PRUDENTIAL GOVERNMENT INCOME FUND
<SERIES>
<NUMBER> 003
<NAME> PRUDENTIAL GOVERNMENT INCOME FUND (CLASS C)
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 1,635,931,425
<INVESTMENTS-AT-VALUE> 1,635,135,108
<RECEIVABLES> 112,162,838
<ASSETS-OTHER> 180,382
<OTHER-ITEMS-ASSETS> 0
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<TOTAL-LIABILITIES> 170,397,401
<SENIOR-EQUITY> 0
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<SHARES-COMMON-PRIOR> 246,970,288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (173,331,563)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 1,577,080,927
<DIVIDEND-INCOME> 143,837,354
<INTEREST-INCOME> 0
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<NET-INVESTMENT-INCOME> 114,223,550
<REALIZED-GAINS-CURRENT> (93,893,429)
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<DISTRIBUTIONS-OF-GAINS> 0
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<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (79,438,134)
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29,685,017
<AVERAGE-NET-ASSETS> 111,000
<PER-SHARE-NAV-BEGIN> 8.69
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.09)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
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<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
For period ending (a) February 28, 1995
File number (c) 811-3712
SUB-ITEM 77C
Submission of Matters to a Vote of Security Holders
A Special Meeting of Shareholders was called for June 23,
1994, adjourned and held on July 19, 1994. At such meeting the
shareholders elected the entire slate of directors, ratified the
selection of independent accountants and voted on the following
proposals:
(a) approval or disapproval of an amendment of the Fund's
Articles of Incorporation to permit a conversion feature for
Class B Shares.
Affirmative Negative
votes cast votes cast
121,855,402 3,944,814
(b) approval or disapproval of an amended and restated Class A
Distribution and Service Plan.
Affirmative Negative
votes cast votes cast
Class A 3,457,200 120,882
Class B 166,440,048 4,423,665
(c) approval or disapproval of an amended and restated Class B
Distribution and Service Plan.
Affirmative Negative
votes cast votes cast
Class B 116,750,440 4,530,214
(d) approval of an amendment of the Fund's investment
restrictions to clarify that collateral arrangements with
respect to interest rate swap transactions, reverse
repurchase agreement and dollar roll transactions are not
deemed to be the issuance of a senior security or the pledge
of assets.
Affirmative Negative
votes cast votes cast
116,766,475 6,111,682
(e) approval of an elimination of the Fund's investment
restrictions regarding restricted and illiquid securities.
Affirmative Negative
votes cast votes cast
114,525,637 8,866,939
(e) approval for the elimination of the Fund's investment
restriction limiting the Fund's ability to purchase any
security if the Fund would hold more than 10% of any class
of securities of an issuer.
Affirmative Negative
votes cast votes cast
115,167,384 8,867,592
(f) approval of the elimination of the Fund's investment
restriction limiting the Fund's ability to invest in
securities of any issuer in which officers and Directors of
the Fund or officers and directors of its investment adviser
own more than a specified interest.
Affirmative Negative
votes cast votes cast
112,914,490 11,153,783
(g) approval or disapproval of an amendment of the Fund's
Articles
of Incorporation to change the name of the Fund to
"Prudential
Government Income Fund, Inc."
Affirmative Negative
votes cast votes cast
122,577,841 3,013,482
(h) ratified the selection by the Board of Directors of Deloitte
& Touche as independent accountants for the fiscal year ending
February 28, 1995.
Affirmative Negative
votes cast votes cast
123,786,844 2,233,930
(i) approval to transact such other business as may properly
come before the Meeting or any adjournments thereof.
Affirmative Negative
votes cast votes cast
122,724,409 2,345,673
For the fiscal year ended (a) 2/28/95
File number (c) 811-3712
SUB-ITEM 77D
Policies With Respect to Security Investments
At a meeting of the Board of Directors held on April 13,
1995, the Directors approved revised procedures for the valuation
of the Fund's portfolio securities. The procedures as revised
primarily change the method of pricing options on stocks and
stock indices so that such securities will be priced at the mean
between the most recently quoted bid and asked prices on the
relevant exchange rather and not at the last sales price at the
close of trading on the relevant exchange.
For the fiscal year ended (a) 2/28/95
File number (c) 811-3712
SUB-ITEM 77I
Terms of New or Amended Securities
The Board of Directors approved the offering of a new class
of shares, to be designated Class C shares, which was offered
simultaneously with the offering of Class B shares with the
proposed conversion feature as of August 1, 1994. [See
Submission of Matters to a Vote of Security Holders, Item 77C]
Sub-Item 77Q1(a)
ARTICLES OF AMENDMENT
OF
PRUDENTIAL-BACHE GOVERNMENT PLUS FUND, INC.
