As Filed with the Securities and Exchange Commission on September 12, 1996
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
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:
---------------------------------------------------------------------
5) Total Fee Paid:
---------------------------------------------------------------------
[X] 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:
---------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
PRUDENTIAL'S INVESTMENT PLAN ACCOUNT
PRUDENTIAL'S ANNUITY PLAN ACCOUNT
PRUDENTIAL'S ANNUITY PLAN ACCOUNT-2
BOX 59
MINNEAPOLIS, MN 55440-8757
Dear Planholder:
Prudential's Gibraltar Fund will hold its annual meeting of stockholders in the
offices of The Prudential Insurance Company of America, Prudential Plaza, 751
Broad Street, Newark, New Jersey on Tuesday, October 1, 1996, at 9:00 a.m.
E.D.T.
You, as a Planholder under a Systematic Investment Plan or a Variable Annuity
Contract that participates in one of the Accounts of the Prudential Financial
Security Program named above, are entitled to instruct The Prudential how to
vote a number of shares of the Common Stock of the Fund related to your interest
in the Accounts as of the close of business on August 9, 1996. The attached
Notice and Statement Concerning the Annual Meeting of Stockholders of
Prudential's Gibraltar Fund set forth the matters to be considered at the
meeting.
Please take a few minutes to consider these matters and then exercise your right
to give your instructions by completing, dating and signing the enclosed voting
instruction form. Included is a self-addressed and postage-paid envelope for
your convenience. In order to be given effect, your voting instructions must be
received not later than Thursday, September 26, 1996.
I wish to thank you in advance for taking this opportunity to give us your
instructions in the conduct of our Program.
Sincerely yours,
/s/ MENDEL A. MELZER
--------------------------------
Mendel A. Melzer
Chief Financial Officer
Money Management Group
September 13, 1996
<PAGE>
PRUDENTIAL'S GIBRALTAR FUND
BOX 59
MINNEAPOLIS, MN 55440-8757
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS OF THE FUND--OCTOBER 1, 1996
The annual meeting of stockholders of Prudential's Gibraltar Fund will be held
in the offices of The Prudential Insurance Company of America, Prudential Plaza,
751 Broad Street, Newark, New Jersey on Tuesday, October 1, 1996, at 9:00 a.m.
E.D.T. for the following purposes:
1. To elect a Board of five directors, each of whom shall serve for an
indefinite term if Proposal No. 3 is adopted;
2. To ratify the Board's selection of Price Waterhouse LLP as
independent public accountant for the Fund;
3. To approve the Agreement of Merger; and
4. To transact such other business as may properly come before the meeting. By
order of the Board of Directors.
Thomas C. Castano
Secretary
<PAGE>
STATEMENT CONCERNING THE
ANNUAL MEETING OF STOCKHOLDERS OF
PRUDENTIAL'S GIBRALTAR FUND
OCTOBER 1, 1996
The Prudential Insurance Company of America (The Prudential) and the Board of
Directors of Prudential's Gibraltar Fund (Fund) are hereby soliciting voting
instructions for the annual meeting of stockholders of the Fund to be held on
October 1, 1996, and at any and all adjournments thereof. The approximate date
on which this statement and the voting instruction form will first be sent to
Planholders is September 13, 1996.
There are 24,172,655 votes eligible to be cast at the meeting, representing the
number of shares of Common Stock of the Fund held as of the close of business on
August 9, 1996 in the Prudential's Gibraltar Fund made up of Prudential's
Investment Plan Account, Prudential's Annuity Plan Account and Prudential's
Annuity Plan Account-2 (Accounts) of the Prudential Financial Security Program
as the result of the sale of Systematic Investment Plans and Variable Annuity
Contracts by The Prudential. Shares of Common Stock are held by the Accounts as
follows: Prudential's Investment Plan Account 19,477,802 shares; Prudential's
Annuity Plan Account 194,401 shares; and Prudential's Annuity Plan Account-2
4,500,452 shares.
Each Planholder of a Systematic Investment Plan or Variable Annuity Contract
issued in connection with the Accounts is entitled to have the number of Fund
shares related to his or her interest in the Accounts voted in accordance with
his or her instructions. If a Planholder submits a properly executed voting
instruction form but omits instructions with respect to any item or items, The
Prudential will vote the appropriate number of Fund shares as if such Planholder
had given instructions to vote for approval of such item or items. The
Prudential will vote Fund shares held in each Account for which it does not
receive properly executed instruction forms in the same proportion as it votes
Fund shares held in that Account for which it does receive such forms.
