<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
|X| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material Under Rule 14a-12
Prudential Value Fund
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(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
-------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL VALUE FUND
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
------------------------
IMPORTANT PROXY MATERIALS
PLEASE VOTE NOW!
DECEMBER 29, 2000
------------------------
Dear Shareholder:
I am inviting you to vote on several proposals relating to the management
and operation of your Fund. A shareholder meeting of Prudential Equity Fund,
Inc. and Prudential Value Fund is scheduled for January 31, 2001. This package
contains information about the proposals and includes materials you will need to
vote.
The Boards of Directors/Trustees of each Fund have reviewed the proposals
and have recommended that the proposals be presented to you for consideration.
Although the Directors/Trustees have determined that the proposals are in your
best interest, the final decision is yours.
Shareholders of each Fund are being asked to approve many of the same
proposals, so in order to save money for your Fund, one proxy statement has been
prepared for two Funds. To help you understand the proposals, we are including a
section that answers commonly asked questions. The accompanying proxy statement
includes a detailed description about each of the proposals relating to your
Fund.
Please read the enclosed materials carefully and cast your vote. Remember,
your vote is extremely important, no matter how large or small your holdings. By
voting now, you can help avoid additional costs that are incurred with follow-up
letters and calls.
TO VOTE, YOU MAY USE ANY OF THE FOLLOWING METHODS:
- BY MAIL. Please complete, date and sign your proxy card before mailing it
in the enclosed postage-paid envelope.
- BY INTERNET. Have your proxy card available. Go to the web site:
www.proxyvote.com. Enter your 12-digit control number from your proxy
card. Follow the simple instructions found on the web site.
- BY TELEPHONE. If your Fund shares are held in your own name, call
1-800-690-6903 toll free. If your Fund shares are held on your behalf in a
brokerage account with Prudential Securities Incorporated or another
broker, call 1-800-454-8683 toll free. Enter your 12-digit control number
from your proxy card. Follow the simple instructions.
If you have any questions before you vote, please call us at 1-800-225-1852.
We're glad to help you understand the proposals and assist you in voting. Thank
you for your participation.
Sincerely,
David R. Odenath, Jr.
PRESIDENT
<PAGE>
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND AND VOTE ON THE
PROPOSALS
Please read the enclosed proxy statement for a complete description of the
proposals. However, as a quick reference, the following questions and answers
provide a brief overview of the proposals.
Q. WHAT PROPOSALS AM I BEING ASKED TO VOTE ON?
A. The purpose of the proxy is to ask you to vote on six issues:
- to elect 13 Board members,
- to approve new subadvisory agreements,
- to permit the Fund's manager to enter into or make material changes to
your Fund's subadvisory agreements without shareholder approval,
- to amend the management agreement to permit the Fund's manager to allocate
assets among subadvisers,
- to approve changes to your Fund's fundamental investment restrictions, and
- to ratify the selection of your Fund's independent accountants for the
current year.
Q. WHY AM I RECEIVING PROXY INFORMATION ON A FUND THAT I DO NOT OWN?
A. Shareholders of two Funds are being asked to approve many of the same
proposals, so most of the information that must be included in a proxy
statement for your Fund needs to be included in a proxy statement for the
other Fund as well. Therefore, in order to save money for your Fund, one
proxy statement has been prepared.
Q. WHY AM I RECEIVING TWO PROXY STATEMENTS OR TWO MAILINGS?
A. You will receive a separate proxy statement for each Fund that you own.
Also, if you hold shares in more than one account--for example, in an
individual account and in an IRA--you will receive multiple proxy
statements. Each proxy card should be voted and returned.
Q. ARE YOU RECOMMENDING A NEW BOARD FOR THE FUNDS?
A. No. The Fund Boards nominated the thirteen individuals who currently serve
on the existing Boards. Ten of the individual Board nominees are independent
of Prudential.
Q. WILL THE PROPOSED CHANGES RESULT IN HIGHER MANAGEMENT FEES?
A. No. The rate of the management fees charged to each Fund will remain the
same.
Q. WILL THE PROPOSED CHANGES RESULT IN HIGHER DIRECTORS' OR TRUSTEES' FEES?
A. No.
Q. WHAT ARE "FUNDAMENTAL" INVESTMENT RESTRICTIONS, AND WHY ARE THEY PROPOSED TO
BE CHANGED?
A. "Fundamental" investment restrictions are limitations placed on a Fund's
investment policies that can be changed only by a shareholder vote--even if
the changes are minor. The law requires certain investment policies to be
designated as fundamental. Each Fund adopted a number of fundamental
investment restrictions, and some of those fundamental restrictions reflect
regulatory, business or industry conditions, practices or requirements that
are no longer in effect. Others reflect regulatory requirements that, while
still in effect, do not need to be classified as fundamental restrictions.
The Boards believe that certain fundamental investment restrictions that are
not legally required should be eliminated. The Boards also believe that
other fundamental restrictions should be modernized and made more uniform.
The reason for these changes is to provide greater investment flexibility
for the Funds.
<PAGE>
Q. DO THE PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS MEAN THAT MY
FUND'S INVESTMENT OBJECTIVE IS BEING CHANGED?
A. No.
Q. WHAT WILL BE THE EFFECT OF THE PROPOSED CHANGES TO MY FUND'S FUNDAMENTAL
RESTRICTIONS?
A. The Board does not believe that the proposed changes to fundamental
investment restrictions will result in a major restructuring of either
Fund's investment portfolio. The changes will allow each Fund greater
flexibility to respond to investment opportunities. By making certain
investment policies and restrictions non-fundamental, the Board may make
changes in the future that it considers desirable without the necessity of a
shareholder vote and the related additional expenses. A shareholder vote is
not necessary for changes to non-fundamental investment policies or
restrictions.
Q. HOW MANY VOTES DO YOU NEED TO APPROVE THESE PROPOSALS?
A. We need a plurality, or a majority of the votes cast, to approve
Proposals No. 1 and 10. For Proposals No. 2, 3, 4, 5, 6, 7, 8 and 9, we need
the affirmative vote of a majority of each applicable Fund's outstanding
voting securities, as defined by the Investment Company Act of 1940.
Q. WHAT IF WE DO NOT HAVE ENOUGH VOTES TO MAKE THIS DECISION BY THE SCHEDULED
SHAREHOLDER MEETING DATE?
A. If we do not receive sufficient votes to hold the meeting, we or Georgeson
Shareholder Communications Inc., a proxy solicitation firm, may contact you
by mail or telephone to encourage you to vote. Shareholders should review
the proxy materials and cast their vote to avoid additional mailings or
telephone calls. If we do not have enough votes to approve the proposals by
the time of the shareholder meeting at 10 a.m. on January 31, 2001, the
meeting may be adjourned to permit further solicitation of proxy votes.
Q. HAS EACH FUND'S BOARD APPROVED THE PROPOSALS?
A. Yes. Your Fund's Board has approved the proposals and recommends that you
vote to approve them.
Q. HOW MANY VOTES AM I ENTITLED TO CAST?
A. As a shareholder, you are entitled to one vote for each share you own of
your Fund on the record date. The record date is November 17, 2000.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy card,
and mailing it in the enclosed postage paid envelope. If you need any
assistance, or have any questions regarding the proposal or how to vote your
shares, please call Prudential at (800) 225-1852.
You may also vote via the Internet. To do so, have your proxy card available
and go to the web site: www.proxyvote.com. Enter your 12-digit control
number from your proxy card and follow the instructions found on the web
site.
Finally, you can vote by telephone. If your Fund shares are held in your own
name, call 1-800-690-6903 toll free. If your Fund shares are held on your
behalf in a brokerage account with Prudential Securities Incorporated or
another broker, call 1-800-454-8683 toll free. Enter your 12-digit control
number from your proxy card and follow the simple instructions given.
<PAGE>
Q. HOW DO I SIGN THE PROXY CARD?
A. INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names appear
on the account registration shown on the card.
JOINT ACCOUNTS: Both owners must sign and the signatures should conform
exactly to the names shown on the account registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her capacity.
For example, a trustee for a trust should include his or her title when he
or she signs, such as "Jane Doe, Trustee"; or an authorized officer of a
company should indicate his or her position with the company, such as "John
Smith, President."
The attached proxy statement contains more detailed information about each of
the proposals relating to your Fund. Please read it carefully.
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL VALUE FUND
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
------------------------
NOTICE OF
JOINT SPECIAL AND ANNUAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON
JANUARY 31, 2001
------------------------
TO OUR SHAREHOLDERS:
Joint meetings of the shareholders of both of the above-listed Funds (each,
a Meeting) will be held at the offices of Prudential Investments Fund Management
LLC (PIFM), 100 Mulberry Street, Gateway Center Three, 14th Floor, Newark, New
Jersey on January 31, 2001 at 10 a.m., Eastern time. The purpose of the Meetings
is to consider and act upon the following proposals:
1. For both Funds, to elect thirteen Directors or Trustees.
2. For both Funds, to approve a new subadvisory agreement between PIFM and
Jennison Associates LLC as to approximately 50% of each Fund's assets.
3. For Prudential Equity Fund, Inc., to approve a new subadvisory agreement
between PIFM and GE Asset Management Incorporated as to approximately 25%
of the Fund's assets.
4. For Prudential Equity Fund, Inc., to approve a new subadvisory agreement
between PIFM and Salomon Brothers Asset Management Inc. as to
approximately 25% of the Fund's assets.
5. For Prudential Value Fund, to approve a new subadvisory agreement
between PIFM and Deutsche Asset Management, Incorporated as to
approximately 25% of the Fund's assets.
6. For Prudential Value Fund, to approve a new subadvisory agreement
between PIFM and Key Asset Management Inc. as to approximately 25% of the
Fund's assets.
7. For both Funds, to permit PIFM to enter into or make material changes to
subadvisory agreements without shareholder approval.
8. For both Funds, to approve an amendment to the Management Agreement to
permit PIFM to allocate assets among affiliated and unaffiliated
subadvisers.
9. For both Funds, to approve changes to certain of the Fund's fundamental
investment restrictions or policies, relating to the following:
(a) fund diversification
(b) issuing senior securities, borrowing money or pledging assets
(c) buying and selling real estate
(d) buying and selling commodities and commodity contracts
(e) fund concentration
(f) engaging in underwriting
(g) making loans
<PAGE>
(h) other investment restrictions relating to investing for control,
investing in securities of other investment companies and, for Value
Fund only, purchasing warrants
10. For both Funds, to ratify the selection of PricewaterhouseCoopers LLP as
independent accountants for the Fund's current fiscal year.
For Prudential Equity Fund, Inc., the Meeting will be the Fund's annual
meeting. For Prudential Value Fund, the Meeting will be a special meeting.
You are entitled to vote at the Meeting, and at any adjournments thereof, of
each Fund in which you owned shares at the close of business on November 17,
2000. If you attend a Meeting, you may vote your shares in person. IF YOU DO NOT
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN EACH
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Boards,
Marguerite E. H. Morrison
SECRETARY
Dated: December 29, 2000
PROXY CARDS FOR YOUR FUND ARE ENCLOSED ALONG WITH THE PROXY STATEMENT. PLEASE
VOTE YOUR SHARES TODAY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD IN THE
POSTAGE PREPAID ENVELOPE PROVIDED. YOU CAN ALSO VOTE YOUR SHARES THROUGH THE
INTERNET OR BY TELEPHONE USING THE 12-DIGIT "CONTROL" NUMBER THAT APPEARS ON THE
ENCLOSED PROXY CARD AND FOLLOWING THE SIMPLE INSTRUCTIONS. THE BOARD OF YOUR
FUND RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AND "FOR" EACH PROPOSAL.
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL VALUE FUND
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
------------------------
PROXY STATEMENT
JOINT SPECIAL AND ANNUAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON JANUARY 31, 2001
------------------------
This proxy statement is being furnished to holders of shares of both of the
above-listed investment companies (Funds) in connection with the solicitation by
their respective Boards of proxies to be used at joint meetings (Meetings) of
shareholders to be held at Gateway Center Three, 100 Mulberry Street, 14th
Floor, Newark, New Jersey 07102 on January 31, 2001, at 10:00 a.m., Eastern
time, or any adjournment or adjournments thereof. For Prudential Equity Fund,
Inc., the Meeting will be an annual meeting. For Prudential Value Fund, the
Meeting will be a special meeting. This proxy statement is being first mailed to
shareholders on or about January 2, 2001.
Both Funds are registered, management investment companies under the
Investment Company Act of 1940, as amended (the 1940 Act). Prudential Equity
Fund, Inc. is organized as a Maryland corporation. Prudential Value Fund is
organized as a Massachusetts business trust. Prudential Equity Fund, Inc.'s
shares of common stock and Prudential Value Fund's shares of beneficial interest
are referred to as "Shares," and the holders of the Shares are "Shareholders,"
each Fund's board of directors or trustees is referred to as a "Board," and the
directors or trustees are "Board Members" or "Directors" or "Trustees," as the
case may be (collectively referred to as Directors). A listing of the formal
name for each Fund, the abbreviated name for each Fund that is used in this
proxy statement and the proposals applicable to each Fund are set forth below.
<TABLE>
<CAPTION>
PROPOSALS
ABBREVIATED APPLICABLE
FUND NAME NAME TO FUND
--------- ------------------ ----------------------------------
<S> <C> <C>
Prudential Equity Fund, Inc................. Equity 1, 2, 3, 4, 7, 8, 9, 10
Prudential Value Fund....................... Value 1, 2, 5, 6, 7, 8, 9, 10
</TABLE>
Prudential Investments Fund Management LLC (PIFM or the Manager), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102, serves as the
Funds' Manager under a management agreement with each Fund (the Management
Agreement). Investment advisory services have been provided to both Funds by
PIFM through its affiliate, The Prudential Investment Corporation (PIC),
Prudential Plaza, 751 Broad Street, Newark, New Jersey 07102, under a
Subadvisory Agreement. Effective September 7, 2000, investment advisory services
to each Fund began to be provided by Jennison Associates LLC (Jennison or the
Subadviser), 466 Lexington Avenue, New York, New York 10017, under an interim
subadvisory agreement. PIFM, PIC and Jennison are subsidiaries of The Prudential
Insurance Company of America (Prudential) and are part of Prudential Asset
Management Holding Company. Prudential Investment Management Services LLC (PIMS
or the Distributor), Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102, serves as the distributor of the Funds' shares. The Funds'
transfer agent is Prudential Mutual Fund Services LLC (PMFS), 194 Wood Avenue
South, Iselin, New Jersey 08830. As of October 31, 2000, PIFM served as the
manager to 48 open-end investment companies and as manager or administrator to
21 closed-end investment companies with aggregate assets of approximately
$74.7 billion. Each Fund has a Board of Directors which, in addition to
overseeing the actions of the Fund's Manager and Subadviser, decides upon
matters of general policy.
<PAGE>
VOTING INFORMATION
The presence, in person or by proxy, of a majority of the Shares of the Fund
outstanding and entitled to vote will constitute a quorum for the transaction of
business at the Meetings.
If a quorum is not present at a Meeting, or if a quorum is present at that
Meeting but sufficient votes to approve any of the Proposals are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any adjournment will require the
affirmative vote of a majority of those Shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies which
they are entitled to vote FOR any Proposal in favor of the adjournment and will
vote those proxies required to be voted AGAINST any Proposal against the
adjournment. A shareholder vote may be taken on one or more of the Proposals in
this proxy statement prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
If a proxy that is properly executed and returned is accompanied by
instructions to withhold authority to vote (an abstention) or 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, with respect to matters to be determined by a majority or plurality of
the votes cast on such matters, will be considered present for purposes of
determining the existence of a quorum for the transaction of business, but, not
being cast, will have no effect on the outcome of such matters. With respect to
matters requiring the affirmative vote of a specified percentage of the total
Shares outstanding, an abstention or broker non-vote will be considered present
for purposes of determining a quorum but will have the effect of a vote against
such matters. Accordingly, abstentions and broker non-votes will have no effect
on Proposals No. 1 and 10, for which the required vote is a plurality or
majority of the votes cast, but effectively will be a vote against adjournment
and against the other Proposals, which require approval of a majority of the
outstanding voting securities under the 1940 Act.
The individuals named as proxies on the enclosed proxy cards will vote in
accordance with your direction as indicated thereon, if your card is received
properly executed by you or by your duly appointed agent or attorney-in-fact. If
your card is properly executed and you give no voting instructions, your Shares
will be voted FOR the nominees named herein for the Board of the Fund to which
the proxy card relates and FOR the remaining Proposals described in this proxy
statement and referenced on the proxy card. If any nominee for the Fund Boards
should withdraw or otherwise become unavailable for election, your Shares will
be voted in favor of such other nominee or nominees as management may recommend.
You may revoke any proxy card by giving another proxy or by letter or telegram
revoking the initial proxy. To be effective your revocation must be received by
the Fund prior to the related Meeting and must indicate your name and account
number. In addition, if you attend a Meeting in person you may, if you wish,
vote by ballot at that Meeting, thereby canceling any proxy previously given.
2
<PAGE>
The close of business on November 17, 2000 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meetings. Information as to the number of outstanding Shares for each Fund as of
the record date is set forth below:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C CLASS Z TOTAL
---- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Equity............................ 102,771,487 81,840,616 3,535,825 13,605,258 201,753,186
Value............................. 33,975,376 34,618,795 1,527,557 3,617,689 73,739,417
</TABLE>
None of the Proposals require separate voting by class. Each Share of each
class is entitled to one vote. To the knowledge of management, the executive
officers and Board Members of both Funds, as a group, owned less than 1% of the
outstanding Shares of both Funds as of November 17, 2000. A listing of persons
who owned beneficially 5% or more of the Shares of either Fund as of
November 17, 2000 is contained in Exhibit A.
COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS OF A FUND MAY OBTAIN WITHOUT CHARGE ADDITIONAL COPIES OF THE FUND'S
ANNUAL AND SEMI-ANNUAL REPORTS BY WRITING THE FUND AT GATEWAY CENTER THREE, 100
MULBERRY STREET, 4TH FLOOR, NEWARK, NEW JERSEY 07102, OR BY CALLING
1-800-225-1852 (TOLL FREE).
Each full Share of each Fund outstanding is entitled to one vote, and each
fractional Share of each Fund outstanding is entitled to a proportionate share
of one vote, with respect to each matter to be voted upon by the shareholders of
that Fund. Information about the vote necessary with respect to each Proposal is
discussed below in connection with the Proposal.
TO ELECT DIRECTORS OR TRUSTEES
PROPOSAL NO. 1
THIS PROPOSAL APPLIES TO BOTH FUNDS.
DISCUSSION. The Board of each Fund has nominated the 13 individuals
identified below for election to each Fund's Board. Under Proposal No. 1,
shareholders of both Funds are being asked to vote on these nominees. Pertinent
information about each nominee is set forth in the listing below and in
Exhibits B through E hereto. Each of the nominees has indicated a willingness to
serve if elected. All of the nominees are currently Directors. All of the
Directors have previously been elected by shareholders, except for Ms. Rice and
Messrs. Fenster, McDonald and Odenath. If elected, each nominee will hold office
until the earlier to occur of (a) the next meeting of shareholders at which
Board Members are elected and until their successors are elected and qualified
or (b) until their terms expire in accordance with the Fund's retirement policy.
Each Fund's retirement policy generally calls for the retirement of Directors on
December 31 of the year in which they reach the age of 75.
Currently, each Board Member who is not affiliated with the Manager, the
Subadviser or the Distributor (an Independent Board Member or Independent
Directors, as applicable) is paid annual fees as set forth below for his or her
service on the Board of each Fund. Directors' fees are allocated among all of
the Funds in a "cluster" (here, the equity funds) based on their proportionate
net assets. In addition, an Independent Board Member who serves on the Executive
Committee is paid by the Funds in the cluster an annual aggregate fee of $8,000
and an Independent Board Member who chairs the Audit or Nominating Committee is
paid by those Funds an annual aggregate fee of $2,000 per Committee. Board
Members affiliated with PIFM or its affiliates will continue to receive no
compensation from any Fund. Board Members will continue to be reimbursed for any
expenses incurred in attending meetings and for other incidental expenses. Board
fees are reviewed periodically by each Fund's Board.
3
<PAGE>
The following table sets forth information relating to the compensation paid
to Board Members (i) specifically by each Fund during the Fund's last fiscal
year and (ii) in the aggregate for all funds in the Prudential Mutual Fund
Complex for the calendar year ended December 31, 1999:
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL 1999
COMPENSATION
PAID TO BOARD
MEMBERS FROM
BOARD MEMBERS AND FUNDS AND FUND
NOMINEES EQUITY VALUE COMPLEX (2)
----------------- -------- -------- -------------------------
<S> <C> <C> <C>
Beach, Edward D.*........................................... $6,625 $ 683 $ 142,500 (43/70)+
Fenster, Saul K............................................. $ 0 $ 492 $ 35,000 (5/21)+
Gold, Delayne D............................................. $6,625 $3,008 $ 144,500 (43/70)+
Gunia, Robert F.(1)......................................... $ 0 $ 0 $ 0
McCorkindale, Douglas H.(3)................................. $6,625 $3,008 $ 80,000 (24/49)+
McDonald, Jr., W. Scott..................................... $ 0 $ 484 $ 35,000 (5/21)+
Mooney, Thomas T.(3)........................................ $6,625 $3,008 $ 129,500 (35/75)+
Munn, Stephen P............................................. $6,825 $3,225 $ 62,250 (29/53)+
Odenath, Jr., David R.(1)................................... $ 0 $ 0 $ 0
Redeker, Richard A.......................................... $6,625 $3,008 $ 95,000 (29/53)+
Rice, Judy A.(1)............................................ $ 0 $ 0 $ 0
Smith, Robin B.(3).......................................... $6,625 $3,008 $ 96,000 (32/44)+
Weil, III, Louis A.......................................... $6,625 $3,008 $ 96,000 (29/53)+
Whitehead, Clay T........................................... $7,050 $3,441 $ 77,000 (38/66)+
</TABLE>
------------------------------
* Indicates Board Member who has since retired.
+ Indicates number of funds/portfolios in Fund Complex (including the Funds)
to which aggregate compensation relates.
(1) Robert F. Gunia, David R. Odenath, Jr. and Judy A. Rice, who are
"interested" Board Members, do not receive compensation from the Funds or
Fund Complex. All other Board Members listed above are deemed to be
independent Board Members.
(2) No fund within the Fund Complex has a bonus, pension, profit sharing or
retirement plan.
(3) Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1999, includes amounts deferred at the
election of Directors under the funds' deferred compensation plans.
Including accrued interest, total compensation amounted to approximately
$97,915 for Douglas H. McCorkindale, $135,101 for Thomas T. Mooney and
$156,477 for Robin B. Smith.
4
<PAGE>
Board Members may elect to receive their fees pursuant to a deferred fee
agreement with each Fund. Under the terms of the agreement, the Fund accrues
daily the amount of the Board Member's fee in installments that accrue interest
at a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or, pursuant to an exemptive
order of the Securities and Exchange Commission (SEC), at the daily rate of
return of any fund within the Fund Complex regardless of whether the Director
serves on the Board of that fund. Payment of the accrued interest also is
deferred and accruals become payable at the option of the Board Member. A Fund's
obligation to make payments of deferred Directors' fees, together with interest
thereon, is a general obligation of the Fund.