PRUDENTIAL-BACHE GOVERNMENT PLUS FUND, INC., a Maryland
Corporation having its principal offices in Baltimore, Maryland
and New York, New York, (the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland
that:
FIRST: Article II of the Corporation's Charter is hereby
amended in its entirety to read as follows:
The name of the corporation (hereinafter called the
"Corporation") is Prudential Government Income Fund, Inc.
SECOND: Article V, Section 1 of the Corporation's Charter
is hereby amended in its entirety to read 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
2,000,000,000 shares of the par value of $.01 per share and of
the aggregate par value of $20,000,000 to be divided initially
into three classes, consisting of 666,666,666 2/3 shares of Class
A Common Stock, 666,666,666 2/3 shares of Class B Common Stock
and 666,666,666 2/3 shares 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 per share 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 originally 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 (1)(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 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 the 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.
THIRD: The foregoing amendments to the Charter of the
Corporation do not increase the authorized stock of the
Corporation.
FOURTH: The foregoing amendments to the Charter of the
Corporation have been advised by the Board of Directors and
approved by a majority of the shareholders of the Corporation.
FIFTH: The foregoing amendments to the Charter of the
Corporation shall become effective at 9:00 a.m. on August 1,
1994.
IN WITNESS WHEREOF, PRUDENTIAL-BACHE GOVERNMENT PLUS FUND,
INC., has caused these presents to be signed in its name and on
its behalf by its President and attested by its Secretary on July
27, 1994.
PRUDENTIAL-BACHE GOVERNMENT PLUS FUND, INC.
By: /s/ Lawrence C. McQuade _
Lawrence C. McQuade
President
Attest: /s/ S. Jane Rose _
S. Jane Rose
Secretary
The undersigned, President of PRUDENTIAL-BACHE GOVERNMENT
PLUS FUND, INC., who executed on behalf of said Corporation the
foregoing amendments to the Charter of which this certificate is
made a part, hereby acknowledges in the name and on behalf of
said Corporation, the foregoing amendments to the Charter to be
the corporate act of said Corporation and further certifies that,
to the best of his knowledge, information and belief, the matters
and facts set forth therein with respect to the approval thereof
are
true in all material respects, under the penalties of perjury.
/s/ Lawrence C. McQuade
Lawrence C. McQuade
GPF_NSAR.D&T - Windows - 05/01/95
PRINT ON COMPAQ
Board of Directors
Prudential Government Income Fund, Inc.
In planning and performing our audit of the financial statements of
Prudential Government Income Fund, Inc. ("Fund") for the year ended
February 28, 1995, we considered its internal control structure, including
procedures for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial
statements and to comply with the requirements of Form N-SAR, not to
provide assurance on the internal control structure.
The management of the Fund is responsible for establishing and maintaining
an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in
conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that
it may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a condition in
which the design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the internal
control structure, including procedures for safeguarding securities, that
we consider to be material weaknesses as defined above as of February 28,
1995.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission.
April 13, 1995
Board of Directors or Trustees of:
Prudential Adjustable Rate Securities Fund
The BlackRock Government Income Trust
Prudential California Municipal Fund
Prudential Equity Fund
Prudential Equity Income Fund
Prudential FlexiFund (2 Portfolios)
Prudential GNMA Fund
Prudential Global Fund
Prudential Global Genesis Fund
Prudential Global Natural Resources Fund
Prudential Government Plus Fund
Prudential Growth Fund
Prudential Growth Opportunity
Prudential High Yield Fund
Prudential IncomeVertible Fund
Prudential Intermediate Global Income Fund
Prudential Multi-Sector Fund
Prudential Municipal Bond Fund (3 Portfolios)
Prudential Municipal Series Fund (11 Portfolios)
Prudential National Municipals Fund
Prudential Pacific Growth Fund
Prudential Short-Term Global Income Fund (2 Portfolios)
Prudential Strategic Income Fund
Prudential Structured Maturity Fund
Prudential U.S. Government Fund
Prudential Utility Fund
Global Utility Fund, Inc.
Nicholas-Appelgate Fund, Inc.
We have examined the accompanying description of the Prudential Dual Pricing
Worksheet (the "Worksheet") application of State Street Bank and Trust Company
("State Street"), custodian and recordkeeper for the Prudential Mutual Funds
(the "Funds"). Our examination included procedures to obtain reasonable
assurance about whether (1) the accompanying description presents fairly, in
all material respects, the aspects of State Street's policies and procedures
that may be relevant to a Fund's internal control structure relating to the
Worksheet, (2) the control structure policies and procedures included in the
description were suitably designed to achieve the control objectives specified
in the description, if those policies and procedures were complied with
satisfactorily, and (3) such policies and procedures had been placed in
operation as of June 30, 1993. The control objectives were specified by
Prudential Mutual Fund Management. Our examination was performed in accordance
with standards established by the American Institute of Certified Public
Accountants and included those procedures we considered necessary in the
circumstances to obtain a reasonable basis for rendering our opinion.
In our opinion, the accompanying description of the aforementioned application
presents fairly, in all material respects, the relevant aspects of State
Street's policies and procedures that had been placed in operation as of June
30, 1993. Also, in our opinion, the policies and procedures, as described, are
suitably designed to provide reasonable assurance that the specified control
objectives would be achieved if the described policies and procedures were
complied with satisfactorily.
In addition to the procedures we considered necessary to render our opinion as
expressed in the previous paragraph, we applied tests to specific policies and
procedures, listed in Section I, to obtain evidence about their effectiveness
in meeting the control objectives, described in Section I during the period
from July 1, 1992 to June 30, 1993. The nature, timing, extent, and results of
the tests are listed in Section II. In our opinion the policies and procedures
that were tested, as described in Section II, were operating with sufficient
effectiveness to provide reasonable, but not absolute, assurance that the
control objectives specified in Section I were achieved during the period from
July 1, 1992 to June 30, 1993.
The relative effectiveness and significance of specific policies and procedures
at State Street, and their effect on assessments of control risk on the Funds
are dependent on their interaction with the policies, procedures, and other
factors present at individual Funds. We have performed no procedures to
evaluate the effectiveness of policies and procedures at individual Funds in
connection with this report.
The description of policies and procedures at State Street is as of June 30,
1993, and information about tests of the operating effectiveness of specified
policies and procedures covers the period from July 1, 1992 to June 30, 1993.
Any projection of such information to the future is subject to the risk that,
because of change, the description may no longer portray the system in
existence. The potential effectiveness of specified policies and procedures at
State Street is subject to inherent limitations and, accordingly, errors or
irregularities may occur and not be detected. Furthermore, the projection of
any conclusions, based on our findings, to future periods is subject to the
risk that changes may alter the validity of such conclusions.
This report is intended solely for use by the management and Boards of
Directors/Trustees of the Funds, the independent auditors of the Funds and the
Securities and Exchange Commission.
DELOITTE & TOUCHE
August 13, 1993
SECTION I
Policies and Procedures Placed in Operation
Prudential Dual Pricing Worksheet
Effective January 22, 1990, the Funds, offered by Prudential Securities
Incorporated (formerly Prudential-Bache Securities, Inc.) and Prudential Mutual
Fund Distributors, Inc., adopted a dual pricing system. The dual pricing
system consists of two classes of shares (Class A and Class B) for the Funds.
The Class A shares are subject to a front-end sales load and the Class B shares
are subject to a contingent deferred sales charge. The two classes of shares
represent interests in the same portfolio of investments of the respective Fund
and are identical in all respects, except that each class is subject to
different distribution expenses and has exclusive voting rights with respect to
the Rule 12b-1 distribution plan pursuant to which such distribution expenses
are paid.
In order to allocate income and expenses between the two classes of shares,
State Street Bank and Trust Company (the Funds' custodian and recordkeeper)
utilizes the Prudential Dual Pricing Worksheet (the "Worksheet") (see Exhibit
I). The Worksheet is a manual supplementary application that extracts relevant
data from the Funds' primary accounting system, allocates income and expenses
between the two classes of shares and computes the daily net asset value and,
if applicable, the dividend/distribution for each class of shares. Internal
accounting controls that are relevant to the Fund can be divided into two
components - controls related to the mutual fund accounting system resident at
State Street Bank and Trust Company (the "primary accounting system") and
controls related to the Worksheet.
The specific control objectives and policies and procedures relating to the
Worksheet are described on pages 4 and 5. A description of the tests of the
policies and procedures designed to obtain evidence about the operating
effectiveness of those policies and procedures in achieving the specific
control objectives is included in Section II.
Control Objectives and Policies and Procedures
Prudential Dual Pricing Worksheet
The Worksheet is a supplementary manual application to the Funds' primary
accounting system. Certain data is extracted from the primary accounting
system to allocate income and expenses and to calculate the daily net asset
value and, if applicable, dividends/distributions for each class of shares.