The nominees for election as Board Members, their ages and a description of
their principal occupations are listed below. The business address of the
Directors and officers is c/o Prudential Investments Fund Management LLC,
Gateway Center Three, 100 Mulberry Street, 14th Floor, Newark, New Jersey
07102-4077, Attention: Lesley L. Mann. Further information about the current
Board Members is set forth in Exhibits B through E. A table indicating each
Director's ownership of Fund Shares is attached as Exhibit C.
<TABLE>
<CAPTION>
NOMINEE (AGE) PRINCIPAL OCCUPATION*
------------- ----------------------------------------------------------
<S> <C>
Saul K. Fenster (67)............ President, New Jersey Institute of Technology;
Commissioner of the Middle States Association, Commission
on Higher Education; Member of the New Jersey Commission
on Science and Technology; formerly director or trustee of
the New Jersey State Chamber of Commerce, Society of
Manufacturing Engineering Education Foundation, the
Research and Development Council of New Jersey, Prosperity
New Jersey, Inc., the Edison Partnership, National Action
Council for Minorities in Engineering, and IDT
Corporation.
Delayne D. Gold (63)............ Marketing and Management Consultant.
Robert F. Gunia** (53).......... Executive Vice President and Chief Administrative Officer
(since June 1999) of Prudential Investments, a business
unit of Prudential; Executive Vice President and Treasurer
(since December 1996) of PIFM; President (since April
1999) of PIMS; Corporate Vice President (since September
1997) of The Prudential Insurance Company of America
(Prudential); formerly Senior Vice President (March
1987-May 1999) of Prudential Securities; Director (January
1989-September 1996), Executive Vice President -- Finance
and Administration, Treasurer and Chief Financial Officer
(June 1987-December 1996) of Prudential Mutual Fund
Management, Inc.
Douglas H. McCorkindale (61).... Chairman (since June 2000) and President (since September
1997) of Gannett Co. Inc. (publishing and media);
President and Chief Executive Officer (since August 2000)
of Central Newspapers, Inc.; formerly Vice Chairman (March
1984-May 2000) of Gannett Co. Inc.; Director of Gannett
Co. Inc., Global Crossing Ltd. and Continental
Airlines, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NOMINEE (AGE) PRINCIPAL OCCUPATION*
------------- ----------------------------------------------------------
<S> <C>
W. Scott McDonald, Jr. (63)..... Vice President (since 1997), Kaludis Consulting
Group, Inc. (a Sallie Mae company serving higher
education); formerly principal (1993-1997), Scott
McDonald & Associates, Chief Operating Officer
(1991-1995), Fairleigh Dickinson University, Executive
Vice President and Chief Operating Officer (1975-1991),
Drew University, interim President (1988-1990), Drew
University and founding director of School, College and
University Underwriters Ltd.
Thomas T. Mooney (58)........... President of the Greater Rochester Metro Chamber of
Commerce; former Rochester City Manager; former Deputy
Monroe County Executive; Trustee of Center for
Governmental Research, Inc.; Director of Blue Cross of
Rochester, Monroe County Water Authority and Executive
Service Corps of Rochester.
Stephen P. Munn (58)............ Chairman, Director and Chief Executive Officer and former
President, Carlisle Companies Incorporated (manufacturer
of industrial products).
David R. Odenath, Jr.** (43).... President (since June 1999) of Prudential Investments;
Officer in Charge, President, Chief Executive Officer and
Chief Operating Officer (since June 1999) of PIFM; Senior
Vice President (since June 1999) of Prudential; formerly
Senior Vice President (August 1993-May 1999) of
PaineWebber Group, Inc.
Richard A. Redeker (57)......... Former employee of Prudential Investments (October
1996-December 1998); prior thereto, President, Chief
Executive Officer and Director (October 1993-September
1996) of Prudential Mutual Fund Management, Inc.;
Executive Vice President, Director and Member of the
Operating Committee (October 1993-September 1996) of
Prudential Securities; Director (October 1993-September
1996) of Prudential Securities Group, Inc.; Executive Vice
President, PIC (January 1994-September 1996); Director
(January 1994-September 1996) of Prudential Mutual Fund
Distributors, Inc. and Prudential Mutual Fund
Services, Inc.
Judy A. Rice**(52).............. Executive Vice President (since 1999) of Prudential
Investments; Executive Vice President (since 1999) of
PIFM; formerly various positions to Senior Vice President
(1992-1999) of Prudential Securities; and various
positions to Managing Director (1975-1992) of Shearson
Lehman Advisors; Governor of the Money Management
Institute and member of the Prudential Securities
Operating Council and the National Association for
Variable Annuities.
Robin B. Smith (61)............. Chairman and Chief Executive Officer (since August 1996),
formerly President and Chief Executive Officer (January
1988-August 1996) and President and Chief Operating
Officer (January 1988-August 1996) of Publishers Clearing
House; Director of BellSouth Corporation, Texaco Inc.,
Spring Industries Inc. and Kmart Corporation.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NOMINEE (AGE) PRINCIPAL OCCUPATION*
------------- ----------------------------------------------------------
<S> <C>
Louis A. Weil, III (59)......... Former Chairman (January 1999-July 2000), President and
Chief Executive Officer (January 1996-July 2000) and
Director (September 1991-July 2000) of Central
Newspapers, Inc.; former Chairman of the Board (January
1996-July 2000), Publisher and Chief Executive Officer
(August 1991-December 1995) of Phoenix Newspapers, Inc.
Clay T. Whitehead (62).......... President of National Exchange Inc. (new business
development firm).
</TABLE>
------------------------
* Except as otherwise indicated, each individual has held the office shown or
other offices in the same company for the last five years.
** Is an "interested" Director, as defined in the 1940 Act, by reason of his or
her affiliation with PIFM, Prudential Securities or Prudential.
Each Fund has a Nominating Committee and an Audit Committee, the members of
which are the Independent Board Members. Among other things, the Audit Committee
has the following responsibilities:
- Advising the Board with respect to the selection, retention or
termination, as appropriate, of the independent public accountants for the
Fund.
- Reviewing the independent public accountants' compensation and the
proposed terms of their engagement.
- Monitoring the independence of the independent public accountants.
- Reviewing annual financial statements.
The Nominating Committee makes recommendations to the Board with respect to
candidates for election as Board Members. The Nominating Committee does not
consider nominees recommended by shareholders to fill vacancies on the Board.
The activities of the Nominating Committee also include:
- Reviewing the independence of Independent Directors then serving on the
Board.
- Recommending to the Board the Independent Directors to be selected for
membership on the various Board Committees.
- Reviewing and making recommendations to the Board of Directors concerning
Director compensation and expenses, including:
-annual Director fees
-supplemental compensation for Committee service
-supplemental compensation for serving as a Committee Chair
-Board or Committee meeting attendance fees
-expense reimbursement
Information about the number of Board and Committee meetings held during the
most recent fiscal year for each Fund is included in Exhibit D. Information
concerning Fund officers is set forth in Exhibit E.
REQUIRED VOTE
The nominees receiving the affirmative vote of a majority (for Value Fund)
and a plurality (for Equity Fund) of the votes cast will be elected, provided a
quorum is present.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL NO. 1.
7
<PAGE>
TO APPROVE NEW SUBADVISORY AGREEMENTS BETWEEN PIFM AND JENNISON
PROPOSAL NO. 2
THIS PROPOSAL APPLIES TO BOTH FUNDS.
BACKGROUND
The Boards of both Funds, including the Independent Directors, have
approved, and recommend that the shareholders of each Fund approve, the adoption
of a subadvisory agreement between PIFM and Jennison as to approximately 50% of
each Fund's assets. Subadvisory services for these Funds have historically been
performed by PIC. PIFM, Jennison and PIC are all indirect wholly-owned
subsidiaries of Prudential.
Due to a broad restructuring of equity investment management within
Prudential, including the transfer of investment advisory duties for equity
management from PIC to Jennison, each Fund's shareholders are being asked to
approve a new subadvisory agreement between PIFM and Jennison. This transition
occurred incrementally and the majority of the equity funds in the Prudential
mutual fund complex that had been subadvised by PIC began to be subadvised by
Jennison by October 31, 2000. Jennison began serving as subadviser for 100% of
the assets of Equity Fund and as subadviser for 100% of the assets of Value Fund
on September 7, 2000.
The combining of subadvisory duties for equity management into Jennison is
intended to provide your Funds with the investment capabilities available from
Jennison. More information about Jennison's history and its management team
appears on page 12 of this proxy statement.
The transition of subadvisory services from PIC to Jennison may constitute
an "assignment" (as that term is defined in the 1940 Act) of the subadvisory
agreements between PIC and PIFM. As required by the 1940 Act, the subadvisory
agreements with PIC provide for their automatic termination in the event of an
assignment. Therefore, shareholders will need to approve the proposed new
subadvisory agreements between PIFM and Jennison in order for Jennison to
continue to provide subadvisory services to the Funds. A copy of the new form of
subadvisory agreement with Jennison for each Fund is attached as Exhibit F-1.
THE NEW SUBADVISORY AGREEMENT WITH JENNISON FOR EACH FUND IS THE SAME IN EVERY
MATERIAL RESPECT AS THE FUND'S SUBADVISORY AGREEMENT WITH PIC, except as to the
date of the agreement and the identity of the Subadviser (Jennison rather than
PIC).
Pending shareholder approval of these new subadvisory agreements, each
Fund's Board approved an interim subadvisory agreement between PIFM and
Jennison. During the period from the date that portfolio management moved from
PIC to Jennison, until shareholders approve a new subadvisory agreement with
Jennison, PIFM is placing into an escrow account fees for subadvisory services
that Jennison is performing for each Fund. The rate of the subadvisory fees
being placed in escrow is the same as the rate of fees PIC received for acting
as subadviser to the Funds. Each Fund's subadvisory fees will be retained in
escrow and will not be paid to Jennison, unless and until that Fund's
shareholders approve the new subadvisory agreement with Jennison.
Because the move from PIC to Jennison was made pursuant to a corporate
restructuring within Prudential, the transition to Jennison should not result in
any changes in the day-to-day operations of your Fund or the investment process
used in managing your Fund. In addition, the transition will not cause any
change to your Fund's investment objective or investment restrictions and
policies (except as shareholders may approve, as discussed in Proposals
No. 9(a) through 9(h) of this proxy statement).
8
<PAGE>
SUBADVISORY AGREEMENTS WITH PIC
PIFM had entered into a subadvisory agreement with PIC for each of the Funds.
Each subadvisory agreement provided that PIC would furnish investment advisory
services in connection with the management of the Fund. In connection with those
services, PIC was obligated to keep certain books and records of the Fund.
Pursuant to PIFM's Management Agreement with each Fund, PIFM continued to have
responsibility for all investment advisory services.
Each Fund's subadvisory agreement provided that PIC would not be liable for
any error of judgment or for any loss suffered by the Fund in connection with
matters to which the subadvisory agreement relates, except a loss resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard of
duties. Each subadvisory agreement also provided that it would terminate in the
event of its assignment (as defined in the 1940 Act) or upon the termination of
the Management Agreement between the Fund and PIFM. Each subadvisory agreement
could be terminated by the Fund, PIFM or PIC on not more than 60 days', nor less
than 30 days', written notice. The subadvisory agreements with PIC terminated at
the time PIFM entered into interim subadvisory agreements with Jennison. With
the exception of their date, the identity of the subadviser and the requirement
that fees paid thereunder be paid into escrow, as described above, the interim
subadvisory agreements with Jennison are substantially similar to the
subadvisory agreements between PIC and PIFM.
The table below lists the compensation paid to PIC by PIFM under its
subadvisory agreements for the subadvisory services performed for each Fund, as
well as the date of each subadvisory agreement with PIC, and the date on which
each agreement was last submitted to shareholders for approval.
<TABLE>
<CAPTION>
DATE
SUBADVISORY
SUBADVISORY AGREEMENT FEE PAID TO PIC
AGREEMENT SUBMITTED TO (% OF AVERAGE DAILY NET
FUND DATE(1) SHAREHOLDERS ASSETS)(2)
---- ----------- ------------ -----------------------
<S> <C> <C> <C>
Equity........................................... 5-2-88 4-29-88 0.250% to $500 mil.
0.226% next $500 mil.
0.203% over $1 bil.
Value............................................ 3-1-88 1-14-88 0.300% to $500 mil.
0.238% next $500 mil.
0.214% next $500 mil.
0.171% over $1.5 bil.
</TABLE>
------------------------
(1) Each subadvisory agreement was amended effective January 1, 2000 to provide
for the payment of compensation by PIFM to PIC based on a percentage of the
average daily net assets of the Fund. The percentage rate applicable to each
Fund is set forth in the last column of this table.
(2) Prior to January 1, 2000, PIFM reimbursed PIC for its reasonable costs and
expenses incurred in performing subadvisory services for the Funds.
The table below sets forth the total fees paid by each Fund to PIFM and the
total fees received by PIC from PIFM for subadvisory services performed by PIC
for each Fund during the last fiscal year:
<TABLE>
<CAPTION>
FISCAL FEE RECEIVED
YEAR FEE PAID TO BY PIC FROM
FUND ENDED PIFM PIFM(a)
---- -------- ----------- ------------
<S> <C> <C> <C>
Equity................................................... 12-31-99 $24,100,287 $ --
Value.................................................... 10-31-00 $ 7,960,211 $2,891,709
</TABLE>
------------------------
(a) Prior to January 1, 2000, PIFM reimbursed PIC for its reasonable costs and
expenses incurred in performing subadvisory services for the Funds. Each
subadvisory agreement between PIFM and PIC was amended effective January 1,
2000 to provide for the payment of compensation by PIFM based on
9
<PAGE>
a percentage of the average daily net assets of each Fund. The percentage
rate applicable to each Fund is set forth in the previous table. For the
Value Fund, with its fiscal year ending on October 31, 2000, the dollar
amount shown in the column "Fee Received by PIC From PIFM" is the fees paid
by PIFM to PIC from January 1, 2000 through October 31, 2000.
The table below lists the equity mutual funds with capital appreciation as
their investment objective that are advised by Jennison as of September 30,
2000, the size of each fund, and the rate of compensation received by Jennison
for the investment advisory services it provides for each fund:
<TABLE>
<CAPTION>
FUND NET FEE PAID TO JENNISON
ASSETS AS OF (% OF AVERAGE DAILY NET
FUND 9/30/00 ASSETS)
---- -------------- ------------------------
<S> <C> <C>
Prudential 20/20 Focus Fund (Growth Segment)........ $1,103,845,923 0.30% to $300 mil.
0.25% over $300 mil.
Equity(a)........................................... $3,961,919,444 0.25% to $500 mil.
0.226% next $500 mil.
0.203% over $1 bil.
Prudential Diversified Funds -- Prudential
Diversified Conservative Growth (Growth
Segment).......................................... $ 74,772,996 0.30% to $300 mil.
0.25% over $300 mil.
Prudential Diversified Funds -- Prudential
Diversified Moderate Growth (Growth Segment)...... $ 191,302,761 0.30% to $300 mil.
0.25% over $300 mil.
Prudential Diversified Funds -- Prudential
Diversified High Growth (Growth Segment).......... $ 158,801,150 0.30% to $300 mil.
0.25% over $300 mil.
Prudential Jennison Equity Opportunity Fund......... $ 203,988,926 0.30% to $300 mil.
0.25% over $300 mil.
Prudential Jennison Growth Fund..................... $7,261,778,258 0.30% to $300 mil.
0.25% over $300 mil.
Prudential Health Sciences Fund (Strategically
Managed Segment).................................. $ 417,769,862 0.30% to $300 mil.
0.25% over $300 mil.
Strategic Partners Series -- Strategic Partners
Focused Growth Fund (Jennison Segment)............ $ 397,850,630 0.30% to $300 mil.
0.25% over $300 mil.
Value(a)............................................ $1,432,094,695 0.30% to $500 mil.
0.238% next $500 mil.
0.214% next $500 mil.
0.191% over $1.5 bil.
Prudential World Fund, Inc. -- Prudential Jennison
International Growth Fund......................... $ 316,914,445 0.60% to $300 mil.
0.50% next $1.2 bil.
0.45% over $1.5 bil.
Harbor Fund -- Harbor Capital Appreciation Fund..... $9,514,000,000 0.75% to $10 mil.
0.50% next $30 mil.
0.35% next $25 mil.
0.25% next $335 mil.
0.22% next $600 mil.
0.20% over $1 bil.
0.25% over $5 bil.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
FUND NET FEE PAID TO JENNISON
ASSETS AS OF (% OF AVERAGE DAILY NET
FUND 9/30/00 ASSETS)
---- -------------- ------------------------
<S> <C> <C>
Harbor Fund --
Harbor International Growth Fund.................. $ 1,313,000 0.50% of first $1.5 bil.
0.45% next $2 bil.
0.40% over $3.5 bil.
Masters' Select Funds Trust --
The Masters Select Equity Fund(b)................. $ 96,356,000 0.75% to $10 mil.
0.50% next $30 mil.
0.35% on next $25 mil.
0.25% on next $335 mil.
0.22% on next $600 mil.
0.20% over $1 bil.
Seasons Series Trust -- Focus Growth Portfolio(b)... $ 51,321,000 0.40%
SunAmerica Style Select Series, Inc. -- Focus
Portfolio(b)...................................... $ 554,575,000 0.40%
SunAmerica Style Select Series, Inc. --
Large-Cap Growth Portfolio(b)..................... $ 43,548,000 0.30% to $300 mil.
0.25% over $300 mil.
The Hirtle Callaghan Trust --
The Growth Equity Portfolio(b).................... $ 176,981,000 0.30%
The Preferred Group of Mutual Funds --
Preferred Growth Fund............................. $ 804,265,000 0.75% first $10 mil.
0.50% next $30 mil.
0.35% next $25 mil.
0.25% next $335 mil.
0.22% next $600 mil.
0.20% over $1 bil.
EQ Advisors Trust -- EQ/Balanced Portfolio(b)....... $ 239,592,000 0.35%
Ohio National Funds -- Capital Appreciation
Portfolio......................................... $ 64,926,000 0.75% first $10 mil.
0.50% next $30 mil.
0.35% next $25 mil.
0.25% next $335 mil.
0.22% next $600 mil.
0.20% over $1 bil.
</TABLE>
------------------------
(a) As noted above, Jennison did not begin acting as subadviser for Equity Fund
and Value Fund until September 7, 2000.
(b) Jennison provides subadvisory services for only one segment of this fund.
Fund net asset figures identify only the portion of total fund net assets
for which Jennison provides subadvisory services.
11
<PAGE>
THE PROPOSED NEW SUBADVISORY AGREEMENT WITH JENNISON
Jennison, located at 466 Lexington Avenue, New York, NY 10017, is a
wholly-owned subsidiary of PIC. PIC is a wholly-owned subsidiary of Prudential
Asset Management Holding Company (PAMHCo), which is a wholly-owned subsidiary of
Prudential. The address for PIC and PAMHCo is Gateway Center Three, 100 Mulberry
Street, Newark, NJ 07102. Jennison has provided investment advisory services to
registered investment companies since 1990.
Under the proposed subadvisory agreements, Jennison would provide investment
advisory services to each Fund pursuant to an agreement with PIFM. The
agreements between PIFM and Jennison will be identical in all material respects
(other than as indicated on page 8) to the subadvisory agreements between PIFM
and PIC. This means that Jennison will be subject to the same terms and
conditions as are applicable to PIC under its former subadvisory agreements with
PIFM.
The table below lists the name and principal occupation of the principal
executive officers and each director of Jennison. The address of each person is
466 Lexington Avenue, New York, NY 10017.
MICHAEL A. DEL BALSO-Director since 1998, Executive Vice President, Jennison,
since 1998; prior to 1998, various positions to Senior Vice President, Jennison
Associates Capital Corp.
MARY-JANE FLAHERTY-Director since 2000. Managing Director, Strategic
Initiatives, PIC, since December 1998; prior to December 1998, various positions
to Chief Financial Officer, PIC, and various positions to Vice President,
Prudential.
JOHN H. HOBBS-Chairman since 1998. Chief Executive Officer, Jennison, since
1998; prior to 1998, various positions to Chairman and Chief Executive Officer,
Jennison Associates Capital Corp.
KAREN E. KOHLER-Director since 1998. Executive Vice President, Jennison, since
2000. Treasurer, Jennison, since 1999. Chief Compliance Officer and Director,
Jennison, since 1998; prior to 1998, various positions to Senior Vice President,
Chief Compliance Officer, Jennison Associates Capital Corp.
KATHLEEN A. MCCARRAGHER-Director since 1998. Executive Vice President, Jennison,
since 1998. 1992-1998, Managing Director, Weis, Peck & Greer LLC.
PHILIP N. RUSSO-Director since 2000. Vice President and Director, PIC, since
1999; Vice President, Prudential, since 1997; prior to 1997, Managing Director,
Bankers Trust Company.
SPIROS SEGALAS-Director since 1998. President and Chief Investment Officer,
Jennison, since 1998. Prior to 1998, various positions to President and Chief
Investment Officer, Jennison Associates Capital Corp.
VICTOR SIM-Director since 2000. Vice President, Prudential, since 1997.
JOHN R. STRANGFELD-Director since 2000. Chief Executive Officer of Prudential
Securities since October 2000, Executive Vice President since February 1998 of
Prudential; Chief Executive Officer, Chairman, President and Director since
January 1999 of PIC; Chairman since August 1989 of Pricoa Capital Group; prior
to 1998, various positions to Chief Executive Officer, Private Asset Management
Group of Prudential.
KEVEN C. UEBELEIN-Director since 2000. Senior Managing Director, Mergers &
Acquisitions, PIC, since 2000; prior to 2000, various positions to Managing
Director, New Products, Private Asset Management Group, Prudential.
BERNARD B. WINOGRAD-Director since 2000. Chief Executive Officer, Prudential
Real Estate Investors, since December 1986; Senior Vice President and Director,
PIC, since December 1996; prior to December 1996, The Taubman Company LLC.
RELATIONSHIP TO PROPOSALS NO. 7 AND 8
As part of the overall restructuring of the management of both Funds,
Proposals No. 7 and 8 request shareholder approval (1) to permit the Manager to
enter into or make material changes to subadvisory
12
<PAGE>
agreements, and (2) to amend the management contracts between PIFM and each
Fund. In brief, Proposal No. 7, if adopted, would permit PIFM, upon Board
approval, to retain new subadvisers or to materially alter its contracts with
existing subadvisers without first obtaining shareholder approval. Proposal
No. 8, if adopted, would permit PIFM, again with Board approval, to allocate the
assets of each Fund among both affiliated and unaffiliated subadvisers under a
"Manager-of-Managers" structure. Please refer to the explanations accompanying
Proposals No. 7 and 8 for more information on each of these Proposals.
Although shareholder approval is also being requested for Proposals No. 7
and 8, THE ADOPTION OF PROPOSAL NO. 2 IS NOT CONTINGENT ON SHAREHOLDER APPROVAL
OF EITHER PROPOSAL NO. 7 OR PROPOSAL NO. 8. This means that if shareholders do
not approve either Proposal No. 7 or Proposal No. 8, but do vote "For" Proposal
No. 2, PIFM will implement the new subadvisory agreements with Jennison. If
Proposal No. 2 is not approved, Jennison will receive the lesser of the
subadvisory fees paid into escrow under the interim subadvisory agreements, plus
interest, or the costs incurred by Jennison in performing the interim contract,
plus interest.
RELATIONSHIP TO PROPOSALS NO. 3, 4, 5 AND 6
Although shareholder approval is also being requested for Proposals No. 3
and 4 for Equity Fund and 5 and 6 for Value Fund, THE ADOPTION OF PROPOSAL
NO. 2 FOR EQUITY FUND OR VALUE FUND, RESPECTIVELY, IS NOT CONTINGENT ON
SHAREHOLDER APPROVAL OF PROPOSALS NO. 3 OR 4 FOR EQUITY FUND OR 5 OR 6 FOR VALUE
FUND. This means that if Equity Fund shareholders do not approve Proposal No. 3
and Proposal No. 4, but do vote "For" Proposal No. 2, PIFM will implement the
new subadvisory agreement with Jennison, and PIFM will allocate a larger portion
of the Equity Fund's assets to Jennison. If either Proposal No. 3 or Proposal
No. 4 is not approved, but Proposal No. 2 is approved as to the Equity Fund,
then PIFM will allocate a larger portion of the Fund's assets to Jennison, or to
both Jennison and the other subadviser whose contract is approved by Equity Fund
shareholders. If Proposal No. 2 is not approved by Equity Fund shareholders but
Proposals No. 3 and 4 are approved, or either Proposal No. 3 or 4 is approved,
PIFM will allocate a larger portion of the Equity Fund's assets to the
subadviser(s) whose contract is approved.
Similarly, if either Proposal No. 5 or Proposal No. 6 is not approved, but
Proposal No. 2 is approved as to the Value Fund, then PIFM will allocate a
larger portion of the Fund's assets to Jennison, or to both Jennison and the
other subadviser whose contract is approved by Value Fund shareholders. If
Proposal No. 2 is not approved by Value Fund shareholders, but Proposals No. 5
and 6 are approved, or if either Proposal No. 5 or 6 is approved, PIFM will
allocate a larger portion of the Value Fund's assets to the subadviser(s) whose
contract is approved.
Finally, as noted above, if Proposal No. 2 is not approved as to a Fund, or
is not approved within 150 days of the interim subadvisory agreement with
Jennison, then Jennison will receive the lesser of the subadvisory fees paid
into escrow under the interim subadvisory agreement, plus interest, or the costs
incurred by Jennison in performing the interim contract, plus interest.
MATTERS CONSIDERED BY THE BOARDS
The proposal to present the proposed new subadvisory agreements with
Jennison was approved by the Boards of each Fund, including the Independent
Directors, on August 22, 2000. The Board Members received materials relating to
the proposed agreements in advance of the meeting at which the proposed
subadvisory agreements were considered, and had the opportunity to ask questions
and request further information in connection with such consideration. The
Boards considered that the rate of fees to be paid to Jennison by PIFM are the
same as the then-existing fee arrangement with PIC, and that the rate of fees
paid by the Funds would not increase. The Boards also considered that it is
appropriate to enter into new subadvisory agreements for these Funds in light of
the transition of the majority of equity management from PIC to Jennison. The
Boards gave primary consideration to Jennison's strong, stable management and
the results of Jennison's growth investing style when the Boards determined to
approve the new subadvisory agreements with Jennison.
13
<PAGE>
REQUIRED VOTE
A Fund's approval of Proposal No. 2 requires approval by a majority of the
outstanding voting securities of the Fund, as defined by the 1940 Act. For
purposes of the 1940 Act, a majority of a Fund's outstanding voting securities
is the lesser of (i) 67% of the Fund's outstanding voting securities represented
at a meeting at which more than 50% of the Fund's outstanding voting securities
are present in person or represented by proxy, or (ii) more than 50% of the
Fund's outstanding voting securities. If Proposal No. 2 is approved by the
shareholders of a particular Fund, Proposal No. 2 will be effective for that
Fund as described above, regardless of whether shareholders of the other Fund
approve Proposal No. 2.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 2.
TO APPROVE A NEW SUBADVISORY AGREEMENT BETWEEN PIFM AND GE ASSET MANAGEMENT
INCORPORATED
PROPOSAL NO. 3
THIS PROPOSAL APPLIES TO EQUITY FUND ONLY.
The Board of Equity Fund, including the Independent Directors, has approved,
and recommends that shareholders approve, the adoption of a subadvisory
agreement between PIFM and GE Asset Management Incorporated (GEAM) under which
GEAM would serve as subadviser to a portion of the assets (approximately 25%
initially) of the Fund. If this proposed contract is approved, and Proposal
No. 2 also is approved by Equity Fund shareholders, then PIFM will employ both
Jennison and GEAM as subadvisers to the Equity Fund. If Proposal No. 4 also is
approved, Salomon Brothers Asset Management Inc. also would manage a portion of
the Equity Fund's assets. If Proposals No. 2, 3 and 4 are approved, there will
be three subadvisers managing the assets of the Equity Fund. The proposed
subadvisory contract with GEAM in substantially final form is attached as
Exhibit F-2.
GEAM, located at 3003 Summer Street, Stamford, CT 06905, is a wholly-owned
subsidiary of General Electric Company, a widely held public corporation.
Together with its predecessor organizations, GEAM has managed assets for
employee pension and benefit plans since the late 1920s. As of September 30,
2000, GEAM oversaw approximately $124 billion in total assets. The name and
principal occupation of the principal executive officer and each director of
GEAM appears below. The address of each person is 3003 Summer Street, Stamford,
CT 06905.
<TABLE>
<CAPTION>
NAME TITLE
---- -------------------------------------
<S> <C>
John H. Myers........................ Chairman & President
Eugene K. Bolton..................... Executive Vice President
Michael J. Cosgrove.................. Executive Vice President
Alan M. Lewis........................ Executive Vice President
Ralph R. Layman...................... Executive Vice President
Robert A. MacDougall................. Executive Vice President
Geoffrey R. Norman................... Executive Vice President
Donald W. Torey...................... Executive Vice President
John J. Walker....................... Executive Vice President
</TABLE>
Although GEAM manages employee pension and benefit plans, GEAM does not
currently advise a registered mutual fund with an investment objective similar
to that which GEAM will pursue in managing a portion of the assets of the Equity
Fund.
14
<PAGE>
The proposed subadvisory agreement, in brief, provides that:
- as compensation for GEAM's services, PIFM will pay GEAM a fee equal, on an
annualized basis, to the following:
0.30 of 1% on the first $50 million of the average net assets
under GEAM's management; and
0.20 of 1% on the next $250 million of the average net assets
under GEAM's management; and
0.15 of 1% over $300 million of the average net assets under
GEAM's management.
- GEAM will provide day-to-day management of the Fund's investments and
otherwise determine what investments the Fund will purchase, retain, and
sell.
- GEAM will select brokers to effect trades for the Fund and may pay a
higher commission to a broker that provides bona fide research services.
- GEAM will maintain certain books and records on behalf of the Fund.
- PIFM may replace GEAM as subadviser or amend the subadvisory agreement
without obtaining shareholder approval (if Proposal No. 7 is approved).
- PIFM will determine the allocation of assets among the Fund's subadvisers.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the proposed subadvisory agreement with GEAM to
shareholders was approved by the Board of Directors of the Fund, including the
Independent Directors, on November 28, 2000. The Board received materials
relating to the proposed subadvisory agreement in advance of the meeting at
which the proposed subadvisory agreement was considered, and had the opportunity
to ask questions and request further information in connection with such
consideration. The Board gave primary consideration to GEAM's past investment
performance, including particularly how that performance ranked on a
risk-adjusted basis. The Board was provided with a quantitative analysis of the
amount of risk associated with the level of return obtained by the proposed
subadviser as measured against a variety of benchmarks. In addition, the Board
considered that the rate of fees to be paid to GEAM is consistent with -- and
even lower than -- industry norms.
THE BOARD OF EQUITY FUND, INCLUDING ITS INDEPENDENT BOARD MEMBERS,
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3.
TO APPROVE A NEW SUBADVISORY AGREEMENT BETWEEN PIFM AND SALOMON BROTHERS ASSET
MANAGEMENT INC.
PROPOSAL NO. 4
THIS PROPOSAL APPLIES TO EQUITY FUND ONLY.
The Board of Equity Fund, including the Independent Directors, has approved,
and recommends that shareholders approve the adoption of a subadvisory agreement
between PIFM and Salomon Brothers Asset Management Inc. (SB), under which SB
would serve as subadviser to a portion of the assets (approximately 25%
initially) of the Equity Fund. If this proposed contract is approved, and
Proposal No. 2 also is approved by Equity Fund shareholders, then PIFM will
employ both Jennison and SB as subadvisers to the Equity Fund. GE Asset
Management Incorporated will subadvise a portion of the Equity Fund if Proposal
No. 3 is approved. If Proposals No. 2, 3 and 4 are approved, there will be three
subadvisers
15
<PAGE>
managing the assets of the Equity Fund. The proposed subadvisory agreement with
SB in substantially final form is attached as Exhibit F-3.
SB, an independent U.S. registered investment adviser since 1989, is located
at 7 World Trade Center, New York, NY 10048. It is a wholly-owned subsidiary of
Salomon Smith Barney Holdings Inc., a subsidiary of Citigroup Inc. SB is part of
SSB Citi Asset Management Group, the global asset management arm of Citigroup
Inc. that managed approximately $396 billion in total assets as of
September 30, 2000. The name and principal occupation of the principal executive
officer and each director of SB appears below. The address of each person is
7 World Trade Center, New York, NY 10048.
<TABLE>
<CAPTION>
NAME TITLE
---- -------------------------------------
<S> <C>
Virgil H. Cummings................... Director
Ross S. Margolies.................... Managing Director
Wendy Murdock........................ Executive Vice President, Salomon
Smith Barney Inc.
Peter J. Wilby....................... Managing Director
</TABLE>
The following tables set out mutual funds with investment objectives similar
to that of the Equity Fund for which SB serves as investment adviser and
indicates the size of each such fund as well as the annual rate of SB's
compensation.
<TABLE>
<CAPTION>
FUND NET ASSETS
FUND AS OF 9/30/00 FEE PAID TO SB
---- ---------------- ------------------------
<S> <C> <C>
Salomon Brothers Fund............................ $1,896.5 million 0.65% to $350 million
0.55% next $150 million
0.525% next $250 million
0.50% next $250 million
0.45% over $1 billion*
</TABLE>
------------------------
* This compensation is adjusted up or down through a "fulcrum fee" formula,
which adjusts SB's compensation according to whether the Fund outperformed
or underperformed the S&P 500 Index.
SB also manages the following, the annual advisory fee for which is paid at
the rates indicated.
<TABLE>
<CAPTION>
FUND NET ASSETS
FUND AS OF 9/30/00 FEE PAID TO SB
---- ---------------- --------------
<S> <C> <C>
Smith Barney Large Cap Blend Fund........................... $525.6 million 0.65%
Smith Barney Growth & Income Fund........................... $1,475.0 million 0.65%
Smith Barney Concert Series Investment Growth & Income $13.9 million 0.75%
Fund......................................................
Smith Barney Greenwich Street Growth & Income Fund.......... $17.8 million 0.45%
</TABLE>
The proposed subadvisory agreement, in brief, provides that:
- as compensation for SB's services, PIFM will pay SB a fee equal, on an
annualized basis, to the following:
0.40 of 1% of the first $50 million of the average net assets
under SB's management; and
0.30 of 1% of the next $250 million of the average net assets
under SB's management; and
0.155 of 1% over $300 million of the average net assets under SB's
management.
- SB will provide day-to-day management of the Fund's investments and
otherwise determine what investments the Fund will purchase, retain, and
sell.
16
<PAGE>
- SB will select brokers to effect trades for the Fund and may pay a higher
commission to a broker that provides bona fide research services.
- SB will maintain certain books and records on behalf of the Fund.
- PIFM may replace SB as subadviser or amend the subadvisory agreement
without obtaining shareholder approval (if Proposal No. 7 is approved).
- PIFM will determine the allocation of assets among the Fund's subadvisers.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the proposed subadvisory agreement with SB to
shareholders was approved by the Board of Directors of the Equity Fund,
including the Independent Directors, on November 28, 2000. The Board received
materials relating to the proposed subadvisory agreement in advance of the
meeting at which the proposed subadvisory agreement was considered, and had the
opportunity to ask questions and request further information in connection with
such consideration. The Board gave primary consideration to SB's past investment
performance, including particularly how that performance ranked on a risk-
adjusted basis. The Board was provided with a quantitative analysis of the
amount of risk associated with the level of return obtained by the proposed
subadviser as measured against a variety of benchmarks. In addition, the Board
considered that the rate of fees to be paid to SB is consistent with--and even
lower than--industry norms.
THE BOARD OF EQUITY FUND, INCLUDING ITS INDEPENDENT BOARD MEMBERS,
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 4.
TO APPROVE A NEW SUBADVISORY AGREEMENT BETWEEN PIFM AND DEUTSCHE ASSET
MANAGEMENT, INCORPORATED
PROPOSAL NO. 5
THIS PROPOSAL APPLIES TO VALUE FUND ONLY.
The Board of Value Fund, including the Independent Directors, has approved,
and recommends that shareholders approve, the adoption of a subadvisory
agreement between PIFM and Deutsche Asset Management, Incorporated (DeAM), under
which DeAM would serve as subadviser to a portion of the assets (approximately
25% initially) of the Value Fund. If this proposed contract is approved, and
Proposal No. 2 also is approved by Value Fund shareholders, then PIFM will
employ both Jennison and DeAM as subadvisers to the Value Fund. If shareholders
approve Proposal No. 6, then Key Asset Management Inc. will subadvise a portion
of the assets of the Value Fund. If Proposals No. 2, 5 and 6 are approved, there
will be three subadvisers managing the assets of the Value Fund. The proposed
subadvisory agreement with DeAM in substantially final form is attached as
Exhibit F-4.
DeAM, located at 130 Liberty Street, New York, NY 10006, is one of five
business units of The Deutsche Bank Group, which has more than 125 years of
global investment experience and has employees in more than 50 countries. DeAM
is owned by Deutsche Asset Management Holdings, BV, and is indirectly owned by
Deutsche Asset Management Group Limited. DeAM is the successor organization to
Morgan Grenfell, Inc., and has approximately $17.4 billion of assets under
management.
17
<PAGE>
The name and principal occupation of the principal executive officer and
each director of DeAM appears below. The address of each person is 130 Liberty
Street, New York, NY 10006.
<TABLE>
<CAPTION>
NAME TITLE(S)
---- --------
<S> <C>
Joshua A. Weinreich.......... Director, Chairman
Dean Barr.................... President, CIO
David Westover Baldt......... Director, Executive Vice President
Audrey Mary Theresa Jones.... Director, Executive Vice President
</TABLE>
DeAM does not currently advise a registered fund with an investment
objective similar to that which DeAM will pursue in managing a portion of the
assets of the Value Fund, although DeAM manages a separate account in this
manner.
The proposed subadvisory agreement, in brief, provides that:
- as compensation for DeAM's services, PIFM will pay DeAM a fee equal, on an
annualized basis, to the following:
0.29 of 1% on the first $50 million of the average net assets
under DeAM's management, and
0.23 of 1% on the next $250 million of the average net assets
under DeAM's management, and
0.15 of 1% over $300 million of the average net assets under
DeAM's management.
- DeAM will provide day-to-day management of the Fund's investments and
otherwise determine what investments the Fund will purchase, retain, and
sell.
- DeAM will select brokers to effect trades for the Fund and may pay a
higher commission to a broker that provides bona fide research services.
- DeAM will maintain certain books and records on behalf of the Fund.
- PIFM may replace DeAM as subadviser or amend the subadvisory agreement
without obtaining shareholder approval (if Proposal No. 7 is approved).
- PIFM will determine the allocation of assets among the Fund's subadvisers.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the proposed subadvisory agreement with DeAM to
shareholders was approved by the Board of the Value Fund, including the
Independent Directors, on November 28, 2000. The Board received materials
relating to the proposed subadvisory agreement in advance of the meeting at
which the proposed subadvisory agreement was considered, and had the opportunity
to ask questions and request further information in connection with such
consideration. The Board gave primary consideration to DeAM's past investment
performance, including particularly how that performance ranked on a risk-
adjusted basis. The Board was provided with a quantitative analysis of the
amount of risk associated with the level of return obtained by the proposed
subadviser as measured against a variety of benchmarks. In addition, the Board
considered that the rate of fees to be paid to DeAM is consistent with industry
norms.
THE BOARD OF VALUE FUND, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL NO. 5.
18
<PAGE>
TO APPROVE A NEW SUBADVISORY AGREEMENT BETWEEN PIFM AND KEY ASSET MANAGEMENT
INC.
PROPOSAL NO. 6
THIS PROPOSAL APPLIES TO VALUE FUND ONLY.
The Board of Value Fund, including the Independent Directors, has approved,
and recommends that shareholders approve, the adoption of a subadvisory
agreement between PIFM and Key Asset Management Inc. (Key), under which Key
would serve as subadviser to a portion of the assets (approximately 25%
initially) of the Value Fund. If this proposed contract is approved, and
Proposal No. 2 also is approved by Value Fund shareholders, then PIFM will
employ both Jennison and Key as subadvisers to the Value Fund. If shareholders
approve Proposal No. 5, then DeAM will subadvise a portion of the assets of the
Value Fund. If Proposals No. 2, 5 and 6 are approved, there will be three
subadvisers managing the assets of the Value Fund. The proposed subadvisory
agreement with Key in substantially final form is attached as Exhibit F-5.
Key, located at 127 Public Square, Cleveland, OH 44114, is a wholly-owned
subsidiary of KeyCorp. Key is one of the largest registered investment advisers
in the United States, managing in excess of $71 billion. Together with its
predecessor firms, Key has been managing assets since 1912.
The name and principal occupation of the principal executive officer and
each director of Key appears below. The address of each person is 127 Public
Square, Cleveland, OH 44114.
<TABLE>
<CAPTION>
NAME TITLE(S)
---- --------
<S> <C>
William G. Spears............ Chairman, Director, Senior Managing Director
Richard J. Buoncore.......... Director, President, CEO, Senior Managing Director
James D. Kacic............... CFO, CAO, Senior Managing Director
Anthony Aveni................ CIO, Director, Senior Managing Director
Vincent Farrell.............. CIO, Senior Managing Director
Bradley E. Turner............ COO, Director, Senior Managing Director
Robert B. Heisler, Jr........ Director
Robert T. Clutterbuck........ Director
</TABLE>
The following table sets out a comparable mutual fund for which Key serves
as investment adviser, and indicates the size of that fund as well as the annual
rate of Key's compensation.
<TABLE>
<CAPTION>
FUND NET ASSETS AS OF 11/27/00 FEE PAID TO KEY
------------------------ ------------------------- ------------------------
<S> <C> <C>
INDOCAM US
Value Fund.............. $148.3 million 0.45%
</TABLE>
The proposed subadvisory agreement, in brief, provides that:
- as compensation for Key's services, PIFM will pay Key a fee equal, on an
annualized basis, to the following:
0.29 of 1% on the first $50 million of the average net assets
under Key's management; and
0.23 of 1% on the next $250 million of the average net assets
under Key's management; and
0.15 of 1% over $300 million of the average net assets under Key's
management.
- Key will provide day-to-day management of the Fund's investments and
otherwise determine what investments the Fund will purchase, retain, and
sell.
19
<PAGE>
- Key will select brokers to effect trades for the Fund and may pay a higher
commission to a broker that provides bona fide research services.
- Key will maintain certain books and records on behalf of the Fund.
- PIFM may replace Key as subadviser or amend the subadvisory agreement
without obtaining shareholder approval (if Proposal No. 7 is approved).
- PIFM will determine the allocation of assets among the Fund's subadvisers.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the proposed subadvisory agreement with Key to
shareholders was approved by the Board of Value Fund, including the Independent
Directors, on November 28, 2000. The Board received materials relating to the
proposed subadvisory agreement in advance of the meeting at which the proposed
subadvisory agreement was considered, and had the opportunity to ask questions
and request further information in connection with such consideration. The Board
gave primary consideration to Key's past investment performance, including
particularly how that performance ranked on a risk-adjusted basis. The Board was
provided with a quantitative analysis of the amount of risk associated with the
level of return obtained by the proposed subadviser as measured against a
variety of benchmarks. In addition, the Board considered that the rate of fees
to be paid to Key are consistent with industry norms.
THE BOARD OF VALUE FUND, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL NO. 6.
INTEREST OF FUND DIRECTORS AND OFFICERS IN PROPOSALS NO. 3-6
With respect to the current Fund Directors and the officers of the Funds
(collectively, Directors/ Officers), none of such individuals currently holds an
office with, or is employed by, either GEAM, SB, DeAM or Key, nor does any such
Director/Officer own more than 1,000 shares of any such subadviser or its
affiliates (as defined by SEC proxy rules). Key Bank, an affiliate of Key, has
made available $34 million in short and medium-term loans to Carlisle Companies
Inc., of which Mr. Munn is Chairman.
TO APPROVE A PROPOSAL TO PERMIT THE MANAGER TO ENTER INTO, OR MAKE MATERIAL
CHANGES TO, SUBADVISORY AGREEMENTS
PROPOSAL NO. 7
THIS PROPOSAL APPLIES TO BOTH FUNDS.
The Board of each Fund has approved, and recommends that shareholders
approve, Proposal No. 7, which would permit PIFM to enter into subadvisory
agreements with new subadvisers to the Fund, or make material amendments to
subadvisory agreements with existing subadvisers to the Fund, without obtaining
shareholder approval. THIS IS CALLED A "MANAGER-OF-MANAGERS" STRUCTURE AND, IN
THE FUTURE, MAY BE USED TO MANAGE EACH FUND. THIS NEW STRUCTURE WOULD NOT CHANGE
THE RATE OF ADVISORY FEES CHARGED TO A FUND. Information concerning each Fund's
current management arrangements, including a description of the Fund's current
subadvisory agreement, is contained in Proposal No. 2. If shareholders approve
Proposal No. 7 so that shareholder approval of new or amended subadvisory
agreements is no longer required, the Directors of a Fund, including a majority
of the Independent Directors, must continue to approve these agreements in order
for them to take effect. On August 22, 2000, the Board of each Fund, including
the Independent Directors, discussed and approved Proposal No. 7 at an in-person
meeting.
Proposal No. 7 is being submitted to shareholders pursuant to the
requirements of an exemptive order obtained from the SEC in September 1996 (the
Original Order). The Original Order grants relief to The Target Portfolio Trust
(for which PIFM acts as a Manager-of-Managers) and other Prudential Mutual Funds
from certain provisions of the 1940 Act and certain rules thereunder.
Specifically, the Original
20
<PAGE>
Order permits PIFM to enter into or amend a subadvisory agreement with a
subadviser that is not otherwise an affiliated person (as defined in the 1940
Act) of PIFM. Among other things, the Original Order permits PIFM to enter into
(1) a new subadvisory agreement that is necessitated due to an "assignment" (as
defined in the 1940 Act), (2) an amendment to a subadvisory agreement, or (3) a
new subadvisory agreement substituting a new subadviser for an old subadviser.
The Funds are seeking confirmation from the staff of the Division of Investment
Management of the SEC (the Staff) that the Original Order applies to the Funds
as well as to The Target Portfolio Trust and other Prudential Mutual Funds.