The primary accounting system includes the details of transactions in
accordance with the Investment Company Act of 1940, as amended.
The following represents the internal accounting control objectives and
policies and procedures for the allocation of income and expenses and the
computation of the net asset value and, if applicable, the
dividend/distribution for each class of shares utilizing the Worksheet. It
does not cover the internal accounting control policies and procedures
surrounding the processing of information into the Funds' primary accounting
system.
CONTROL OBJECTIVES CONTROL POLICIES AND PROCEDURES
A. Capital share activity 1. Daily, the transfer agent forwards
as reported by the Fund's reports of capital share capital share
transfer agent is recorded activity for each class which includes
for each class in an accurate a summary of subscriptions,
and timely manner by the fund. redemptions, exchanges and other
information (the "Supersheet"). The
opening day's balance for shares
outstanding and for shares eligible for
dividends are recorded on the
Worksheet. shares eligible for
dividends are recorded on
2. Estimated interim share activity
for the current day not recorded in the
Supersheet is received via telefax from
the transfer agent and is recorded for
each class on the Worksheet.
B. Net Asset Value ("NAV") 1. The prior days ending NAV per
and, if applicable, the share (unrounded) for each class is
dividend/distribution for agreed to the prior day's Worksheet.
each class are accurately
computed on a daily basis. 2. The daily net capital stock
activity for each class for the current
day is agreed to the Supersheet as
described in Control Procedures A.1 and
2., above.
3. Percentage Assets by Class and
Percentage Dividend Assets by Class are
calculated for each class based upon
information from the prior day
Worksheet and information recorded on
the Supersheet.
CONTROL OBJECTIVES CONTROL POLICIES AND PROCEDURES
4. Allocate investment income between
classes based on the appropriate asset
allocation percentage for each class.
5. Agree composite dividend income,
interest income, income amortization,
income equalization, management fees,
other expenses, realized gains and
losses, and unrealized
appreciation/depreciation to the
primary accounting system of the Fund.
6. Allocate expenses between classes
as follows:
a. Expenses directly
attributable to each class (12b-1
distribution expenses) are calculated
and recorded to that class.
b. Expenses attributable to both
classes are allocated in accordance
with the appropriate asset allocation
percentage for each class.
7. Allocate realized and
unrealized gains and losses between the
classes in accordance with the
appropriate asset allocation percentage
of each class.
8. Record dividends/distributions to
shareholders of each class in the
primary accounting system.
9. Aggregate the net assets for each
class and agree to the total net assets
per the primary accounting system.
10. For each class, reconcile the
current day's NAV and, if applicable,
the dividend/distribution to the
previous day's NAV and
dividend/distribution for each class.
11. The above procedures are reviewed
by the Fund supervisor or manager.
SECTION II
Tests of Operating Effectiveness
Prudential Dual Pricing Worksheet
July 1, 1992 to June 30, 1993
We reviewed the methodology and procedures for calculating the daily net asset
value and, if applicable, the dividends/distributions of the two classes of
shares and the allocation of income and expenses between the two classes of
shares.
The following are the detailed procedures which we performed with respect to
the Worksheet. These procedures were performed for selected days encompassing
all Funds subject to dual pricing during the year ended June 30, 1993, which we
believe is a representative sample, to test compliance with the control
policies and procedures as described in Section I.
Prudential Mutual Fund Management, Inc. is the manager of the Funds and has
represented to us that adequate facilities are in place to ensure
implementation of the methodology and procedures for calculating the net asset
value and dividends/distributions of the two classes of shares and the
allocation of income and expenses between the two classes of shares. Based on
our review of the description of the policies and procedures of the Worksheet,
as described in Section I, and performance of tests of operating effectiveness
as described in Section II, we concur with such representation.
Agreed "Prior Day NAV Per Share" to the previous day's Worksheet and
to the rounded NAV included on the Supersheet for each class.
Agreed "Shares Outstanding Beginning of the Day" to the Supersheet
for each class.
Agreed "Activity/Estimate" to the estimated interim share activity
reported via fax from the transfer agent for each class.
Recalculated "Current Shares Outstanding" by adding "Shares
Outstanding Beginning of the Day" and "Activity/Estimate" for each
class.
Recalculated for each class "Adjusted Total Assets" by multiplying
"Prior Day NAV Per Share" by "Current Shares Outstanding."
Recalculated "Percentage Assets-Class A/Front End" by dividing
"Adjusted Total Assets-Class A/Front End" by "Adjusted Total Assets
Composite."