In addition, the Funds currently intend to seek an order (the Proposed
Order) from the SEC permitting PIFM, with Board approval, and without further
shareholder approval, to (1) hire one or more new affiliated subadvisers and
(2) amend existing agreements with affiliated subadvisers. In their request for
relief, the Funds may also ask the SEC to amend the Original Order to permit the
replacement of an unaffiliated subadviser with an affiliated subadviser and to
replace an affiliated adviser with a different affiliated adviser, all with
prior Board approval. The Funds also may seek an amended order from the SEC
permitting them not to disclose the fee rates paid to specific subadvisers
because that may permit PIFM to hire subadvisers at lower fees. With this
Proposal, the Funds seek your approval for any such arrangement if approved by
the SEC. The Funds will, of course, comply with any conditions imposed by the
SEC under any amended order.
WHY SHAREHOLDER APPROVAL IS BEING SOUGHT
Section 15 of the 1940 Act makes it unlawful for any person to act as
investment adviser to an investment company, except pursuant to a written
contract that has been approved by shareholders. For purposes of Section 15, the
term "investment adviser" includes any subadviser to an investment company.
Section 15 also requires that an investment advisory agreement provide that it
will terminate automatically upon its assignment.
In conformity with Section 15 of the 1940 Act, a Fund currently would obtain
shareholder approval of subadvisory agreements in the following situations:
- (1) the employment by a Fund of a new subadviser to replace an existing
subadviser or (2) the allocation of a portion of assets to an additional
subadviser or the reallocation of portfolio assets among existing
subadvisers;
- a material change in the terms of a subadvisory agreement; and
- the continued employment of an existing subadviser on the same terms if
there has been or is expected to be an assignment of a subadvisory
agreement as a result of a change of control of the subadviser.
The 1940 Act does not require shareholder approval for the termination of a
subadvisory agreement if such termination is approved by a Fund's Board,
including its Independent Directors, although shareholders of the Fund may
terminate a subadvisory agreement at any time by a vote of a majority of its
outstanding voting securities, as defined in the 1940 Act.
DISCUSSION
Under the "Manager-of-Managers" structure, each Fund would continue to
employ PIFM, subject to the supervision of the Board, to manage or provide for
the management of each Fund. PIFM would select one or more subadvisers to invest
the assets of each Fund, subject to the review and approval of the Board.
(Currently, the selection of one or more subadvisers is subject to the approval
of the Fund's shareholders, which is why Proposals No. 2, 3 and 4 are being
submitted to Equity Fund Shareholders and Proposals No. 2, 5 and 6 are being
submitted to Value Fund Shareholders.) PIFM would review each subadviser's
performance on an ongoing basis. PIFM would be responsible for communicating
performance
21
<PAGE>
expectations and evaluations to subadvisers and for recommending to the Board
whether a subadviser's contract should be renewed, modified or terminated. PIFM
would continue to pay an advisory fee to each subadviser from the management
fee. Each Board believes that requiring a Fund's shareholders to approve changes
in subadvisers and subadvisory agreements (including continuation of subadvisory
agreements that otherwise would have terminated by virtue of an assignment) not
only results in unnecessary administrative expenses to the Fund, but also may
cause delays in executing changes that PIFM and the Board have determined are
necessary or desirable. Each Board believes that these expenses, and the
possibility of delays, may result in shareholders receiving less satisfactory
service than would be the case if Proposal No. 7 is implemented.
The kind of changes to subadvisory arrangements that could be effected
without further shareholder approval if Proposal No. 7 is approved include:
(1) reallocating Fund assets among existing subadvisers; (2) allocating a
portion of a Fund's assets to one or more additional subadvisers;
(3) continuing a subadvisory agreement where a change in control of the
subadviser automatically otherwise causes that agreement to terminate; and
(4) replacing an existing subadviser with a new subadviser when PIFM and the
Board determine that the new subadviser's investment philosophy and style, past
performance, security selection experience and preferences, personnel,
facilities, financial strength, quality of service and client communication are
more consistent with the best interests of the Fund and its shareholders. Each
Board believes that PIFM can effect the types of subadvisory changes described
above more efficiently, without sacrificing the quality of service to
shareholders, if the Funds were permitted to operate in the manner described in
Proposal No. 7. Each Board further believes that these gains in efficiency would
ultimately benefit each Fund and each of its shareholders.
Although a Manager-of-Managers structure will be put into place for each
Fund whose shareholders approve Proposal No. 7, the Fund will not employ new
subadvisers pursuant to this structure unless and until PIFM and the Board
determine that a change in subadvisory arrangements is appropriate. In making
these determinations as to a Fund, PIFM intends to evaluate rigorously both
affiliated subadvisers and unaffiliated subadvisers according to objective and
disciplined standards. It is this analysis that led PIFM to propose GEAM and SB
(in addition to Jennison) as subadvisers for Equity Fund and DeAM and Key (in
addition to Jennison) as subadvisers for Value Fund.
Following shareholder approval of Proposal No. 7 and Proposals No. 2 and 8,
PIFM will continue to be each Fund's investment manager and Jennison, the
Prudential subsidiary primarily responsible for day-to-day management of
Prudential's equity funds, will continue to serve as a subadviser for the Funds.
(Proposals No. 8 and 2 provide more information about PIFM and Jennison,
respectively.) Each Board and PIFM, under the Board's supervision, will continue
to monitor the nature and quality of Jennison's services and may, in the future,
recommend additional subadvisers (apart from GEAM, SB, DeAM or Key) or the
reallocation of assets among Jennison and other subadvisers. If one or more new
subadvisers are added to a Fund, PIFM will be responsible for determining the
allocation of assets among the subadvisers and will have the flexibility to
increase the allocation to any one subadviser to as much as 100% and decrease
the allocation to any one subadviser to as little as 0%, subject to Board
approval. The Manager-of-Managers structure that each Board is asking
shareholders to approve will give the Boards and PIFM the flexibility to appoint
additional subadvisers without shareholder approval, but it is possible that no
new subadvisers (apart from GEAM, SB, DeAM or Key) will be added.
If Proposal No. 7 is approved by a Fund's shareholders, those shareholders
no longer would be entitled to approve the selection of a new subadviser or a
material amendment to an existing subadvisory agreement. Instead, shareholders,
within 90 days of the change, would receive an information statement containing
substantially all of the information about the subadviser and the subadvisory
agreement that would otherwise be contained in a proxy statement. The
information statement would include disclosure as to the level of fees to be
paid to PIFM and each subadviser (unless the SEC permits information as to the
rate of fees to be paid to subadvisers not to be disclosed) and would disclose
subadviser changes or changes in subadvisory agreements.
22
<PAGE>
Each Board and PIFM have concluded that, through the information statement
and adherence to the conditions outlined below, shareholders of each Fund will
receive adequate disclosure about any new subadvisers or material amendments to
subadvisory agreements. Whether or not Proposal No. 7 is approved, amendments to
the Management Agreement between PIFM and each Fund would remain subject to the
shareholder and Board approval requirements of Section 15 of the 1940 Act and
related proxy disclosure requirements. Moreover, although PIFM and the Board
already generally may change the rate of fees payable to a subadviser without
shareholder approval, PIFM and the Board could not increase the rate of the
management fees payable by a Fund to PIFM or cause the Fund to pay subadvisory
fees directly to a subadviser without first obtaining shareholder approval.
For these reasons, each Board believes that approval of Proposal No. 7 to
permit PIFM and the Boards to enter into new subadvisory agreements or make
material changes to existing subadvisory agreements without shareholder approval
is in the best interests of the shareholders of the Funds.
CONDITIONS
If the Staff of the SEC confirms that the Original Order applies to the
Funds, the Original Order would grant relief from Section 15(a) of the 1940 Act
and certain rules thereunder in order for the Funds to operate in the manner
described in Proposal No. 7, subject to certain conditions, including approval
of Proposal No. 7 by shareholders of each Fund seeking to rely on the Original
Order. A Fund will not rely on the Original Order until all of the conditions
set forth below have been met.
As stated above, the Funds and PIFM intend to seek the Proposed Order, which
would expand the relief obtained under the Original Order to certain situations
involving affiliates of PIFM. There can be no assurance that the SEC will issue
the Proposed Order or that the SEC will not impose additional conditions on the
Funds.
The following are conditions for relief under the Original Order:
1. PIFM will provide general management and administrative services to
a Fund, including overall supervisory responsibility for the general
management and investment of the Fund's securities portfolio, and, subject
to review and approval by the Board, will (a) set the Fund's overall
investment strategies; (b) select subadvisers; (c) monitor and evaluate the
performance of subadvisers; (d) allocate and, when appropriate, reallocate
the Fund's assets among its subadvisers in those cases where the Fund has
more than one subadviser; and (e) implement procedures reasonably designed
to ensure that the subadvisers comply with the Fund's investment objectives,
policies, and restrictions.
2. Before a Fund may operate in the manner described in Proposal
No. 7, the Proposal must be approved by a majority of its outstanding voting
securities, as defined in the 1940 Act, or in the case of a new series of a
Fund whose public shareholders purchased shares on the basis of a prospectus
containing the disclosure contemplated by condition 4 below, by the sole
shareholder before the offering of shares of such series to the public.
[Approval of Proposal No. 7 would satisfy this condition.]
3. A Fund will furnish to shareholders all of the information about a
new subadviser or subadvisory agreement that would be included in a proxy
statement. This information will include any change in the disclosure caused
by the addition of a new subadviser or any material changes in a subadvisory
agreement. The Funds will meet this condition by providing shareholders with
an information statement complying with certain provisions of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder. With
respect to a newly retained subadviser, or a change in a subadvisory
agreement, the information statement will be provided to shareholders of a
Fund within a maximum of 90 days after the addition of the new subadviser or
the implementation of any material change in a subadvisory agreement.
23
<PAGE>
4. A Fund will disclose in its prospectus the existence, substance and
effect of the Original Order.
5. No Director or officer of a Fund or director or officer of PIFM will
own directly or indirectly (other than through a pooled investment vehicle
that is not controlled by the Director or officer) any interest in any
subadviser except for (a) ownership of interests in PIFM or any entity that
controls, is controlled by or is under common control with PIFM, or
(ii) ownership of less than 1% of the outstanding securities of any class of
equity or debt of a publicly-traded company that is either a subadviser or
any entity that controls, is controlled by or is under common control with a
subadviser.
6. PIFM will not enter into a subadvisory agreement with any subadviser
that is an "affiliated person" (as defined in the 1940 Act) of a Fund or
PIFM other than by reason of serving as a subadviser to the Fund (an
Affiliated Subadviser) without such agreement, including the compensation
payable thereunder, being approved by the shareholders of the Fund. [If the
Proposed Order is granted, this condition would be eliminated.]
7. At all times, a majority of the members of the Board of a Fund will
be persons each of whom is an Independent Director of the Fund and the
nomination of new or additional Independent Directors will be placed within
the discretion of the then existing Independent Directors.
8. When a subadviser change is proposed for a Fund with an Affiliated
Subadviser, the Board, including a majority of the Independent Directors,
will make a separate finding, reflected in the Board's minutes, that such
change is in the best interests of the Fund and its shareholders and does
not involve a conflict of interest from which PIFM or the Affiliated
Subadviser derives an inappropriate advantage.
MATTERS CONSIDERED BY EACH BOARD
At a Board meeting held on August 22, 2000, each Board, including the
Independent Directors, approved the submission to shareholders of Proposal
No. 7 regarding the Manager-of-Managers structure. Prior to the meeting each
Director received materials discussing this type of management structure. At the
meeting, each Director attended a comprehensive presentation on the proposed
structure and had the opportunity to ask questions and request further
information in connection with such consideration. Management representatives
presented an update on Proposal No. 7 to the Directors during a telephone
meeting held on September 21, 2000. Each Board gave primary consideration to the
fact that the rate of the management fee payable to PIFM would not change as a
result of adopting a Manager-of-Managers structure and that the new structure
would provide the potential for PIFM to hire subadvisers and amend subadvisory
agreements more efficiently and with less expense. Each Board also considered
that PIFM had substantial experience in evaluating investment advisers and that
PIFM would bring that experience to the task of evaluating the current
subadviser for a Fund and any potential new subadviser. Each Board took into
account the fact that PIFM could not, without the prior approval of the Board,
including a majority of the Independent Directors: (1) appoint a new subadviser,
(2) materially change the allocation of portfolio assets among subadvisers, or
(3) make material amendments to existing subadvisory agreements.
REQUIRED VOTE
Approval of this Proposal as to a Fund requires the affirmative vote of a
majority of that Fund's outstanding voting securities, as defined in the 1940
Act.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 7.
24
<PAGE>
TO PERMIT AN AMENDMENT TO THE MANAGEMENT CONTRACT TO ALLOCATE A FUND'S
ASSETS AMONG AFFILIATED AND UNAFFILIATED SUBADVISERS
PROPOSAL NO. 8
THIS PROPOSAL APPLIES TO BOTH FUNDS.
The Board of each Fund, including the Independent Directors, has approved,
and recommends that shareholders of the Funds approve, a proposal to amend the
management agreement between each Fund and PIFM (the Amended Agreements).
Because the material features of each Amended Agreement are substantially
similar to each other, we have attached as Exhibit G to this proxy statement a
form of the Amended Agreements applicable to each Fund. If approved at the
Meeting, the Amended Agreements will supersede the existing Management
Agreements (the Existing Agreements) between each Fund and PIFM.
The Amended Agreements are substantially similar to the Existing Agreements.
THE RATE OF ADVISORY FEES PAYABLE BY EACH FUND WILL NOT CHANGE. The primary
difference is that the Amended Agreements would permit PIFM, with Board
approval, to allocate and reallocate a Fund's portfolio assets among subadvisers
from 0% to 100%.
If a Fund's shareholders approve this Proposal, the relevant Existing
Agreement would be amended to provide that PIFM may reallocate Fund assets upon
Board approval only and without further shareholder approval. This would mean,
for example, that a Fund that has allocated 50% of its assets to subadviser #1
and 50% to subadviser #2 would be able to change the allocation to 75% of assets
to subadviser #1 and 25% to subadviser #2 without seeking shareholder approval.
Reallocations may result in additional costs since sales of securities may
result in higher portfolio turnover. Also, because each subadviser selects
portfolio securities independently, it is possible that a security held by one
portfolio segment of a Fund may also be held by the other portfolio segment of
that Fund or that the two subadvisers may simultaneously favor the same
industry. PIFM will monitor each Fund's overall portfolio to ensure that any
such overlaps do not create an unintended industry concentration or result in a
violation of a Fund's diversification requirements. In addition, if one
subadviser of a Fund buys a security at the same time that another Fund
subadviser sells it, the net position of the Fund in the security may be
approximately the same as it would have been with an undivided portfolio and no
such sale and purchase, but the Fund will have incurred additional costs. PIFM
will consider these costs in determining the allocation of assets. PIFM will
consider the timing of reallocation based upon the best interests of a Fund and
its shareholders. To maintain a Fund's federal income tax status as a regulated
investment company, PIFM also may have to sell securities on a periodic basis
and the Fund could realize capital gains that would not have otherwise occurred.
Below we provide additional information about the Amended Agreements and the
Existing Agreements.
EXISTING AGREEMENTS
The Funds are currently managed under Existing Agreements with PIFM, dated
as shown in the following table.
The material features of each Existing Agreement are similar to those of the
Amended Agreements except with respect to the provisions relating to the
Manager-of-Managers structure. The following table also shows the date that each
Fund's Existing Agreement was most recently renewed by its Board and the date
that each Existing Agreement was last approved by a vote of the Fund's
shareholders.
25
<PAGE>
<TABLE>
<CAPTION>
DATE MOST DATE MOST RECENTLY
DATE OF CONTRACT RECENTLY RENEWED SUBMITTED FOR SHAREHOLDER
FUND WITH PIFM BY BOARD APPROVAL
---- ---------------- ---------------- -------------------------
<S> <C> <C> <C>
Equity................... 5/2/88 5/24/00 4/29/88
Value.................... 3/1/88* 5/24/00 1/14/88
</TABLE>
------------------------
* As amended and restated as of June 1, 1995 to add further breakpoints.
PIFM serves as manager to the Funds and to almost all of the other
investment companies that comprise the Prudential Mutual Funds. As of
October 31, 2000, PIFM managed and/or administered open-end and closed-end
management investment companies with assets of approximately $74.7 billion.
PIFM is a wholly-owned subsidiary of PIFM HoldCo, Inc., which is a
wholly-owned subsidiary of Prudential Asset Management Holding Company, which is
a wholly-owned subsidiary of Prudential. The address of PIFM, PIFM HoldCo and
PAMHCO is Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102. The
address of Prudential is 751 Broad Street, Newark, NJ 07102.
The table below lists the name and principal occupation of the officer in
charge and the senior officers of PIFM. The address of each person is Gateway
Center Three, 100 Mulberry Street, Newark, NJ 07102-4077.
<TABLE>
<CAPTION>
NAME POSITION AND PRINCIPAL OCCUPATION
---- -----------------------------------------------------------------------------
<S> <C>
David R. Odenath,
Jr.................. Officer in Charge and President, Chief Executive Officer & Chief Operating
Officer
Robert F. Gunia....... Executive Vice President & Chief Administrative Officer
William V. Healey..... Executive Vice President, Chief Legal Officer & Secretary
Theodore F.
Kilkuskie........... Executive Vice President
Judy A. Rice.......... Executive Vice President
Ajay Sawhney.......... Executive Vice President
Lynn M. Waldvogel..... Executive Vice President
Shaun M. Byrnes....... Senior Vice President
John L. Carter........ Senior Vice President
Keitha L. Kinne....... Senior Vice President
James Novak........... Senior Vice President
Kevin B. Osborn....... Senior Vice President
</TABLE>
Under the Existing Agreements, PIFM manages each Fund's investments and
determines the composition of the assets of each Fund's portfolio, including the
purchase, retention or sale of the securities and cash contained in the
portfolios. PIFM (or Jennison under PIFM's supervision) is responsible for the
selection of brokers and dealers to effect all transactions, and is authorized
to pay higher commissions in order to receive research services. Under the
Existing Agreements, PIFM performs administrative services for each Fund and
furnishes each Fund with statistical information concerning its investments. In
general, each Fund bears its own expenses pursuant to the appropriate Existing
Agreement, although PIFM pays the salaries of its employees who provide services
to the Fund. For its services, PIFM was paid as compensation the following
amounts during each Fund's most recent fiscal year:
<TABLE>
<CAPTION>
TOTAL MANAGEMENT FEES AS % MANAGEMENT
FUND OF AVERAGE NET ASSETS FEES
---- -------------------------- -----------
<S> <C> <C>
Equity................................................. 0.50% to $500 mil. $24,100,287
0.475% next $500 mil.
0.45% over $1 bil.
Value.................................................. 0.60% to $500 mil. $ 7,960,211
0.50% next $500 mil.
0.475% next $500 mil.
0.45% over $1.5 bil.
</TABLE>
26
<PAGE>
AMOUNTS PAID TO AFFILIATES
THE DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Funds. PIMS is a subsidiary of
Prudential. Pursuant to distribution and service plans adopted under Rule 12b-1
under the 1940 Act, the Funds bear the expense of distribution and service
(12b-1) fees paid to PIMS with respect to their respective Class A, Class B and
Class C shares. For their most recently completed fiscal years, PIMS received
distribution and service fees from the Funds as follows.
<TABLE>
<CAPTION>
FISCAL CLASS A CLASS B CLASS C
FUND YEAR ENDED 12B-1 FEES 12B-1 FEES 12B-1 FEES
---- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Equity...................... 12/31/99 $5,543,526 $26,662,689 $860,782
Value....................... 10/31/00 $1,427,621 $ 7,787,217 $277,821
</TABLE>
PIMS also receives front-end sales charges resulting from the sales of
Class A and Class C shares. From these fees, PIMS pays sales charges to
affiliated broker-dealers, who in turn pay commissions to salespersons and incur
other distribution costs. PIMS has advised the Funds that it received the
following front-end sales charges during the Funds' fiscal years as described
above.
<TABLE>
<CAPTION>
CLASS A CLASS C
FUND SALES CHARGES SALES CHARGES
---- ------------- -------------
<S> <C> <C>
Equity.......................................... $910,124 $136,340
Value........................................... $171,300 $ 15,500
</TABLE>
PIMS also received the following contingent deferred sales charges (CDSCs)
imposed on certain redemptions by Class B and Class C shareholders of the Funds
for their fiscal years as described above.
<TABLE>
<CAPTION>
CLASS B CLASS C
FUND CDSCS CDSCS
---- ---------- --------
<S> <C> <C>
Equity.............................................. $5,458,206 $35,566
Value............................................... $1,831,300 $ 9,100
</TABLE>
THE TRANSFER AGENT
The Fund's transfer agent, Prudential Mutual Fund Services LLC (PMFS),
194 Wood Avenue South, Iselin, New Jersey 08830, is a wholly-owned subsidiary of
PIFM. PMFS received the following fees for its services to the Funds for their
fiscal years as described above.
<TABLE>
<CAPTION>
TRANSFER AGENT
FUND FEES
---- --------------
<S> <C>
Equity...................................................... $5,747,900
Value....................................................... $3,965,000
</TABLE>
COMMISSIONS PAID TO PRUDENTIAL SECURITIES
Prudential Securities, One Seaport Plaza, New York, New York 10292 is a
wholly owned subsidiary of Prudential. Prudential Securities received the
following commissions from each Fund, as of their fiscal years as described
above:
<TABLE>
<CAPTION>
AGGREGATE AMOUNT OF COMMISSIONS
PAID (% OF AGGREGATE BROKERAGE
FUND COMMISSIONS)
---- -------------------------------
<S> <C>
Equity....................................... $264,017 (16.01%)
Value........................................ $122,000 (2.74%)
</TABLE>
27
<PAGE>
AMENDED AGREEMENTS
Pursuant to the Existing Agreements, PIFM, subject to the supervision of the
Funds' Boards, and in conformity with the investment policies and restrictions
of the Funds, manages both the investment operations of the Funds and the
composition of the Funds' portfolios, including the purchase, retention,
disposition and loan of securities or other assets. Under the Amended
Agreements, PIFM may delegate the subadvisory function to one or more than one
subadviser. As discussed in Proposal No. 7 above, PIFM would like the ability to
manage in a "Manager-of-Managers" style in which PIFM would, among other things,
(i) continually evaluate the performance of the subadvisers to each Fund through
qualitative and quantitative analysis and consultations with each subadviser,
(ii) periodically make recommendations to the Fund's Board as to whether the
contract with one or more subadvisers should be renewed, modified or terminated
and (iii) periodically report to the Fund's Board regarding the results of its
evaluation and monitoring functions. Under the Amended Agreements, PIFM must
keep certain books and records of each Fund. PIFM also would administer each
Fund's business affairs and furnish appropriate office facilities, together with
ordinary clerical and bookkeeping services that are not furnished by the Funds'
custodian and PMFS, the Funds' transfer and dividend disbursing agent. Officers
and employees of PIFM serve as officers and Directors of the Funds without
compensation.
A model Amended Agreement under which PIFM would provide management services
to the Funds is attached as Exhibit G to this proxy statement. In brief, the
Amended Agreement provides that:
- PIFM will administer a Fund's business affairs and supervise the Fund's
investments. Subject to Board approval, PIFM may select and employ one or
more subadvisers for a Fund, who will have primary responsibility for
determining what investments the Fund will purchase, retain and sell;
- Subject to Board approval, PIFM may reallocate a Fund's assets among
subadvisers;
- PIFM (or a subadviser, acting under PIFM's supervision) will select
brokers to effect trades for a Fund, and may pay a higher commission to a
broker that provides bona fide research services;
- PIFM will pay the salaries and expenses of any employee or officer of a
Fund (other than the fees and expenses of the Fund's Independent
Directors). Otherwise, the Fund pays its own expenses; and
- For each Fund, PIFM will be paid at the same advisory fee rate as is
currently charged to each such Fund under the Existing Agreements.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the Amended Agreements to shareholders was approved
by the Board of each Fund, including the Independent Directors, on August 22,
2000. The Board Members received materials relating to the Amended Agreements in
advance of the meeting at which these Agreements were considered, and had the
opportunity to ask questions and request further information in connection with
such consideration. The Board gave primary consideration to the fact that the
rate of fees will not change and that the terms of the Amended Agreements were
substantially similar to the Existing Agreements, except that, under the Amended
Agreements, PIFM would be able to allocate Fund assets among subadvisers,
subject to Board approval. The Board also gave weight to the fact that it was
beneficial to conform the advisory structure of the Funds to the advisory
structure already in place for other Prudential Mutual Funds. After
consideration of all these factors, each Board concluded that adopting Proposal
No. 8 is reasonable, fair and in the best interest of each Fund and its
shareholders.
REQUIRED VOTE
Approval of this Proposal as to a Fund requires the affirmative vote of a
majority of that Fund's outstanding voting securities, as defined in the 1940
Act.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 8.
28
<PAGE>
TO APPROVE CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES
PROPOSAL NO. 9
THIS PROPOSAL APPLIES TO BOTH FUNDS.
BACKGROUND
The Board of each Fund has approved, and recommends that shareholders of the
Fund approve, the amendment of certain fundamental investment restrictions and
policies of the Fund.
Each Fund has adopted fundamental investment restrictions and policies
regarding the management of the Fund's investments. The designation of these
restrictions and policies as "fundamental" means that they cannot be changed
without shareholder approval. You are being asked to approve changes to your
Fund's fundamental investment restrictions and policies in order to:
(a) provide the Fund's Manager and subadvisers with additional flexibility to
pursue the Fund's investment objective; (b) allow the Fund to implement certain
investment programs that may help the Fund to achieve economies of scale by
participating in transactions with other Prudential Mutual Funds, such as joint
investment in affiliated investment companies and an inter-fund lending program;
and (c) eliminate investment restrictions that were imposed by state regulators
that are no longer required or that were imposed years ago, but do not support
the Manager's and subadvisers' strategy to pursue your Fund's investment
objective.
The Funds have similar, although not identical, fundamental investment
restrictions. Some of the differences are due to the Funds' different investment
objectives. Other differences are due to historical evolution. PIFM would like
to realign the Funds' limits by establishing uniform fundamental investment
restrictions, while achieving the goals described above. Consistency among the
Funds' fundamental investment restrictions should also facilitate the management
of the Funds since shareholders of other Prudential Mutual Funds have been asked
to approve these uniform restrictions, and the Funds' Manager is expected to be
better able to monitor compliance of the Funds if they have uniform investment
restrictions.
The 1940 Act requires a mutual fund to disclose, in its registration
statement, its policy with respect to each of the following:
- diversification
- issuing senior securities
- borrowing money, including the purpose for which the proceeds will be used
- underwriting securities of other issuers
- concentrating investments in a particular industry or group of industries
- purchasing or selling real estate or commodities
- making loans
In addition to the above items, a mutual fund is free to designate as
"fundamental" investment policies concerning other investment practices. Each
Fund's Statement of Additional Information currently sets out fundamental
restrictions with respect to, among other things, the specific practices listed
above. As discussed below, the Board of each Fund recommends that some of those
restrictions be amended.
29
<PAGE>
SPECIFIC RECOMMENDATIONS
The Board of each Fund has approved the adoption of a uniform set of
fundamental investment restrictions. Each Fund's current fundamental investment
restrictions appear in that Fund's Statement of Additional Information. In
addition to variations among Prudential Mutual Funds arising from their
historical development, there are also, and will continue to be, differences
resulting from a Fund's investment objective or, with respect to other
Prudential Mutual Funds, its operation as a non-diversified Fund or its
intention to concentrate its investments in a specific industry or group of
industries. Exhibit H provides a list of your Fund's current fundamental
investment restrictions and the proposed revisions to each restriction.
The proposed uniform fundamental investment restrictions and policies are as
follows (the information disclosed in brackets is explanatory and is not part of
the restrictions):
The following restrictions are fundamental policies. Fundamental
policies are those that cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities. The term
"majority of the Fund's outstanding voting securities" means the vote of the
lesser of (i) 67% or more of the voting shares of the Fund represented at a
meeting at which more than 50% of the outstanding voting shares of the Fund
are present in person or represented by proxy, or (ii) more than 50% of
outstanding voting shares of the Fund.
The Fund may not:
(1) Purchase the securities of any issuer if, as a result, the Fund would
fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as each may be amended
from time to time except to the extent that the Fund may be permitted to
do so by exemptive order, SEC release, no-action letter or similar relief
or interpretations (collectively, the "1940 Act Laws, Interpretations and
Exemptions").
(2) Issue senior securities or borrow money or pledge its assets, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions. For
purposes of this restriction, the purchase or sale of securities on a
when-issued or delayed delivery basis, reverse repurchase agreements,
dollar rolls, short sales, derivative and hedging transactions such as
interest rate swap transactions, and collateral arrangements with respect
thereto, and transactions similar to any of the foregoing and collateral
arrangements with respect thereto, and obligations of the Fund to
[Directors/Trustees] pursuant to deferred compensation arrangements are
not deemed to be a pledge of assets or the issuance of a senior security.
(3) Buy or sell real estate, except that investment in securities of issuers
that invest in real estate and investments in mortgage-backed securities,
mortgage participations or other instruments supported or secured by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights relating to such securities, including
the right to enforce security interests and to hold real estate acquired
by reason of such enforcement until that real estate can be liquidated in
an orderly manner.
(4) Buy or sell physical commodities or contracts involving physical
commodities. The Fund may purchase and sell (i) derivative, hedging and
similar instruments such as financial futures contracts and options
thereon, and (ii) securities or instruments backed by, or the return from
which is linked to, physical commodities or currencies, such as forward
currency exchange contracts, and the Fund may exercise rights relating to
such instruments, including the right to enforce security interests and
to hold physical commodities and contracts involving physical commodities
acquired as a result of the Fund's ownership of instruments supported or
secured thereby until they can be liquidated in an orderly manner.
30
<PAGE>
(5) Purchase any security if as a result 25% or more of the Fund's total
assets would be invested in the securities of issuers having their
principal business activities in the same industry, except for temporary
defensive purposes, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(6) Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
The Fund may make loans, including loans of assets of the Fund,
repurchase agreements, trade claims, loan participations or similar
investments, or as permitted by the 1940 Act Laws, Interpretations and
Exemptions. The acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments in
government obligations, commercial paper, certificates of deposit, bankers'
acceptances or instruments similar to any of the foregoing will not be
considered the making of a loan, and is permitted if consistent with the
Fund's investment objective.
[For purposes of Investment Restriction 1, the Fund will currently not
purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets, (i) more than 5% of the Fund's total assets (determined
at the time of investment) would be invested in securities of a single
issuer and (ii) the Fund would own more than 10% of the outstanding voting
securities of any single issuer.
For purposes of Investment Restriction 5, the Fund relies on The North
American Industry Classification System published by the Bureau of Economic
Analysis, U.S. Department of Commerce, in determining industry
classification. The Fund's reliance on this classification system is not a
fundamental policy of the Fund and, therefore, can be changed without
shareholder approval.
Whenever any fundamental investment policy or investment restriction
states a maximum percentage of the Fund's assets, it is intended that, if
the percentage limitation is met at the time the investment is made, a later
change in percentage resulting from changing total asset values will not be
considered a violation of such policy. However, if the Fund's asset coverage
for borrowings permitted by Investment Restriction 2 falls below 300%, the
Fund will take prompt action to reduce its borrowings, as required by the
1940 Act Laws, Interpretations and Exemptions.]
PROPOSAL 9(a): FUND DIVERSIFICATION (BOTH FUNDS)
The Funds are operated as diversified investment companies under the 1940
Act. In general, this means that, with respect to 75% of the value of the Fund's
total assets, the Fund invests in cash, cash items, obligations of the U.S.
government, its agencies or instrumentalities, securities of other investment
companies and other securities. The "other securities" are subject to the
additional requirement that not more than 5% of total assets will be invested in
the securities of a single issuer and that the Fund will not hold more than 10%
of an issuer's outstanding voting securities.
The proposed amendment would restrict a Fund from purchasing the securities
of any issuer if, as a result, the Fund would fail to be a diversified company
within the meaning of the 1940 Act Laws, Interpretations and Exemptions, except
to the extent that the Fund may be permitted to do so by exemptive order or
similar relief. The restriction is accompanied by a note that explains what the
1940 Act currently requires for the Fund to be "diversified." The Fund would,
however, be free to amend that note if applicable laws are amended or the Fund
receives an exemption from the requirements imposed by applicable law.
In addition, each Fund currently has a fundamental investment restriction
prohibiting purchasing more than 10% of the outstanding voting securities of any
one issuer. If the proposed amendment is approved, this restriction would be
eliminated.
31
<PAGE>
RECOMMENDATION: To provide flexibility as laws change or relief is obtained
from the SEC or its Staff, while also requiring the Fund to comply with the
currently applicable definition of a "diversified" investment company, the Board
of each Fund recommends that shareholders adopt the following as a fundamental
investment restriction:
The Fund may not:
Purchase the securities of any issuer if, as a result, the Fund would
fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as each may be amended
from time to time, except to the extent that the Fund may be permitted to
do so by exemptive order, SEC release, no-action letter or similar relief
or interpretations (collectively, the "1940 Act Laws, Interpretations and
Exemptions").
The following note accompanies this investment restriction:
For purposes of Investment Restriction 1, the Fund will currently not
purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets, (i) more than 5% of the Fund's total assets
(determined at the time of investment) would be invested in securities of
a single issuer and (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer.
PROPOSAL 9(b): ISSUING SENIOR SECURITIES, BORROWING MONEY OR PLEDGING ASSETS
(BOTH FUNDS)
The Funds are permitted to borrow money and pledge assets to secure such
borrowings. However, the amount that may be borrowed, the purposes for which
borrowings may be made, and the amount of securities that may be pledged vary.
The proposed amendment would allow each Fund to borrow money and pledge its
assets to secure such borrowings to the extent permitted by the 1940 Act Laws,
Interpretations and Exemptions. The restriction is accompanied by a note stating
that if asset coverage for a borrowing falls below 300%, the Fund will take
prompt action to reduce its borrowings. This note is to reflect the current
requirement that the Fund limit borrowing to one-third of its total assets.
However, a Fund would be free to amend its borrowing limitations if applicable
law changes or the Fund receives an exemption from the requirements imposed by
applicable law. Neither Fund currently has pending nor currently proposes to
file a request for exemptive relief to permit it to borrow with an asset
coverage ratio of less than 300%. Moreover, there can be no assurance that the
SEC Staff would grant exemptive or similar relief if requested.
Keep in mind that borrowing money and pledging assets are not integral parts
of your Fund's investment program. Under the proposed investment restriction,
the Fund could borrow money for temporary, extraordinary or emergency purposes
or for the clearance of transactions and to take advantage of investment
opportunities. In the future, the Fund may seek to obtain an exemptive order
from the SEC to allow the Fund to lend and borrow money from other Prudential
Mutual Funds. If the Fund requests and obtains such relief, the borrowing Fund
may be able to reduce the cost of borrowing money and the lending Fund may be
able to generate interest income. The proposed investment restriction could, if
adopted, provide each Fund with flexibility in adopting an inter-fund lending
program if an exemptive order is obtained from the SEC, receipt of which cannot
be assured.
Each Fund also has fundamental investment restrictions prohibiting short
sales, other than short sales against-the-box (which require the Fund to own an
equal amount of the same securities or securities convertible into the
securities sold short), and the Equity Fund's restriction specifically allows
the Fund to obtain short-term credits necessary for the clearance of
transactions. Since the proposed investment restriction includes short sales
within the list of items not deemed to be a pledge of assets or the issuance of
a senior security, approval of Proposal No. 9(b) will result in the elimination
of each Fund's fundamental investment restriction relating to short sales.
32
<PAGE>
In addition, the Value Fund has a fundamental investment restriction
prohibiting the purchase of securities on margin (except that the Fund may
obtain such short-term loans as may be necessary for the clearance of
transactions); provided that the deposit or payment by the Fund of initial or
maintenance margin in connection with futures or options is not considered the
purchase of a security on margin. Approval of Proposal No. 9(b) would result in
the elimination of this restriction of the Value Fund.
RISKS: If a Fund borrows money to invest in securities and the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the money borrowed), the net asset value of the
Fund's shares will decrease faster than would otherwise be the case. This is the
speculative factor known as "leverage." In order to reduce the risk presented by
leverage, each of the Funds intends to not purchase portfolio securities when
borrowings exceed 5% of the value of its total assets. This policy may be
changed by the Directors.
If the Fund's asset coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell portfolio
securities to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time.
Short sales involve costs and risks. The Fund must pay the lender interest
on the security it borrows, and the Fund will lose money if the price of the
security increases between the time of the short sale and the date when the Fund
replaces the borrowed security.
RECOMMENDATION: To provide flexibility as laws change or relief may be
obtained from the SEC or its Staff, while also requiring the Fund to comply with
currently applicable restrictions on issuing senior securities, borrowing money
and pledging assets, the Board of each Fund recommends that shareholders adopt
the following as a fundamental investment restriction:
The Fund may not:
Issue senior securities or borrow money or pledge its assets, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions. For
purposes of this restriction, the purchase or sale of securities on a
when-issued or delayed delivery basis, reverse repurchase agreements,
short sales, derivative and hedging transactions such as interest rate
swap transactions, and collateral arrangements with respect thereto, and
transactions similar to any of the foregoing and collateral arrangements
with respect thereto, and obligations of the Fund to [Directors/Trustees]
pursuant to deferred compensation arrangements are not deemed to be a
pledge of assets or the issuance of a senior security.
The following note accompanies this investment restriction:
[I]f the Fund's asset coverage for borrowings permitted by Investment
Restriction 2, above, falls below 300%, the Fund will take prompt action
to reduce its borrowings, as required by the 1940 Act Laws,
Interpretations and Exemptions.
PROPOSAL 9(c): BUYING AND SELLING REAL ESTATE (BOTH FUNDS)
Neither of the Funds is permitted to buy or sell real estate. However, the
Funds are permitted to invest in the securities of companies that invest in real
estate or to invest in mortgage-backed securities, mortgage participations or
other instruments supported by interests in real estate.
The proposed investment restriction confirms that each Fund may not buy or
sell real estate. The restriction also clarifies that each Fund may make
investments in securities that are real estate-related, as described in the
restriction. In addition, the amended investment restriction allows a Fund that
holds real estate due to the enforcement of rights under an agreement or a
security interest (not through a purchase of the real estate) to hold the real
estate until it can be sold in an orderly manner.
33
<PAGE>
RISKS: The performance of real estate-related securities depends upon the
strength of the real estate market and property management. Thus, investment
performance can be affected by national and regional economic conditions, as
well as other factors. These factors can have a more pronounced impact on
performance than investments in other securities.
RECOMMENDATION: To clarify the Fund's investment restriction with respect
to investments in real estate-related securities, the Board of each Fund
recommends that shareholders adopt the following as a fundamental investment
restriction:
The Fund may not:
Buy or sell real estate, except that investment in securities of issuers
that invest in real estate and investments in mortgage-backed securities,
mortgage participations or other instruments supported or secured by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights relating to such securities, including
the right to enforce security interests and to hold real estate acquired
by reason of such enforcement until that real estate can be liquidated in
an orderly manner.
PROPOSAL 9(d): BUYING AND SELLING COMMODITIES AND COMMODITY CONTRACTS (BOTH
FUNDS)
Neither of the Funds is permitted to buy or sell commodities or commodity
contracts. In addition, neither Fund is permitted to invest in interests in oil,
gas or other mineral exploration or development programs. The Funds are
permitted to invest in financial futures contracts, options on financial futures
contracts and forward currency exchange contracts, and in the securities of
companies that sponsor mineral exploration or development programs, which are
not viewed as commodity contracts for purposes of the fundamental restriction.
The proposed investment restriction confirms that each Fund may not buy or
sell commodities or commodity contracts. The restriction also clarifies that a
Fund's investment in financial futures contracts, options on financial futures
contracts and forward currency exchange contracts is not subject to the
restriction applicable to commodity contracts. If your Fund intends to utilize
financial futures contracts and options on financial futures contracts, a
description of these instruments will appear in the Fund's Prospectus or
Statement of Additional Information.
If the proposed investment restriction is approved as to a Fund, that Fund's
restriction prohibiting the Fund from investing in interests in oil, gas or
other mineral exploration or development programs will be eliminated.
RISKS: Financial futures contracts, options on financial futures contracts
and forward currency exchange contracts may be used by a Fund as a hedging
device or, in some circumstances, for speculation. Due to imperfect correlation
between the price of futures contracts and movements in a currency or a group of
currencies, the price of a futures contract may move more or less than the price
of the currency or currencies being hedged. The use of these instruments will
hedge only the currency risks associated with investments in foreign securities,
not market risk. In the case of futures contracts on securities indices or a
security, the correlation between the price of the futures contract and the
movement of the index or security may not be perfect. Therefore, a correct
forecast of currency rates, market trends or international political trends by
your Fund's investment adviser may still not result in a successful hedging
transaction.
In addition, a Fund's ability to establish and close out positions in
futures contracts and options on futures contracts will be subject to the
development and maintenance of liquid markets. There is no assurance that a
liquid market on an exchange will exist for any particular futures contract or
option on a particular futures contract. If no liquid market exists for a
particular futures contract or option on a futures contract in which a Fund
invests, it will not be possible to effect a closing transaction in that
contract or to do so at a satisfactory price and the Fund would have to either
make or take delivery under the futures contract or, in the case of a written
option, wait to sell the underlying securities until the option expires or is
exercised or, in the case of a purchased option, exercise the option.
34
<PAGE>
Successful use of futures contracts, options on futures contracts and
forward currency exchange contracts by a Fund is subject to the ability of an
investment adviser to predict correctly movements in the direction of interest
and foreign currency rates and the market generally. If the investment adviser's
expectations are not met, the Fund would be in a worse position than if the
strategy had not been pursued.
RECOMMENDATION: In order to provide uniformity among the Funds'
restrictions applicable to investments in commodities and commodity contracts,
the Board of each Fund recommends that shareholders adopt the following as a
fundamental investment restriction:
The Fund may not:
Buy or sell physical commodities or contracts involving physical
commodities. The Fund may purchase and sell (i) derivative, hedging and
similar instruments such as financial futures contracts and options
thereon, and (ii) securities or instruments backed by, or the return from
which is linked to, physical commodities or currencies, such as forward
currency exchange contracts, and except that the Fund may exercise rights
relating to such instruments, including the right to enforce security
interests and to hold physical commodities and contracts involving
physical commodities acquired as a result of the Fund's ownership of
instruments supported or secured thereby until they can be liquidated in
an orderly manner.
PROPOSAL 9(e): FUND CONCENTRATION (BOTH FUNDS)
Both Funds invest their portfolios to avoid "concentration" in a particular
industry or group of industries. The 1940 Act requires that a mutual fund recite
its policy regarding concentration. If a Fund has a policy not to concentrate,
this means that, except for temporary defensive purposes, no more than 25% of
the Fund's total assets will be invested in the securities of issuers having
their principal business activities in the same industry. This limitation does
not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
The proposed amendment is not intended to change either Fund's policy
regarding concentration, but to provide uniformity in disclosure of the policy
among the Funds and the other Prudential Mutual Funds having a policy not to
concentrate their investments.
RISKS: Although the Funds do not concentrate their investment in a
particular industry or group of industries, they may, for temporary defensive
purposes, do so. If this occurs, a Fund would, on a temporary basis, be subject
to risks that may be unique or pronounced relating to a particular industry or
group of industries. These risks could include greater sensitivity to
inflationary pressures or supply and demand for a particular product or service.
RECOMMENDATION: The Board of each Fund recommends that shareholders adopt
the following as a fundamental investment restriction:
The Fund may not:
Purchase any security if as a result 25% or more of the Fund's total
assets would be invested in the securities of issuers having their
principal business activities in the same industry, except for temporary
defensive purposes, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
PROPOSAL 9(f): ENGAGING IN UNDERWRITING (NO PROPOSED CHANGE)
Neither of the Funds may act as an "underwriter" of securities, except to
the extent that a Fund may be deemed to be an underwriter under federal
securities laws when it disposes of certain securities held in its investment
portfolio. Each Fund's current investment restriction regarding underwriting is
the same as the proposed uniform policy, so it is not being presented to
shareholders for approval.
35
<PAGE>
THE FOLLOWING IS EACH FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH RESPECT TO
ENGAGING IN UNDERWRITING:
The Fund may not:
Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
PROPOSAL 9(g): MAKING LOANS (BOTH FUNDS)
The Funds currently lend money and assets in limited situations. The Funds
may, for example, purchase certain debt securities of governments, corporate
issuers or banks, as described in each Fund's current registration statement and
the proposed investment restriction.
Each Fund also may engage in repurchase agreement transactions, where the
Fund purchases securities from a broker or bank with an agreement by the seller
to repurchase the securities at an agreed upon price at an agreed upon time.
These transactions allow the Fund to invest its cash to generate income, usually
on a short-term basis, while maintaining liquidity to honor its redemption
obligations. Generating portfolio income through investment in repurchase
agreements is not an integral part of your Fund's investment program. A Fund
would engage in these transactions primarily to keep its cash fully invested,
but available to meet redemption requests.
The Funds have established a securities lending program where they use a
securities lending agent to locate institutions that, on a temporary basis, seek
to hold certain securities that are owned by a Fund. In these transactions, a
Fund transfers its ownership interest in a security with the right to receive
income from the borrower and the right to have the security returned to the Fund
on short notice, for example, to enable the Fund to vote the securities.
Securities lending allows a Fund to generate income on portfolio securities to
enhance the Fund's returns.
In recognition of the fact that the Funds do make loans of assets, the
revised investment policy is intended to eliminate the current investment
restriction. The new disclosure more accurately describes the Funds' lending
activities and plans to make loans of assets in the future. The new policy would
not prevent a Fund's purchase of debt securities, including investments in
government securities, corporate debt securities and certain bank obligations.
The new investment policy would also allow a Fund to engage in repurchase
agreement transactions and securities lending without these activities being
deemed prohibited loans.
RISKS: Where a Fund engages in securities lending, it assumes a risk that a
borrower fails to maintain the required amount of collateral. The Fund or its
lending agent would be required to pursue the borrower for any excess
replacement cost over the value of the collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral if the borrower of the securities fails financially. To mitigate
these risks, each Fund's investment adviser makes loans of portfolio securities
only to firms determined to be creditworthy.
In repurchase agreement transactions, a seller of a security agrees to
repurchase that security from a Fund at a mutually agreed-upon time and price.
The repurchase price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money is
invested in the transaction. If a seller fails to repurchase securities as
required by its agreement with the Fund and the value of the collateral securing
the repurchase agreement declines, the Fund may lose money. To address this
risk, each Fund's investment adviser enters into repurchase agreements only with
firms determined to be creditworthy.