Recalculated "Percentage Assets-Class B/Back End" by dividing
"Adjusted Total Assets-Class B/Back End" by "Adjusted Total Assets
Composite."
Agreed "Dividend Shares Beginning of Day" to the Supersheet for each
class.
Agreed "Activity/Estimate" to the estimated interim share activity
reported via fax from the transfer agent for each class.
Recalculated "Current Dividend Shares" by adding "Dividend Shares
Beginning of Day" and "Activity/Estimate" for each class.
Recalculated for each class "Adjusted Dividend Assets" by multiplying
"Prior Day NAV Per Share" by "Current Dividend Shares."
Recalculated "Percentage Dividend Assets-Class A/Front End" by
dividing "Adjusted Dividend Assets-Class A/Front End" by "Adjusted
Dividend Assets Composite."
Recalculated "Percentage Dividend Assets-Class B/Back End" by
dividing "Adjusted Dividend Assets-Class B/Back End" by "Adjusted
Dividend Assets Composite."
Agreed composite total "Dividend Income", "Interest Income",
"Amortization" and "Income Equalization" to the primary accounting
system.
Recalculated the allocation for each class of "Dividend Income",
"Interest Income" and "Amortization" for daily dividend funds by
multiplying the composite total by "Percentage Dividend Assets-Class
A/Front End" and "Percentage Dividend Assets-Class B/Back End," and
for non-daily dividend funds by multiplying the composite total by
"Percentage Assets-Class A/Front End" and "Percentage Assets-Class
B/Back End."
Recalculated "Daily Income", composite and for each class, by
totaling "Dividend Income", "Interest Income", "Amortization" and
"Income Equalization."
Agreed composite total "Management Fee" and "Other Fixed Expenses" to
the primary accounting system.
Recalculated the allocation for each class of "Management Fee" and
"Other Fixed Expenses" for daily dividend funds by multiplying the
composite total by "Percentage Dividend Assets-Class A/Front End" and
"Percentage Dividend Assets-Class B/Back End," and non-daily dividend
funds by multiplying the composite total by "Percentage Assets-Class
A/Front End" and "Percentage Assets-Class B/Back End."
Agreed the "12b-1 Fee-Class A/Front End" and "12b-1 Fee-Class B/Back
End" to the respective "PC Expense Worksheet."
Recalculated "Daily Expense", composite and for each class, by
totaling "Management Fee", "12b-1 Fee" and "Other Fixed Expenses."
Recalculated "Daily Net Income" for each class by subtracting "Daily
Expense" from "Daily Income."
Recalculated "Dividend Rate" for each class for daily dividend funds
by dividing "Daily Net Income" by "Dividend Shares Beginning of
Day-Class A/Front End" and "Dividend Shares Beginning of Day-Class
B/Back End."
Agreed "Daily Income" and "Income Distribution" for each class to the
primary accounting system.
Recalculated "Undistributed Net Income" for each Class by subtracting
"Income Distribution" from "Income Available for Distribution."
Agreed "Capital Stock Activity" for each Class to the Supersheet.
Agreed the "Capital Gain Distribution" to the amount recorded in the
primary accounting system.
Agreed composite total "Realized Gain/Loss", "Unrealized
Appreciation/Depreciation", "Unrealized Appreciation/Depreciation -
Options" and "Unrealized Appreciation/Depreciation - Futures" to the
primary accounting system.
Recalculated the allocation for each class of "Realized Gain/Loss",
"Unrealized Appreciation/Depreciation", "Unrealized
Appreciation/Depreciation - Options" and "Unrealized
Appreciation/Depreciation - Futures" by multiplying the composite
amount by the "Percentage Assets-Class A/Front End" and "Percentage
Assets-Class B/Back End."
Agreed "Prior Days Net Assets" to the previous day's Worksheet.
Recalculated "Net Assets", composite and for each class, by totaling
"Undistributed Net Income", "Capital Stock Activity", "Capital Gain
Distribution", "Realized Gain/Loss", "Unrealized
Appreciation/Depreciation", "Unrealized Appreciation/Depreciation -
Options", "Unrealized Appreciation/Depreciation - Futures", and
"Prior Days Net Assets."
Recalculated "NAV Per Share" dividing the "Net Assets-Class A/Front
End" and "Net Assets - Class B/Back End" by "Current Shares
Outstanding - Class A/Front End" and 'Current Shares Outstanding -
Class B/Back End", respectively.
Recalculated "Offering Price" for Class A shares by applying the
"Load" percentage as stated in the fund's prospectus.