36
<PAGE>
RECOMMENDATION: In order to provide uniformity among the Funds' policies
applicable to making loans, including allowing the Funds to implement their
securities lending program as described above, the Board of each Fund recommends
that shareholders adopt the following as a fundamental investment policy:
The Fund may make loans, including loans of assets of the Fund,
repurchase agreements, trade claims, loan participations or similar
investments, or as permitted by the 1940 Act Laws, Interpretations and
Exemptions. The acquisition of bonds, debentures, other debt securities
or instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates of
deposit, bankers' acceptances or instruments similar to any of the
foregoing is not considered the making of a loan, and is permitted if
consistent with the Fund's investment objective.
PROPOSAL 9(h): OTHER INVESTMENT RESTRICTIONS (BOTH FUNDS)
The Funds have adopted additional fundamental investment restrictions which
were required to be designated as fundamental by state securities laws. These
state securities laws have since been repealed or are otherwise no longer
applicable to the Funds.
To provide maximum flexibility in managing the Funds and uniformity in the
restrictions applicable to the Funds, the Board of each Fund proposes that all
investment restrictions and policies of each Fund apart from its investment
objective and other than those listed in Proposals No. 9(a) through 9(g), be
designated as non-fundamental. This means that each such investment restriction
or policy could be changed by the Board of Directors, without shareholder
approval, although shareholders would be informed of any material change to any
non-fundamental restriction or policy prior to the change.
The investment restrictions of each Fund that will be designated
non-fundamental are included in Exhibit H and are summarized below. There is no
current intention to change these, apart from the restrictions relating to
investing in other investment companies, as described below.
The Fund may not:
1. Make investments for the purpose of exercising control or
management. (This restriction would become non-fundamental for both Funds.)
2. Invest in securities of other investment companies, except, subject
to certain restrictions, by purchases in the open market involving customary
brokerage commissions. (This restriction would become non-fundamental for
both Funds and would be modified as described below.)
3. Purchase warrants if as a result the Fund would then have more than
5% of its total assets invested in warrants or more than 2% of its total
assets invested in warrants not listed on the New York or American Stock
Exchanges. (This restriction would become non-fundamental for Value Fund.)
The Funds have obtained an exemptive order from the SEC that allows each
Fund to invest up to 25% of its assets in shares of an affiliated mutual fund.
Such investment would be made to facilitate your Fund's investment of its cash
and short-term investments. The ability to invest in an affiliated mutual fund
should allow each Fund to reduce the administrative burdens and costs associated
with investing in money market instruments and short-term debt securities. Each
Fund would be permitted to invest in an affiliated mutual fund only if the
investment is consistent with the Fund's investment objective and strategy.
Currently, each Fund is subject to a fundamental or non-fundamental investment
restriction that limits its investment to mutual funds that are purchased in the
open market and so long as the Fund does not hold more than 3% of the
outstanding voting securities of another investment company, will not invest
more than 5% of its total assets in any one investment company and will not
invest more than 10% of its total assets (determined at the time of investment)
in any number of investment companies. If shareholders approve the designation
of a Fund's investment in mutual funds as a non-fundamental investment
restriction, we
37
<PAGE>
anticipate that such Fund's Board will amend the investment restriction to
implement the cash management strategy permitted by the SEC relief. For Value
Fund, the Board approved this change in conjunction with shareholder approval in
September 2000 of an amendment to its fundamental investment restriction
relating to its ability to invest in other investment companies.
The specific investment restrictions and policies affected by Proposal
No. 9 are identified in Exhibit H. If shareholders of a Fund approve Proposal
No. 9(h), all of the Fund's investment restrictions and policies apart from its
investment objective and other than those listed in Proposals No. 9(a) through
9(g) will be non-fundamental. If shareholders of a Fund reject Proposal
No. 9(h), the Fund's two or three additional current fundamental investment
restrictions will remain fundamental.
REQUIRED VOTE
Approval of these Proposals as to a Fund requires the affirmative vote of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSALS NO. 9(a), 9(b), 9(c), 9(d), 9(e), 9(f) AND 9(h).
TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS OF THE FUND
PROPOSAL NO. 10
The Board of each Fund, including a majority of the Independent Directors,
has selected PricewaterhouseCoopers LLP as independent accountants for each Fund
for the current fiscal year. PricewaterhouseCoopers LLP has served as
independent accountants for the Funds for each year since at least 1996. The
ratification of the selection of independent accountants is to be voted on at
the Meeting and it is intended that the persons named in the accompanying proxy
vote for PricewaterhouseCoopers LLP. No representative of PricewaterhouseCoopers
LLP is expected to be present at the Meeting.
The Board policy regarding engaging independent accountants' services is
that management may engage a Fund's principal independent accountants to perform
any service normally provided by independent accounting firms, provided that
such service meets the independence requirements of the American Institute of
Certified Public Accountants and the SEC. The Audit Committee will review and
approve services provided by the independent accountants prior to their being
rendered. The Audit Committee responsibilities have been summarized in Proposal
No. 1. Each Board also receives a report from its Audit Committee relating to
all services after they have been performed by a Fund's independent accountants.
REQUIRED VOTE
The affirmative vote of at least a majority of the shares present, in person
or by proxy, at the Meeting is required for ratification as to each Fund.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 10.
38
<PAGE>
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne mostly by the
Funds, will be made primarily by mail but also may include telephone or oral
communications by regular employees of Prudential Securities or PIFM, who will
not receive any compensation therefor from the Funds or by Georgeson Shareholder
Communications Inc., a proxy solicitation firm retained by the Funds, who will
be paid the approximate fees and expenses for soliciting services set forth
below. Proxies may be recorded pursuant to (i) electronically transmitted
instructions or (ii) telephone instructions obtained through procedures
reasonably designed to verify that the instructions have been authorized.
Soliciting fees and expenses payable to Shareholder Communications Corporation
by a particular Fund are a function of the number of shareholders in that Fund.
Twenty-five percent of the cost of the Meetings will be borne by PIFM.
<TABLE>
<CAPTION>
ESTIMATED SOLICITATION
FUND FEES AND EXPENSES
---- ----------------------
<S> <C>
Equity................................................. $433,800
Value.................................................. $165,000
</TABLE>
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal to be considered at a Fund's
next meeting of shareholders should send the proposal to that Fund at Gateway
Center Three, 100 Mulberry Street, 4th Floor, Newark, New Jersey 07102, so as to
be received within a reasonable time before the Board makes the solicitation
relating to such meeting, in order to be included in the proxy statement and
form of proxy relating to such meeting.
The Funds will not be required to hold annual meetings of shareholders if
the election of Board Members is not required under the 1940 Act. It is the
present intention of the Board of each Fund not to hold annual meetings of
shareholders unless such shareholder action is required.
Shareholder proposals that are submitted in a timely manner will not
necessarily be included in the Fund's proxy materials. Inclusion of such
proposals is subject to limitations under the federal securities laws.
OTHER BUSINESS
Management knows of no business to be presented at the Meetings other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of shareholders arise, the proxies will vote according to their
best judgment in the interest of the Funds.
Marguerite E. H. Morrison
SECRETARY
December 29, 2000
It is important that you execute and return ALL of your proxies promptly.
39
<PAGE>
INDEX TO EXHIBITS TO PROXY STATEMENT
<TABLE>
<S> <C>
Exhibit A Five Percent Shareholder Report
Exhibit B Year in Which Each Current Board Member Standing for
Re-election Became a Member of the Board
Exhibit C Fund Ownership of Nominees and Current Board Members
Standing for Election
Exhibit D Board and Committee Information
Exhibit E Officer Information
Exhibit F-1 Form of Subadvisory Agreement with Jennison
Exhibit F-2 Form of Subadvisory Agreement with GEAM
Exhibit F-3 Form of Subadvisory Agreement with SB
Exhibit F-4 Form of Subadvisory Agreement with DeAM
Exhibit F-5 Form of Subadvisory Agreement with Key
Exhibit G Form of Management Agreement
Exhibit H Fundamental Restrictions
</TABLE>
40
<PAGE>
EXHIBIT A
FIVE PERCENT SHAREHOLDER REPORT
As of November 17, 2000, the beneficial owners, directly or indirectly, of
more than 5% of the outstanding shares of the Funds are listed below.
<TABLE>
<CAPTION>
FUND NAME REGISTRATION SHARES (PERCENT)
--------- --------------------------------------- --------- ---------
<S> <C> <C> <C>
Prudential Equity Fund, Inc. (Class C) Prudential Trust Company 553,124 (15.64%)
FBO Wood-Wilson Co. Inc.
8111 LBJ Freeway
Suite 585
Dallas TX 75251
Prudential Equity Fund, Inc. (Class Z) Marquette Trust Co 4,038,715 (29.68%)
TTEE, STAT
Hawaii Deferred Compensation Plan
Marquette Trust Company
ATTN: Ann Mejia DCA/TR Admins
13100 Wayzata Blvd
Minnetonka MN 55305
Pru Defined Contribution 553,124 (15.64%)
SVCS
FBO PRU-NON-TRUST ACCOUNTS
Attn John Surdy
30 Scranton Office Park
Moosic PA 18507
Nationwide Insurance Co 694,735 (5.11%)
GPVA
C/O IPO Portfolio Accounting
PO Box 182029
Columbus OH 432182
Prudential Trust Company 952,289 (7.00%)
FBO PRU -- DC TRUST ACCOUNTS
Attn: John Surdy
30 Scranton Office Park
Moosic PA 18507
Prudential Value Fund (Class C) Prudential Trust Company 296,488 (19.41%)
FBO Hirschl & Adler Galleries
21 East 70th St
Attn: Ray Lazerson
New York NY 10021
Prudential Value Fund (Class Z) Prudential Trust Company 1,944,242 (53.74%)
FBO PRU -- DC TRUST ACCOUNTS
Attn John Surdy
30 Scranton Office Park
Moosic PA 18507
</TABLE>
A-1
<PAGE>
EXHIBIT B
YEAR IN WHICH CURRENT BOARD MEMBER STANDING
FOR RE-ELECTION BECAME A MEMBER OF THE BOARD
<TABLE>
<CAPTION>
DIRECTORS/TRUSTEES EQUITY VALUE
------------------ -------- --------
<S> <C> <C>
Fenster, Saul K. ........................................... 2000 2000
Gold, Delayne D. ........................................... 1982 1996
Gunia, Robert F. ........................................... 1996 1996
McCorkindale, Douglas H. ................................... 1996 1987
McDonald, Jr., W. Scott .................................... 2000 2000
Mooney, Thomas T. .......................................... 1986 1986
Munn, Stephen P. ........................................... 1996 1996
Odenath, Jr., David R. ..................................... 1999 1999
Redeker, Richard A. ........................................ 1993 1993
Rice, Judy A. .............................................. 2000 2000
Smith, Robin B. ............................................ 1996 1996
Weil, III, Louis A. ........................................ 1996 1986
Whitehead, Clay T. ......................................... 1996 1996
</TABLE>
B-1
<PAGE>
EXHIBIT C
FUND OWNERSHIP OF NOMINEES AND CURRENT
BOARD MEMBERS STANDING FOR ELECTION
NUMBER OF SHARES HELD AS OF NOVEMBER 17, 2000
<TABLE>
<CAPTION>
DIRECTOR/
TRUSTEE EQUITY VALUE
------- -------- --------
<S> <C> <C>
Saul K. Fenster.............................................
Delayne Dedrick Gold........................................ 992 987
Robert F. Gunia.............................................
Douglas H. McCorkindale..................................... 1,278
W. Scott McDonald, Jr....................................... 366
Thomas T. Mooney............................................ 6,899 959
Stephen P. Munn............................................. 1,496 477
David R. Odenath, Jr........................................ 1,625 3,841
Richard A. Redeker.......................................... 9,907
Judy A. Rice................................................ 5,742
Robin B. Smith..............................................
Louis A. Weil, III.......................................... 812
Clay T. Whitehead...........................................
</TABLE>
C-1
<PAGE>
EXHIBIT D
BOARD AND COMMITTEE INFORMATION (1)
<TABLE>
<CAPTION>
PRUDENTIAL PRUDENTIAL
EQUITY VALUE
FUND, INC. FUND
---------- ----------
<S> <C> <C>
Annual Fee(2)............................................... N/A N/A
Fee for Attendance at Board Meetings(2)..................... N/A N/A
Fee for Attendance at Committee Meetings(2)................. N/A N/A
Number of Board Meetings during the Last Fiscal Year........ 6 6
Number of Audit Committee Meetings during the Last Fiscal
Year*..................................................... 4 4
Number of Nominating Committee Meetings during the Fiscal
Year*..................................................... 3 3
Size of Current Board....................................... 13 13
</TABLE>
------------------------------
* Only the Independent Directors serve on the Fund's Audit and Nominating
Committees.
(1) No fund within the Fund Complex has a bonus, pension, profit sharing or
retirement plan.
(2) While Board and Committee members do not receive attendance fees, they do
receive compensation for Board and Committee membership. See page 3 of this
proxy statement. No Director attended fewer than 75% of the total number of
Board and Committee meetings during the last fiscal year of each Fund.
D-1
<PAGE>
EXHIBIT E
OFFICER INFORMATION
<TABLE>
<CAPTION>
OFFICER
NAME, AGE, PRINCIPAL SINCE
BUSINESS OCCUPATION FOR THE -------------------
PAST FIVE YEARS OFFICE EQUITY VALUE
--------------------------- ------ ------ -----
<S> <C> <C> <C>
David R. Odenath, Jr. (43) President 2000 2000
President (since June 1999) of Prudential Investments;
President, Chief Executive Officer and Chief Operating
Officer (since June 1999) of Prudential Investments Fund
Management LLC (PIFM); Senior Vice President (since June
1999) of The Prudential Insurance Company of America
Prudential; formerly Senior Vice President (Prudential)
(August 1993-May 1999) of PaineWebber Group, Inc.
Robert F. Gunia (53) Vice 1987 1987
Executive Vice President and Chief Administrative Officer President
(since June 1999) of Prudential Investments; Corporate Vice
President (since September 1997) of Prudential; Executive
Vice President and Treasurer (since December 1996) of PIFM;
President (since April 1999) of Prudential Investment
Management Services LLC (PIMS); formerly Senior Vice
President (March 1987-May 1999) of Prudential Securities
Incorporated (Prudential Securities); formerly Chief
Administrative Officer (July 1990-September 1996), Director
(January 1989-September 1996), and Executive Vice President,
Treasurer and Chief Financial Officer (June 1987-September
1996) of Prudential Mutual Fund Management, Inc.
Grace C. Torres (41) Treasurer 1998 1997
First Vice President (since December 1996) of PIFM; First and
Vice President (since March 1994) of Prudential Securities; Principal
formerly First Vice President (March 1994-September 1996), Financial
Prudential Mutual Fund Management, Inc. and
Accounting
Officer
Marguerite E. H. Morrison (44) Secretary 1999 1999
Vice President and Corporate Counsel of Prudential and Chief
Legal Officer (since August 2000) of the Mutual Funds
Division of Prudential; Vice President and Associate General
Counsel (since December 1996) of PIFM; formerly Vice
President and Associate General Counsel (September
1987-September 1996) of Prudential Securities; Vice
President and Associate General Counsel
(June 1991-September 1996) of Prudential Mutual Fund
Management, Inc.
William V. Healey (46) Assistant 2000 2000
Assistant Secretary, Vice President and Corporate Counsel of Secretary
Prudential and Chief Legal Officer of Prudential Investments
(since August 1998); Director, ICI Mutual Insurance Company
(since June 1999); formerly Associate General Counsel of The
Dreyfus Corporation (Dreyfus), a subsidiary of Mellon
Bank, N.A. (Mellon Bank), and an officer and/or director of
various affiliates of Mellon Bank and Dreyfus.
Jonathan Shain (42) Assistant 2000 2000
Vice President and Corporate Counsel of Prudential (since Secretary
August 1998); formerly, Attorney with Fleet Bank, N.A.
(January 1997-July 1998) and Associate Counsel (August
1994-January 1997) of New York Life Insurance Company.
</TABLE>
E-1
<PAGE>
EXHIBIT F-1
[FUND]
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2001, between Prudential
Investments Fund Management LLC (PIFM or the Manager) and Jennison
Associates LLC (the Subadviser or Jennison).
WHEREAS, the Manager has entered into a Management Agreement, dated ,
2001 (the Management Agreement), with [FUND] (the Fund), a [Massachusetts
business trust/Maryland corporation] and a diversified, open-end management
investment company registered under the Investment Company Act of 1940 (the 1940
Act), pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund and to manage such portion of the Fund as the
Manager shall from time to time direct, and the Subadviser is willing to render
such investment advisory services; and
WHEREAS, this Agreement is intended to supersede the agreement, dated
September 7, 2000, between PIFM and the Subadviser;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
Directors/Trustees of the Fund, the Subadviser shall manage such portion of
the investment operations of the Fund as the Manager shall direct and shall
manage the composition of the Fund's portfolio, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus and
Statement of Additional Information (such Prospectus and Statement of
Additional Information as currently in effect and as amended or supplemented
from time to time, being herein called the Prospectus), and subject to the
following understandings:
(i) The Subadviser shall provide supervision of such portion of
the Fund's investments as the Manager shall direct and shall
determine from time to time what investments and securities will be
purchased, retained, sold or loaned by the Fund, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the [Articles
of Incorporation/Declaration of Trust], By-Laws and Prospectus of the
Fund and with the instructions and directions of the Manager and of
the Board of Directors/Trustees of the Fund, cooperate with the
Manager's (or its designee's) personnel responsible for monitoring
the Fund's compliance, and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986 and
all other applicable federal and state laws and regulations. In
connection therewith, the Subadviser shall, among other things,
prepare and file such reports as are, or may in the future be,
required by the Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by such portion of the Fund, and
will place orders with or through such persons, brokers, dealers or
futures commission merchants (including but not limited to Prudential
Securities Incorporated or any broker or dealer affiliated with the
Subadviser) to carry out the policy with respect to brokerage as set
forth in the Fund's Prospectus or as the Board of Directors/Trustees
may direct from time to time. In providing the Fund with investment
supervision, it is recognized that the Subadviser will give primary
consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Subadviser may
consider the financial responsibility, research and investment
information and other services provided by brokers, dealers or
futures commission merchants who may
F-1(a)
<PAGE>
effect or be a party to any such transaction or other transactions to
which the Subadviser's other clients may be a party. It is understood
that Prudential Securities Incorporated or any broker or dealer
affiliated with the Subadviser may be used as principal broker for
securities transactions, but that no formula has been adopted for
allocation of the Fund's investment transaction business. It is also
understood that it is desirable for the Fund that the Subadviser have
access to supplemental investment and market research and security
and economic analysis provided by brokers or futures commission
merchants who may execute brokerage transactions at a higher cost to
the Fund than may result when allocating brokerage to other brokers
on the basis of seeking the most favorable price and efficient
execution. Therefore, the Subadviser is authorized to place orders
for the purchase and sale of securities and futures contracts for the
Fund with such brokers or futures commission merchants, subject to
review by the Fund's Board of Directors/Trustees from time to time
with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers or futures
commission merchants may be useful to the Subadviser in connection
with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Fund
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall
be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's
Board of Directors/Trustees such periodic and special reports as the
Directors/Trustees may reasonably request. The Subadviser shall make
reasonably available its employees and officers for consultation with
any of the Directors/Trustees or officers or employees of the Fund
with respect to any matter discussed herein, including, without
limitation, the valuation of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
the portion of the Fund's assets it manages, and shall provide the
Manager with such information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser to the Fund through quantitative and
qualitative analysis and consultations with the Subadviser,
(ii) periodically make recommendations to the Fund's Board as to
whether the contract with the Subadviser should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or modified
pursuant to this process.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Directors/Trustees or officers
of the Fund to serve in the capacities in which they are
F-1(b)
<PAGE>
elected. Services to be furnished by the Subadviser under this Agreement may
be furnished through the medium of any of such directors, officers or
employees.
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and records
of the Fund required by Rule 31a-1 under the 1940 Act. The Subadviser agrees
that all records which it maintains for the Fund are the property of the
Fund and the Subadviser will surrender promptly to the Fund any of such
records upon the Fund's request, provided, however, that the Subadviser may
retain a copy of such records. The Subadviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such records as
are required to be maintained by it pursuant to paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described in
the attached Schedule A.
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund at
any time, without the payment of any penalty, by the Board of
Directors/Trustees of the Fund or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund, or by the
Manager or the Subadviser at any time, without the payment of any penalty,
on not more than 60 days' nor less than 30 days' written notice to the other
party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers or employees who may also be a
Director/Trustee, officer or employee of the Fund to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or a
dissimilar nature, nor limit or restrict the Subadviser's right to engage in
any other business or to render services of any kind to any other
corporation, firm, individual or association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing
F-1(c)
<PAGE>
five business days (or such other time as may be mutually agreed) after
receipt thereof. Sales literature may be furnished to the Subadviser
hereunder by first-class or overnight mail, facsimile transmission equipment
or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
--------------------------------------------
Robert F. Gunia
EXECUTIVE VICE PRESIDENT
JENNISON ASSOCIATES LLC
By:
--------------------------------------------
Karen E. Kohler
EXECUTIVE VICE PRESIDENT
</TABLE>
F-1(d)
<PAGE>
SCHEDULE A
<TABLE>
<S> <C>
Prudential Equity Fund, Inc................................. 0.250% to $500 mil.
0.226% next $500 mil.
0.203% over $1 bil.
Prudential Value Fund....................................... 0.300% to $500 mil.
0.238% next $500 mil.
0.214% next $500 mil.
0.171% over $1.5 bil.
</TABLE>
F-1(e)
<PAGE>
EXHIBIT F-2
PRUDENTIAL EQUITY FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2001, between Prudential
Investments Fund Management LLC (PIFM or the Manager) and GE Asset Management
Incorporated (the Subadviser or GEAM).
WHEREAS, the Manager has entered into a Management Agreement, dated ,
2001 (the Management Agreement), with Prudential Equity Fund, Inc. (the Fund), a
Maryland corporation and a diversified, open-end management investment company
registered under the Investment Company Act of 1940 (the 1940 Act), pursuant to
which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund and to manage such portion of the Fund as the
Manager shall from time to time direct, and the Subadviser is willing to render
such investment advisory services;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
Directors of the Fund, the Subadviser shall manage such portion of the
investment operations of the Fund as the Manager shall direct and shall
manage the composition of the Fund's portfolio, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus and
Statement of Additional Information (such Prospectus and Statement of
Additional Information as currently in effect and as amended or supplemented
from time to time, being herein called the Prospectus), and subject to the
following understandings:
(i) The Subadviser shall provide supervision of such portion of
the Fund's investments as the Manager shall direct and shall
determine from time to time what investments and securities will be
purchased, retained, sold or loaned by the Fund, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Articles
of Incorporation, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Board of
Directors of the Fund, cooperate with the Manager's (or its
designee's) personnel responsible for monitoring the Fund's
compliance, and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations. In connection
therewith, the Subadviser shall, among other things, prepare and file
such reports as are, or may in the future be, required by the
Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by such portion of the Fund, and
will place orders with or through such persons, brokers, dealers or
futures commission merchants (including but not limited to Prudential
Securities Incorporated or any broker or dealer affiliated with the
Subadviser) to carry out the policy with respect to brokerage as set
forth in the Fund's Prospectus or as the Board of Directors may
direct from time to time. In providing the Fund with investment
supervision, it is recognized that the Subadviser will give primary
consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Subadviser may
consider the financial responsibility, research and investment
information and other services provided by brokers, dealers or
futures commission merchants who may effect or be a party to any such
transaction or other transactions to which the Subadviser's other
clients
F-2(a)
<PAGE>
may be a party. It is understood that Prudential Securities
Incorporated or any broker or dealer affiliated with the Subadviser
may be used as principal broker for securities transactions, but that
no formula has been adopted for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for
the Fund that the Subadviser have access to supplemental investment
and market research and security and economic analysis provided by
brokers or futures commission merchants who may execute brokerage
transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the
most favorable price and efficient execution. Therefore, the
Subadviser is authorized to place orders for the purchase and sale of
securities and futures contracts for the Fund with such brokers or
futures commission merchants, subject to review by the Fund's Board
of Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers or futures commission merchants may be
useful to the Subadviser in connection with the Subadviser's services
to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Fund
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall
be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's
Board of Directors such periodic and special reports as the Directors
may reasonably request. The Subadviser shall make reasonably
available its employees and officers for consultation with any of the
Directors or officers or employees of the Fund with respect to any
matter discussed herein, including, without limitation, the valuation
of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
the portion of the Fund's assets it manages, and shall provide the
Manager with such information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser to the Fund through quantitative and
qualitative analysis and consultations with the Subadviser,
(ii) periodically make recommendations to the Fund's Board as to
whether the contract with the Subadviser should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or modified
pursuant to this process.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Directors or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
F-2(b)
<PAGE>
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and records
of the Fund required by Rule 31a-1 under the 1940 Act. The Subadviser agrees
that all records which it maintains for the Fund are the property of the
Fund and the Subadviser will surrender promptly to the Fund any of such
records upon the Fund's request, provided, however, that the Subadviser may
retain a copy of such records. The Subadviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such records as
are required to be maintained by it pursuant to paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described in
the attached Schedule A.
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund at
any time, without the payment of any penalty, by the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at
any time, without the payment of any penalty, on not more than 60 days' nor
less than 30 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the
1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers or employees who may also be a
Director, officer or employee of the Fund to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or a dissimilar nature, nor
limit or restrict the Subadviser's right to engage in any other business or
to render services of any kind to any other corporation, firm, individual or
association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature
F-2(c)
<PAGE>
may be furnished to the Subadviser hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
--------------------------------------------
Robert F. Gunia
EXECUTIVE VICE PRESIDENT
GE ASSET MANAGEMENT INCORPORATED
By:
--------------------------------------------
</TABLE>
F-2(d)
<PAGE>
SCHEDULE A
As compensation for GEAM's services, PIFM will pay GEAM a fee equal, on an
annualized basis, to the following:
0.30 of 1% on the first $50 million of the average net assets under GEAM's
management; and
0.20 of 1% on the next $250 million of the average net assets under GEAM's
management; and
0.15 of 1% over $300 million of the average net assets under GEAM's
management.
For purposes of computing the fees set out above, PIFM will aggregate the
assets of The Prudential Series Fund, Inc.--Equity Portfolio and Prudential
Equity Fund, Inc. that are under GEAM's management. The parties may aggregate
the assets of other Prudential mutual fund portfolios which GEAM may subadvise
in the future with the portfolios described above by amending this Schedule A.
F-2(e)
<PAGE>
EXHIBIT F-3
PRUDENTIAL EQUITY FUND, INC.
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2001, between Prudential
Investments Fund Management LLC (PIFM or the Manager) and Salomon Brothers Asset
Management Inc. (the Subadviser or SB).
WHEREAS, the Manager has entered into a Management Agreement, dated ,
2001 (the Management Agreement), with Prudential Equity Fund, Inc. (the Fund), a
Maryland corporation and a diversified, open-end management investment company
registered under the Investment Company Act of 1940 (the 1940 Act), pursuant to
which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund and to manage such portion of the Fund as the
Manager shall from time to time direct, and the Subadviser is willing to render
such investment advisory services;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
Directors of the Fund, the Subadviser shall manage such portion of the
investment operations of the Fund as the Manager shall direct and shall
manage the composition of the Fund's portfolio, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus and
Statement of Additional Information (such Prospectus and Statement of
Additional Information as currently in effect and as amended or supplemented
from time to time, being herein called the Prospectus), and subject to the
following understandings:
(i) The Subadviser shall provide supervision of such portion of
the Fund's investments as the Manager shall direct and shall
determine from time to time what investments and securities will be
purchased, retained, sold or loaned by the Fund, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Articles
of Incorporation, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Board of
Directors of the Fund, cooperate with the Manager's (or its
designee's) personnel responsible for monitoring the Fund's
compliance, and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations. In connection
therewith, the Subadviser shall, among other things, prepare and file
such reports as are, or may in the future be, required by the
Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by such portion of the Fund, and
will place orders with or through such persons, brokers, dealers or
futures commission merchants (including but not limited to Prudential
Securities Incorporated or any broker or dealer affiliated with the
Subadviser) to carry out the policy with respect to brokerage as set
forth in the Fund's Prospectus or as the Board of Directors may
direct from time to time. In providing the Fund with investment
supervision, it is recognized that the Subadviser will give primary
consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Subadviser may
consider the financial responsibility, research and investment
information and other services provided by brokers, dealers or
futures commission merchants who may effect or be a party to any such
transaction or other transactions to which the Subadviser's other
clients
F-3(a)
<PAGE>
may be a party. It is understood that Prudential Securities
Incorporated or any broker or dealer affiliated with the Subadviser
may be used as principal broker for securities transactions, but that
no formula has been adopted for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for
the Fund that the Subadviser have access to supplemental investment
and market research and security and economic analysis provided by
brokers or futures commission merchants who may execute brokerage
transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the
most favorable price and efficient execution. Therefore, the
Subadviser is authorized to place orders for the purchase and sale of
securities and futures contracts for the Fund with such brokers or
futures commission merchants, subject to review by the Fund's Board
of Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers or futures commission merchants may be
useful to the Subadviser in connection with the Subadviser's services
to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Fund
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall
be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's
Board of Directors such periodic and special reports as the Directors
may reasonably request. The Subadviser shall make reasonably
available its employees and officers for consultation with any of the
Directors or officers or employees of the Fund with respect to any
matter discussed herein, including, without limitation, the valuation
of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
the portion of the Fund's assets it manages, and shall provide the
Manager with such information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser to the Fund through quantitative and
qualitative analysis and consultations with the Subadviser,
(ii) periodically make recommendations to the Fund's Board as to
whether the contract with the Subadviser should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or modified
pursuant to this process.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Directors or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
F-3(b)
<PAGE>
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and records
of the Fund required by Rule 31a-1 under the 1940 Act. The Subadviser agrees
that all records which it maintains for the Fund are the property of the
Fund and the Subadviser will surrender promptly to the Fund any of such
records upon the Fund's request, provided, however, that the Subadviser may
retain a copy of such records. The Subadviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such records as
are required to be maintained by it pursuant to paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described in
the attached Schedule A.
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund at
any time, without the payment of any penalty, by the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at
any time, without the payment of any penalty, on not more than 60 days' nor
less than 30 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the
1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers or employees who may also be a
Director, officer or employee of the Fund to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or a dissimilar nature, nor
limit or restrict the Subadviser's right to engage in any other business or
to render services of any kind to any other corporation, firm, individual or
association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature
F-3(c)
<PAGE>
may be furnished to the Subadviser hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
--------------------------------------------
Robert F. Gunia
EXECUTIVE VICE PRESIDENT
SALOMON BROTHERS ASSET
MANAGEMENT INC.
By:
--------------------------------------------
</TABLE>
F-3(d)
<PAGE>
SCHEDULE A
As compensation for SB's services, PIFM will pay SB a fee equal, on an
annualized basis, to the following:
0.40 of 1% on the first $50 million of the average net assets under SB's
management; and
0.30 of 1% on the next $250 million of the average net assets under SB's
management; and
0.155 of 1% over $300 million of the average net assets under SB's management.
For purposes of computing the fees set out above, PIFM will aggregate the
assets of The Prudential Series Fund, Inc.--Equity Portfolio and Prudential
Equity Fund, Inc. that are under SB's management. The parties may aggregate the
assets of other Prudential mutual fund portfolios which SB may subadvise in the
future with the portfolios described above by amending this Schedule A.
F-3(e)
<PAGE>
EXHIBIT F-4
PRUDENTIAL VALUE FUND
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2001, between Prudential
Investments Fund Management LLC (PIFM or the Manager) and Deutsche Asset
Management, Incorporated (the Subadviser or DeAM).
WHEREAS, the Manager has entered into a Management Agreement, dated ,
2001 (the Management Agreement), with Prudential Value Fund (the Fund), a
Massachusetts business trust and a diversified, open-end management investment
company registered under the Investment Company Act of 1940 (the 1940 Act),
pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund and to manage such portion of the Fund as the
Manager shall from time to time direct, and the Subadviser is willing to render
such investment advisory services;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees
of the Fund, the Subadviser shall manage such portion of the investment
operations of the Fund as the Manager shall direct and shall manage the
composition of the Fund's portfolio, including the purchase, retention and
disposition thereof, in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Prospectus and Statement of
Additional Information (such Prospectus and Statement of Additional
Information as currently in effect and as amended or supplemented from time
to time, being herein called the Prospectus), and subject to the following
understandings:
(i) The Subadviser shall provide supervision of such portion of
the Fund's investments as the Manager shall direct and shall
determine from time to time what investments and securities will be
purchased, retained, sold or loaned by the Fund, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the
Declaration of Trust, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Board of
Trustees of the Fund, co-operate with the Manager's (or its
designee's) personnel responsible for monitoring the Fund's
compliance, and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations. In connection
therewith, the Subadviser shall, among other things, prepare and file
such reports as are, or may in the future be, required by the
Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by such portion of the Fund, and
will place orders with or through such persons, brokers, dealers or
futures commission merchants (including but not limited to Prudential
Securities Incorporated or any broker or dealer affiliated with the
Subadviser) to carry out the policy with respect to brokerage as set
forth in the Fund's Prospectus or as the Board of Trustees may direct
from time to time. In providing the Fund with investment supervision,
it is recognized that the Subadviser will give primary consideration
to securing the most favorable price and efficient execution. Within
the framework of this policy, the Subadviser may consider the
financial responsibility, research and investment information and
other services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such transaction or
other transactions to which the Subadviser's other clients may be a
party. It is understood that Prudential Securities Incorporated or
any broker or dealer affiliated with the Subadviser may be used as
principal broker for securities
F-4(a)
<PAGE>
transactions, but that no formula has been adopted for allocation of
the Fund's investment transaction business. It is also understood
that it is desirable for the Fund that the Subadviser have access to
supplemental investment and market research and security and economic
analysis provided by brokers or futures commission merchants who may
execute brokerage transactions at a higher cost to the Fund than may
result when allocating brokerage to other brokers on the basis of
seeking the most favorable price and efficient execution. Therefore,
the Subadviser is authorized to place orders for the purchase and
sale of securities and futures contracts for the Fund with such
brokers or futures commission merchants, subject to review by the
Fund's Board of Trustees from time to time with respect to the extent
and continuation of this practice. It is understood that the services
provided by such brokers or futures commission merchants may be
useful to the Subadviser in connection with the Subadviser's services
to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Fund
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall
be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's
Board of Trustees such periodic and special reports as the Trustees
may reasonably request. The Subadviser shall make reasonably
available its employees and officers for consultation with any of the
Trustees or officers or employees of the Fund with respect to any
matter discussed herein, including, without limitation, the valuation
of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
the portion of the Fund's assets it manages, and shall provide the
Manager with such information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser to the Fund through quantitative and
qualitative analysis and consultations with the Subadviser,
(ii) periodically make recommendations to the Fund's Board as to
whether the contract with the Subadviser should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or modified
pursuant to this process.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information
F-4(b)
<PAGE>
relating to the Subadviser's services hereunder needed by the Manager to
keep the other books and records of the Fund required by Rule 31a-1 under
the 1940 Act. The Subadviser agrees that all records which it maintains for
the Fund are the property of the Fund and the Subadviser will surrender
promptly to the Fund any of such records upon the Fund's request, provided,
however, that the Subadviser may retain a copy of such records. The
Subadviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required to be
maintained by it pursuant to paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described in
the attached Schedule A.
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund at
any time, without the payment of any penalty, by the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at
any time, without the payment of any penalty, on not more than 60 days' nor
less than 30 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the
1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers or employees who may also be a Trustee,
officer or employee of the Fund to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of
any business, whether of a similar or a dissimilar nature, nor limit or
restrict the Subadviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature may
be furnished to the Subadviser hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery.
F-4(c)
<PAGE>
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
--------------------------------------------
Robert F. Gunia
EXECUTIVE VICE PRESIDENT
DEUTSCHE ASSET MANAGEMENT,
INCORPORATED
By:
--------------------------------------------
</TABLE>
F-4(d)
<PAGE>
SCHEDULE A
As compensation for DeAM's services, PIFM will pay DeAM a fee equal, on an
annualized basis, to the following:
0.29 of 1% on the first $50 million of the average net assets under DeAM's
management, and
0.23 of 1% on the next $250 million of the average net assets under DeAM's
management, and
0.15 of 1% over $300 million of the average net assets under DeAM's
management.
For purposes of computing the fees set out above, PIFM will aggregate the
assets of The Prudential Series Fund, Inc.--Prudential Value Portfolio and
Prudential Value Fund under DeAM's management. The parties may aggregate the
assets of other Prudential mutual fund portfolios which DeAM may subadvise in
the future with the portfolios described above by amending this Schedule A.
F-4(e)
<PAGE>
EXHIBIT F-5
PRUDENTIAL VALUE FUND
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2001, between Prudential
Investments Fund Management LLC (PIFM or the Manager) and Key Asset Management
Inc. (the Subadviser or Key).
WHEREAS, the Manager has entered into a Management Agreement, dated ,
2001 (the Management Agreement), with Prudential Value Fund (the Fund), a
Massachusetts business trust and a diversified, open-end management investment
company registered under the Investment Company Act of 1940 (the 1940 Act),
pursuant to which PIFM acts as Manager of the Fund; and
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Fund and to manage such portion of the Fund as the
Manager shall from time to time direct, and the Subadviser is willing to render
such investment advisory services;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees
of the Fund, the Subadviser shall manage such portion of the investment
operations of the Fund as the Manager shall direct and shall manage the
composition of the Fund's portfolio, including the purchase, retention and
disposition thereof, in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Prospectus and Statement of
Additional Information (such Prospectus and Statement of Additional
Information as currently in effect and as amended or supplemented from time
to time, being herein called the Prospectus), and subject to the following
understandings:
(i) The Subadviser shall provide supervision of such portion of
the Fund's investments as the Manager shall direct and shall
determine from time to time what investments and securities will be
purchased, retained, sold or loaned by the Fund, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the
Declaration of Trust, By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the Board of
Directors/Trustees of the Fund, cooperate with the Manager's (or its
designee's) personnel responsible for monitoring the Fund's
compliance, and will conform to and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations. In connection
therewith, the Subadviser shall, among other things, prepare and file
such reports as are, or may in the future be, required by the
Securities and Exchange Commission.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by such portion of the Fund, and
will place orders with or through such persons, brokers, dealers or
futures commission merchants (including but not limited to Prudential
Securities Incorporated or any broker or dealer affiliated with the
Subadviser) to carry out the policy with respect to brokerage as set
forth in the Fund's Prospectus or as the Board of Trustees may direct
from time to time. In providing the Fund with investment supervision,
it is recognized that the Subadviser will give primary consideration
to securing the most favorable price and efficient execution. Within
the framework of this policy, the Subadviser may consider the
financial responsibility, research and investment information and
other services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such transaction or
other transactions to which the Subadviser's other clients may be a
party. It is understood that Prudential Securities Incorporated or
any broker or dealer affiliated with the Subadviser may be used as
principal broker for securities transactions, but that no formula has
been adopted for allocation of the Fund's investment
F-5(a)
<PAGE>
transaction business. It is also understood that it is desirable for
the Fund that the Subadviser have access to supplemental investment
and market research and security and economic analysis provided by
brokers or futures commission merchants who may execute brokerage
transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the
most favorable price and efficient execution. Therefore, the
Subadviser is authorized to place orders for the purchase and sale of
securities and futures contracts for the Fund with such brokers or
futures commission merchants, subject to review by the Fund's Board
of Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided by such brokers or futures commission merchants may be
useful to the Subadviser in connection with the Subadviser's services
to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security or futures contract to be in the best interest of the Fund
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall
be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act, and shall render to the Fund's
Board of Trustees such periodic and special reports as the Trustees
may reasonably request. The Subadviser shall make reasonably
available its employees and officers for consultation with any of the
Trustees or officers or employees of the Fund with respect to any
matter discussed herein, including, without limitation, the valuation
of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
the portion of the Fund's assets it manages, and shall provide the
Manager with such information upon request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser to the Fund through quantitative and
qualitative analysis and consultations with the Subadviser,
(ii) periodically make recommendations to the Fund's Board as to
whether the contract with the Subadviser should be renewed, modified,
or terminated and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or modified
pursuant to this process.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and
F-5(b)
<PAGE>
records of the Fund required by Rule 31a-1 under the 1940 Act. The
Subadviser agrees that all records which it maintains for the Fund are the
property of the Fund and the Subadviser will surrender promptly to the Fund
any of such records upon the Fund's request, provided, however, that the
Subadviser may retain a copy of such records. The Subadviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any
such records as are required to be maintained by it pursuant to
paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement.
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described in
the attached Schedule A.
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Subadviser's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940
Act; provided, however, that this Agreement may be terminated by the Fund at
any time, without the payment of any penalty, by the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at
any time, without the payment of any penalty, on not more than 60 days' nor
less than 30 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the
1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers or employees who may also be a Trustee,
officer or employee of the Fund to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of
any business, whether of a similar or a dissimilar nature, nor limit or
restrict the Subadviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature may
be furnished to the Subadviser hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
F-5(c)
<PAGE>
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
--------------------------------------------
Robert F. Gunia
EXECUTIVE VICE PRESIDENT
KEY ASSET MANAGEMENT INC.
By:
--------------------------------------------
</TABLE>
F-5(d)
<PAGE>
SCHEDULE A
As compensation for Key's services, PIFM will pay Key a fee equal, on an
annualized basis, to the following:
0.29 of 1% on the first $50 million of the average net assets under Key's
management; and
0.23 of 1% on the next $250 million of the average net assets under Key's
management; and
0.15 of 1% over $300 million of the average net assets under Key's
management.
For purposes of computing the fees set out above, PIFM will aggregate the
assets of The Prudential Series Fund, Inc.--Prudential Value Portfolio and
Prudential Value Fund under Key's management. The parties may aggregate the
assets of other Prudential mutual fund portfolios which Key may subadvise in the
future with the portfolios described above by amending this Schedule A.
F-5(e)
<PAGE>
EXHIBIT G
[FUND]
MANAGEMENT AGREEMENT
Agreement made this day of , 2001, between , a
Massachusetts business trust/Maryland corporation] (the Fund), and Prudential
Investments Fund Management LLC, a New York limited liability company (the
Manager).
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund and the
Fund also desires to avail itself of the facilities available to the Manager
with respect to the administration of its day-to-day business affairs, and the
Manager is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of the Fund and
each series thereof, if any (each a Portfolio), and as administrator of its
business affairs for the period and on the terms set forth in this Agreement.
The Manager accepts such appointment and agrees to render the services herein
described, for the compensation herein provided. Subject to the approval of the
Board of Directors/ Trustees of the Fund, the Manager is authorized to enter
into a subadvisory agreement with The Prudential Investment Corporation,
Jennison Associates LLC, or any other subadviser, whether or not affiliated with
the Manager (each, a Subadviser), pursuant to which such Subadviser shall
furnish to the Fund the investment advisory services in connection with the
management of the Fund (each, a Subadvisory Agreement). Subject to the approval
of the Board of Directors/Trustees of the Fund, the Manager is authorized to
retain more than one Subadviser for the Fund or any Portfolio, and if the Fund
or any Portfolio has more than one Subadviser, the Manager is authorized to
allocate the Fund's or the Portfolio's assets among the Subadvisers. The Manager
will continue to have responsibility for all investment advisory services
furnished pursuant to any Subadvisory Agreement. The Fund and Manager understand
and agree that the Manager may manage the Fund in a "manager-of-managers" style
with either a single or multiple Subadvisers, which contemplates that the
Manager will, among other things and pursuant to an Order issued by the
Securities and Exchange Commission (SEC): (i) continually evaluate the
performance of the Subadviser to the Fund and to each Portfolio, if applicable,
through quantitative and qualitative analysis and consultations with such
Subadviser; (ii) periodically make recommendations to the Fund's Board as to
whether the contract with one or more Subadvisers should be renewed, modified,
or terminated; and (iii) periodically report to the Fund's Board regarding the
results of its evaluation and monitoring functions. The Fund recognizes that,
subject to the approval of the Board of Directors/Trustees of the Fund, a
Subadviser's services may be terminated or modified pursuant to the
"manager-of-managers" process and that the Manager may appoint a new Subadviser
for a Subadviser that is so removed.
2. Subject to the supervision of the Board of Directors/Trustees of the
Fund, the Manager shall administer the Fund's business affairs and, in
connection therewith, shall furnish the Fund with office facilities and with
clerical, bookkeeping and recordkeeping services at such office facilities and,
subject to Section 1 hereof and any Subadvisory Agreement, the Manager shall
manage the investment operations of the Fund and the composition of the Fund's
or Portfolio's portfolio including the purchase, retention and
G-1
<PAGE>
disposition thereof, in accordance with the Fund's and each Portfolio's
investment objectives, policies and restrictions as stated in the Fund's SEC
registration statement, and subject to the following understandings:
(a) The Manager (or a Subadviser under the Manager's supervision) shall
provide supervision of the Fund's and each Portfolio's investments, and
shall determine from time to time what investments or securities will be
purchased, retained, sold or loaned by the Fund and each Portfolio, and what
portion of the assets will be invested or held uninvested as cash.
(b) The Manager, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the [Articles of
Incorporation/Declaration of Trust] and By-Laws of the Fund and the Fund's
SEC registration statement and with the instructions and directions of the
Board of Directors/Trustees of the Fund, and will conform to and comply with
the requirements of the 1940 Act and all other applicable federal and state
laws and regulations. In connection therewith, the Manager shall, among
other things, prepare and file (or cause to be prepared and filed) such
reports as are, or may in the future be, required by the SEC.
(c) The Manager (or the Subadviser under the Manager's supervision)
shall determine the securities and futures contracts to be purchased or sold
by the Fund and each Portfolio and will place orders pursuant to its
determinations with or through such persons, brokers, dealers or futures
commission merchants (including but not limited to Prudential Securities
Incorporated) in conformity with the policy with respect to brokerage as set
forth in the Fund's Registration Statement or as the Board of
Directors/Trustees may direct from time to time. In providing the Fund with
investment supervision, it is recognized that the Manager (or the Subadviser
under the Manager's supervision) will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this
policy, the Manager (or Subadviser under the Manager's supervision) may
consider the financial responsibility, research and investment information
and other services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such transaction or other
transactions to which other clients of the Manager (or Subadviser) may be a
party. It is understood that Prudential Securities Incorporated (or a
broker-dealer affiliated with a Subadviser) may be used as principal broker
for securities transactions, but that no formula has been adopted for
allocation of the Fund's investment transaction business. It is also
understood that it is desirable for the Fund that the Manager (or
Subadviser) have access to supplemental investment and market research and
security and economic analysis provided by brokers or futures commission
merchants, and that such brokers or futures commission merchants may execute
brokerage transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers or futures commission merchants on the
basis of seeking the most favorable price and efficient execution.
Therefore, the Manager (or the Subadviser under the Manager's supervision)
is authorized to pay higher brokerage commissions for the purchase and sale
of securities and futures contracts for the Fund to brokers or futures
commission merchants who provide such research and analysis, subject to
review by the Fund's Board of Directors/Trustees from time to time with
respect to the extent and continuation of this practice. It is understood
that the services provided by such broker or futures commission merchant may
be useful to the Manager (or the Subadviser) in connection with its services
to other clients.
On occasions when the Manager (or a Subadviser under the Manager's
supervision) deems the purchase or sale of a security or a futures contract
to be in the best interest of the Fund as well as other clients of the
Manager (or the Subadviser), the Manager (or Subadviser), to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities or futures contracts to be so sold
or purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities or futures contracts so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Manager (or the
Subadviser) in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients.
G-2
<PAGE>
(d) The Manager (or the Subadviser under the Manager's supervision)
shall maintain all books and records with respect to the Fund's portfolio
transactions and shall render to the Fund's Board of Directors/Trustees such
periodic and special reports as the Board may reasonably request.
(e) The Manager (or the Subadviser under the Manager's supervision)
shall be responsible for the financial and accounting records to be
maintained by the Fund (including those being maintained by the Fund's
Custodian).
(f) The Manager (or the Subadviser under the Manager's supervision)
shall provide the Fund's Custodian on each business day information relating
to all transactions concerning the Fund's assets.
(g) The investment management services of the Manager to the Fund under
this Agreement are not to be deemed exclusive, and the Manager shall be free
to render similar services to others.
(h) The Manager shall make reasonably available its employees and
officers for consultation with any of the Directors/Trustees or officers or
employees of the Fund with respect to any matter discussed herein,
including, without limitation, the valuation of the Fund's securities.
3. The Fund has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) [Articles of Incorporation/Declaration of Trust];
(b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors/Trustees of the Fund
authorizing the appointment of the Manager and approving the form of this
agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the Registration Statement), as filed with
the SEC relating to the Fund and its shares of [common stock/beneficial
interest] and all amendments thereto; and
(e) Prospectus and Statement of Additional Information of the Fund and
each of its Portfolios.
4. The Manager shall authorize and permit any of its officers and employees
who may be elected as Directors/Trustees or officers of the Fund to serve in the
capacities in which they are elected. All services to be furnished by the
Manager under this Agreement may be furnished through the medium of any such
officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to be
maintained by it pursuant to Paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund, and it
will surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records as are required to be maintained by the Manager
pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the following
expenses:
(i) the salaries and expenses of all employees of the Fund and the
Manager, except the fees and expenses of Directors/Trustees who are not
affiliated persons of the Manager or any Subadviser,
(ii) all expenses incurred by the Manager in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund herein, and
G-3
<PAGE>
(iii) the fees, costs and expenses payable to a Subadviser pursuant to a
Subadvisory Agreement. The Fund assumes and will pay the expenses described
below:
(a) the fees and expenses incurred by the Fund in connection with the
management of the investment and reinvestment of the Fund's assets,
(b) the fees and expenses of Fund Directors/Trustees who are not
"interested persons" of the Fund within the meaning of the 1940 Act,
(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith,
(ii) preparing and maintaining the general accounting records of the Fund
and the provision of any such records to the Manager useful to the
Manager in connection with the Manager's responsibility for the
accounting records of the Fund pursuant to Section 31 of the 1940 Act and
the rules promulgated thereunder, (iii) the pricing or valuation of the
shares of the Fund, including the cost of any pricing or valuation
service or services which may be retained pursuant to the authorization
of the Board of Directors/Trustees of the Fund, and (iv) for both mail
and wire orders, the cashiering function in connection with the issuance
and redemption of the Fund's securities,
(d) the fees and expenses of the Fund's Transfer and Dividend
Disbursing Agent that relate to the maintenance of each shareholder
account,
(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes chargeable
to the Fund in connection with its securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of share certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of the Fund,
(j) the cost of fidelity, directors' and officers' and errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and
Exchange Commission, and paying notice filing fees under state securities
laws, including the preparation and printing of the Fund's registration
statement and the Fund's prospectuses and statements of additional
information for filing under federal and state securities laws for such
purposes,
(l) allocable communications expenses with respect to investor
services and all expenses of shareholders' and Directors'/Trustees'
meetings and of preparing, printing and mailing reports and notices to
shareholders in the amount necessary for distribution to the
shareholders,
(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Distribution and
Service Plan adopted in a manner that is consistent with Rule 12b-1 under
the 1940 Act.
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Manager as full compensation therefor a fee
at the annual rate(s) as described on the attached Schedule A with respect to
the average daily net assets of each Portfolio of the Fund. This fee will be
computed daily, and will be paid to the Manager monthly.
G-4
<PAGE>
8. The Manager shall not be liable for any error of judgment or for any
loss suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act) or loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated with respect to any
Portfolio by the Fund at any time, without the payment of any penalty, by the
Board of Directors/ Trustees of the Fund or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Portfolio, or
by the Manager at any time, without the payment of any penalty, on not more than
60 days' nor less than 30 days' written notice to the other party. This
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
10. Nothing in this Agreement shall limit or restrict the right of any
officer or employee of the Manager who may also be a Director/Trustee, officer
or employee of the Fund to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any business,
whether of a similar or dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Board of
Directors/Trustees of the Fund from time to time, the Manager shall for all
purposes herein be deemed to be an independent contractor, and shall have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
12. During the term of this Agreement, the Fund agrees to furnish the
Manager at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
shareholders of the Fund or the public, which refer in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Fund will continue to furnish to the Manager copies of any of the
above-mentioned materials which refer in any way to the Manager. Sales
literature may be furnished to the Manager hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery. The Fund shall furnish
or otherwise make available to the Manager such other information relating to
the business affairs of the Fund as the Manager at any time, or from time to
time, reasonably requests in order to discharge its obligations hereunder.
13. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
14. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry
Street, 4th Floor, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the
Fund at Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077,
Attention: President.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
16. The Fund may use the name "[INSERT FUND NAME]" or any name including the
word "Prudential" only for so long as this Agreement or any extension, renewal
or amendment hereof remains in effect, including any similar agreement with any
organization which shall have succeeded to the
G-5
<PAGE>
Manager's business as Manager or any extension, renewal or amendment thereof
remain in effect. At such time as such an agreement shall no longer be in
effect, the Fund will (to the extent that it lawfully can) cease to use such a
name or any other name indicating that it is advised by, managed by or otherwise
connected with the Manager, or any organization which shall have so succeeded to
such businesses. In no event shall the Fund use the name "[INSERT FUND NAME]" or
any name including the word "Prudential" if the Manager's function is
transferred or assigned to a company of which The Prudential Insurance Company
of America does not have control.
[17. The name "Prudential Value Fund" is the designation of the Trustees
under a Declaration of Trust dated September 18, 1986, as amended, and all
persons dealing with the Fund must look solely to the property of the Fund for
the enforcement of any claims against the Fund as neither the Trustees,
officers, agents or shareholders assume any personal liability for obligations
entered into on behalf of the Fund.]
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
[FUND]
By:
-----------------------------------------
David R. Odenath, Jr.
PRESIDENT
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
By:
-----------------------------------------
Robert F. Gunia
EXECUTIVE VICE PRESIDENT
</TABLE>
G-6
<PAGE>
SCHEDULE A
<TABLE>
<S> <C>
Prudential Equity Fund, Inc................................. 0.50% to $500 mil.
0.475% next $500 mil.
0.45% over $1 bil.
Prudential Value Fund....................................... 0.60% to $500 mil.
0.50% next $500 mil.
0.475% next $500 mil.
0.45% over $1.5 bil.
</TABLE>
G-7
<PAGE>
EXHIBIT H
AMENDMENTS TO FUNDAMENTAL
INVESTMENT RESTRICTIONS AND POLICIES
The following chart compares each Fund's fundamental investment restrictions
and policies as they currently exist to the proposed amended provisions. For
more information about these changes, please refer to Proposals No. 9(a) through
9(h) in the Proxy Statement.
<TABLE>
<CAPTION>
CURRENT PROPOSED
RESTRICTIONS RESTRICTIONS/POLICIES
------------ --------------------------------------------
<S> <C>
PRUDENTIAL EQUITY FUND, INC.
The Fund may not:
1. Purchase any security (other than Purchase the securities of any issuer if, as
obligations of the U.S. government, its a result, the Fund would fail to be a
agencies or instrumentalities) if as a diversified company within the meaning of
result with respect to 75% of the Fund's the Investment Company Act of 1940 Act, and
total assets, more than 5% of the Fund's the rules and regulations promulgated
total assets (taken at current value) would thereunder, as each may be amended from time
then be invested in securities of a single to time, except to the extent that the Fund
issuer. may be permitted to do so by exemptive
order, SEC release, no-action letter or
similar relief or interpretations
(collectively, the "1940 Act Laws,
Interpretations and Exemptions").
2. Make short sales of securities except The restriction will be eliminated if
short sales against-the-box (but the Fund Proposal No. 9(b) is approved.
may obtain such short-term credits as may be
necessary for the clearance of
transactions).
3. Concentrate its investments in any one Purchase any security if as a result more
industry (no more than 25% of the Fund's than 25% or more of the Fund's total assets
total assets will be invested in any one would be invested in the securities of
industry). issuers having their principal business
activities in the same industry, except for
temporary defensive purposes, and except
that this limitation does not apply to
securities issued or guaranteed by the U.S.
government, its agencies or
instrumentalities.
4. Issue senior securities, borrow money or Issue senior securities or borrow money or
pledge its assets, except that the Fund may pledge its assets, except as permitted by
borrow up to 20% of the value of its total the 1940 Act Laws, Interpretations and
assets (calculated when the loan is made) Exemptions. For purposes of this
for temporary, extraordinary or emergency restriction, the purchase or sale of
purposes or for the clearance of securities on a when-issued or delayed
transactions. The Fund may pledge up to 20% delivery basis, reverse repurchase
of the value of its total assets to secure agreements, dollar rolls, short sales,
such borrowings. For the purpose of this derivative and hedging transactions such as
restriction, obligations of the Fund to interest rate swap transactions, and
Directors pursuant to deferred compensation collateral arrangements with respect
arrangements, the purchase or sale of thereto, and transactions similar to any of
securities on a when-issued or delayed the foregoing and collateral arrangements
delivery basis, the purchase and sale of with respect thereto, and obligations of the
options, futures contracts and foreign Fund to Directors pursuant to deferred
currency forward compensation arrangements are not deemed to
be a pledge of
</TABLE>
H-1
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED
RESTRICTIONS RESTRICTIONS/POLICIES
------------ --------------------------------------------
<S> <C>
contracts and collateral arrangements with assets or the issuance of a senior security.
respect to the purchase and sale of options,
futures contracts, options on futures
contracts and foreign currency forward
contracts are not deemed to be the issuance
of a senior securitiy or a pledge of assets.
5. Purchase any security if as a result the This restriction will be eliminated if
Fund would then hold more than 10% of the Proposal No. 9(a) is approved.
outstanding voting securities of any one
issuer.
6. Buy or sell commodities or commodity Buy or sell physical commodities or
contracts or real estate or interests in contracts involving physical commodities.
real estate except that the Fund may The Fund may purchase and sell
purchase and sell stock index futures (i) derivative, hedging and similar
contracts, options thereon and foreign instruments such as financial futures
currency forward contracts and securities contracts and options thereon, and
which are secured by real estate and (ii) securities or instruments backed by,
securities of companies which invest or deal or the return from which is linked to,
in real estate. physical commodities or currencies, such as
forward currency exchange contracts, and the
Fund may exercise rights relating to such
instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Fund's ownership of instruments supported or
secured thereby until they can be liquidated
in an orderly manner.
-and -
Buy or sell real estate, except that
investment in securities of issuers that
invest in real estate and investments in
mortgage-backed securities, mortgage
participations or other instruments
supported or secured by interests in real
estate are not subject to this limitation,
and except that the Fund may exercise rights
relating to such securities, including the
right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
7. Act as underwriter except to the extent No change.
that, in connection with the disposition of
portfolio securities, it may be deemed to be
an underwriter under certain federal
securities laws.
8. Make investments for the purpose of This restriction will not change, but will
exercising control or management. become non-fundamental.
9. Invest in securities of other investment This restriction will become non-fundamental
companies, except by purchases in the open and, as described in Proposal No. 9(h), is
market involving only customary brokerage expected to be amended by the Board.
commissions and as a result of which not
more than 10% of its total assets (taken at
current
</TABLE>
H-2
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED
RESTRICTIONS RESTRICTIONS/POLICIES
------------ --------------------------------------------
<S> <C>
value) would be invested in such securities,
or except as part of a merger, consolidation
or other acquisition.
10. Invest in interests in oil, gas or other This restriction will be eliminated if
mineral exploration or development programs, Proposal No. 9(d) is approved.
although it may invest in the common stock
of companies which invest in or sponsor such
programs.
11. Make loans, except through The Fund may make loans, including loans of
(i) repurchase agreements and (ii) loans of assets of the Fund, repurchase agreements,
portfolio securities (limited to 30% of the trade claims, loan participations or similar
Fund's total assets). (The purchase of a investments, or as permitted by the 1940 Act
portion of an issue of securities Laws, Interpretations and Exemptions. The
distributed publicly, whether or not the acquisition of bonds, debentures, other debt
purchase is made on the orginal issuance, is securities or instruments, or participations
not considered the making of a loan.) or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Fund's investment
objective.
PRUDENTIAL VALUE FUND
The Fund may not:
1. Purchase securities on margin (but the The restriction will be eliminated if
Fund may obtain such short-term credits as Proposal No. 9(b) is approved.
may be necessary for the clearance of
transactions); provided that the deposit or
payment by the Fund of initial or
maintenance margin in connection with stock
index futures or options thereon is not
considered the purchase of a security on
margin.
2. Make short sales of securities or The restriction will be eliminated if
maintain a short position, except short Proposal No. 9(b) is approved.
sales against-the-box.
3. Issue senior securities, borrow money or Issue senior securities or borrow money or
pledge its assets, except that the Fund may pledge its assets, except as permitted by
borrow up to 20% of the value of its total the 1940 Act Laws, Interpretations and
assets (calculated when the loan is made) Exemptions. For purposes of this
for temporary, extraordinary or emergency restriction, the purchase or sale of
purposes or for the clearance of securities on a when-issued or delayed
transactions and to take advantage of delivery basis, reverse repurchase
investment opportunities. The Fund may agreements, dollar rolls, short sales,
pledge up to 20% of the value of its total derivative and hedging transactions such as
assets to secure such borrowings. For interest rate swap transactions, and
purposes of this restriction, the purchase collateral arrangements with respect
or sale of securities on a when-issued or thereto, and transactions similar to any of
delayed delivery basis, forward foreign the foregoing and collateral arrangements
currency exchange contracts and collateral with respect thereto, and obligations of the
and collateral arrangements relating Fund to Trustees pursuant to deferred
thereto, collateral compensation arrangements are not deemed to
be a pledge of
</TABLE>
H-3
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED
RESTRICTIONS RESTRICTIONS/POLICIES
------------ --------------------------------------------
<S> <C>
arrangements with respect to stock index assets or the issuance of a senior security.
futures and options thereon and with respect
to the writing of options on securities or
on stock indices and obligations of the Fund
to Trustees pursuant to deferred
compensation arrangements are not deemed to
be a pledge of assets or the issuance of a
senior security.
4. Purchase any security (other than Purchase the securities of any issuer if, as
obligations of the U.S. government, its a result, the Fund would fail to be a
agencies or instrumentalities) if as a diversified company within the meaning of
result: (i) with respect to 75% of the the Investment Company Act of 1940 Act, and
Fund's total assets, more than 5% of the the rules and regulations promulgated
Fund's total assets (determined at the time thereunder, as each may be amended from time
of investment) would then be invested in to time, except to the extent that the Fund
securities of a single issuer, or (ii) more may be permitted to do so by exemptive
than 25% of the Fund's total assets order, SEC release, no-action letter or
(determined at the time of investment) would similar relief or interpretations
be invested in a single industry. As to (collectively, the "1940 Act Laws,
utility companies, gas, electric and Interpretations and Exemptions").
telephone companies will be considered as -and -
separate industries. Purchase any security if as a result 25% or
more of the Fund's total assets would be
invested in the securities of issuers having
their principal business activities in the
same industry, except for temporary
defensive purposes, and except that this
limitation does not apply to securities
issued or guaranteed by the U.S. government,
its agencies or instrumentalities.
5. Purchase any security if as a result the The restriction will be eliminated if
Fund would then hold more than 10% of the Proposal No. 9(a) is approved.
outstanding voting securities of an issuer.
6. Buy or sell real estate or interests in Buy or sell real estate, except that
real estate, except that the Fund may investment in securities of issuers that
purchase and sell securities which are invest in real estate and investments in
secured by real estate, securities of mortgage-backed securities, mortgage
companies which invest or deal in real participations or other instruments
estate and publicly traded securities of supported or secured by interests in real
real estate investment trusts. The Fund may estate are not subject to this limitation,
not purchase interests in real estate and except that the Fund may exercise rights
limited partnerships which are not readily relating to such securities, including the
marketable. right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
7. Buy or sell commodities or commodity Buy or sell physical commodities or
contracts, except that the Fund may purchase contracts involving physical commodities.
and sell stock index futures contracts and The Fund may purchase and sell
options thereon. (For purposes of this (i) derivative, hedging and similar
restriction, foreign currency forward instruments such as financial futures
contracts are not deemed to be a commodity contracts and options thereon, and
or commodity contract.) (ii) securities or instruments backed by,
or the return from which is linked to,
physical commodities or currencies, such as
forward currency exchange
</TABLE>
H-4
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED
RESTRICTIONS RESTRICTIONS/POLICIES
------------ --------------------------------------------
<S> <C>
contracts, and the Fund may exercise rights
relating to such instruments, including the
right to enforce security interests and to
hold physical commodities and contracts
involving physical commodities acquired as a
result of the Fund's ownership of
instruments supported or secured thereby
until they can be liquidated in an orderly
manner.
8. Act as underwriter except to the extent No change.
that, in connection with the disposition of
portfolio securities, it may be deemed to be
an underwriter under certain federal
securities laws.
9. Make investments for the purpose of The restriction will not change, but will
exercising control or management. become non-fundamental.
10. Invest in securities of other registered The restriction will become non-fundamental
investment companies, except as permitted and, as described in Proposal No. 9(h), is
under the Investment Company Act of 1940 and expected to be amended by the Board.
the rules thereunder, as amended from time
to time, or by any exemptive relief granted
by the Securities and Exchange Commission.
(Currently, under the Investment Company Act
of 1940, the Fund may invest in securities
of other investment companies subject to the
following limitations: the Fund may hold not
more than 3% of the outstanding voting
securities of any one investment company,
may not have invested more than 5% of its
total assets in any one investment company
and may not have invested more than 10% of
its total assets in securities of one or
more investment companies.)
11. Invest in interests in oil, gas or other The restriction will be eliminated if
mineral exploration or development programs, Proposal No. 9(d) is approved.
except that the Fund may invest in the
securities of companies which invest in or
sponsor such programs.
12. Make loans, except through repurchase The Fund may make loans, including loans of
agreements and loans of portfolio securities assets of the Fund, repurchase agreements,
(limited to 33% of the Fund's total assets) trade claims, loan participations or similar
and as otherwise permitted by exemptive investments, or as permitted by the 1940 Act
order of the Securities and Exchange Laws, Interpretations and Exemptions. The
Commission. acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments
</TABLE>
H-5
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED
RESTRICTIONS RESTRICTIONS/POLICIES
------------ --------------------------------------------
<S> <C>
similar to any of the foregoing will not be
considered the making of a loan, and is
permitted if consistent with the Fund's
investment objective.
13. Purchase warrants if as a result the The restriction will not change, but will
Fund would then have more than 5% of its become non-fundamental.
total assets (taken at current value)
invested in warrants or more than 2% of its
total assets (taken at current value)
invested in warrants not listed on the New
York or American Stock Exchanges.
</TABLE>
H-6
<PAGE>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
PRUDENTIAL VALUE FUND
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
Special Meeting of Shareholders (Meeting) -
January 31, 2001, 10:00 a.m.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The undersigned
hereby appoints Grace C. Torres, Jonathan D. Shain and Marguerite E.H.
Morrison as Proxies, each with the power of substitution, and hereby
authorizes each of them to represent and to vote, as designated below, all
the shares of beneficial interest of the Fund held of record by the
undersigned on November 17, 2000 at the Meeting to be held on January 31,
2001 or any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
THE PROXY WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 5, 6, 7, 8, 9
AND 10 IF YOU DO NOT SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY
STATEMENT DATED DECEMBER 29, 2000 FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PRUC01 KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
PRUDENTIAL VALUE FUND
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL OF
THE NOMINEES AND EACH OF THE PROPOSALS.
VOTE ON PROPOSALS
1. To elect thirteen Trustees.
Nominees: 01) Saul K. Fenster, 02) Delayne FOR WITHHOLD FOR ALL
Dedrick Gold, 03) Robert F. Gunia, 04) Douglas ALL ALL EXCEPT
H. McCorkindale, 05) W. Scott McDonald, Jr.,
06) Thomas T. Mooney, 07) Stephen P. Munn, 08) 0 0 0
David R. Odenath, Jr., 09) Richard A. Redeker,
10) Judy A. Rice, 11) Robin B. Smith, 12)
Louis A. Weil III, 13) Clay T. Whitehead
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
---------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve a new subadvisory agreement between
Prudential Investments Fund Management LLC
(PIFM) and Jennison Associates LLC. 0 0 0
3. NOT APPLICABLE
4. NOT APPLICABLE
5. To approve a new subadvisory agreement between
PIFM and Deutsche Asset Management, Incorporated. 0 0 0
6. To approve a new subadvisory agreement between
PIFM and Key Asset Management Inc. 0 0 0
7. To permit PIFM to enter into or make material
changes to subadvisory agreements without 0 0 0
shareholder approval.
8. To approve an amendment to the Management
Agreement to permit PIFM to allocate assets 0 0 0
among affiliated and unaffiliated subadvisers.
9. To approve certain changes to the Fund's
fundamental investment restrictions or
policies relating to the following:
(a) fund diversification 0 0 0
(b) issuing senior securities, borrowing money
or pledging assets 0 0 0
(c) buying and selling real estate 0 0 0
(d) buying and selling commodities and
commodity contracts 0 0 0
(e) fund concentration 0 0 0
(f) NOT APPLICABLE
(g) making loans 0 0 0
(h) other investment restrictions 0 0 0
10. To ratify the selection of
PricewaterhouseCoopers LLP as independent 0 0 0
accountants for the Fund's current fiscal
year.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
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.
Please be sure to sign and date this Proxy.
---------------------------------- -------
---------------------------------- -------
Signature [PLEASE SIGN WITHIN BOX] Date
---------------------------------- --------
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Signature (Joint Owners) Date
________________________________________________________________________________