Voting instructions, in order to be effective, must be received by The
Prudential prior to the close of business on September 26, 1996. Such
instructions may be revoked provided written notice of revocation is received by
The Prudential at Box 59, Minneapolis, MN 55440-8757, prior to the close of
business on September 26, 1996. This solicitation is being made by mail, but it
may also be by telephone or personal interview. The Prudential will bear the
cost.
Upon request, the Fund will furnish, without charge, a copy of the Fund's most
recent annual report and the most recent semi-annual report succeeding the
annual report, if any, to any Planholder. If you wish to obtain copies of these
reports, mail a request to Prudential, Prudential Plaza, Newark, New Jersey
07102, or call 1-800-445-4571.
1. ELECTION OF DIRECTORS
The By-laws of the Fund authorize the Board of Directors to establish the number
of directors at not less than three, nor more than nine. The Board has been
established at five members, and these are elected annually by the stockholders.
Each director serves until the next annual meeting of stockholders or until a
successor is duly elected and qualified. If Proposal No. 3 is approved, then
each director will serve an indefinite term. The Board held two meetings during
1995.
The voting instruction form provides that unless The Prudential is directed
otherwise, a properly executed form will be voted for the election of the
persons listed below, all of whom have agreed to serve if elected. None of the
nominees are the record or beneficial owner of any interest in any separate
account of The Prudential which holds Fund shares.
1
<PAGE>
<TABLE>
<CAPTION>
NOMINEE AND OTHER
POSITIONS WITH THE FUND PERIOD OF SERVICE
(IF ANY) PRINCIPAL OCCUPATION FOR THE LAST FIVE YEARS AS DIRECTOR
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mendel A. Melzer* Chief Financial Officer, Money Management November, 1995
Chairman of the Board Group of The Prudential since 1995; Senior Vice to date
(age 35) President and Chief Financial Officer of
Prudential Preferred Financial Services from
1993 to 1995; Managing Director, Equity Management
Assocs. of the Prudential from 1991 to 1993.
Jonathan M. Greene* President, Money Management Group of To commence
(age 52) The Prudential since March 1996; Vice October 1996
President, T. Rowe Price prior to 1996.
Saul K. Fenster President of New Jersey Institute of Technology September, 1985
(age 63) since 1978. to date
W. Scott McDonald, Jr. Principal, Scott McDonald & Associates since April September, 1985
(age 59) 1995; Executive Vice President, Fairleigh Dickinson to date
University prior to April 1995.
Joseph Weber Vice President, Interclass (international corporate September, 1985
(age 72) learning) since 1990. to date
</TABLE>
- -----------------
* Mr. Melzer and Mr. Greene are interested persons as that term is defined in
the Investment Company Act of 1940 (1940 Act), of The Prudential, its
affiliates and the Fund, because they are officers and/or affiliated
persons of The Prudential, the investment advisor to the Fund. The duties
of Mr. Melzer and Mr. Greene include overall responsibility for the
development, introduction and ongoing administration of individual type
products established by The Prudential and its subsidiaries.
Certain actions of the Board, including the annual continuance of the Investment
Advisory Contract between the Fund and The Prudential, must be approved by a
majority of the members of the Board who are not interested persons of The
Prudential, its affiliates or the Fund. Messrs. Fenster, McDonald and Weber are
not interested persons of The Prudential, its affiliates or the Fund. However,
Mr. Fenster is President of the New Jersey Institute of Technology. The
Prudential has issued a group annuity contract to the New Jersey Institute of
Technology and provides group life and group health insurance to its employees.
If any nominee should not be able to serve as a director, or for good cause will
not serve, The Prudential will vote for the election of such other person as it
may nominate. The Board has no standing nominating or compensation committees,
nor are there any other committees performing similar functions. The Board of
Directors has no formal audit or similar committee. Nonetheless, those directors
of the Fund who are not interested persons of the Fund periodically meet at
their discretion with representatives of the Fund's independent public
accountant. No interested person of the Fund or The Prudential is present at
such meetings.
COMPENSATION OF DIRECTORS AND OFFICERS
The Fund pays all compensation to directors who are not affiliated with
Prudential. Compensation information for there directors appears on the table
below.
<TABLE>
<CAPTION>
TOTAL 1995
PENSION OR COMPENSATION
RETIREMENT ESTIMATED RELATED TO THE
AGGREGATE BENEFITS TOTAL FUND AND OTHER
1995 ACCRUED AS ANNUAL PRUDENTIAL-
COMPENSATION PART OF BENEFITS RELATED
RELATED TO THE FUND UPON INVESTMENT
NAME THE FUND EXPENSES RETIREMENT COMPANIES
- ---- -------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Saul K. Fenster .......... $8,400 None None $22,000
W. Scott McDonald, Jr. .... $8,400 None None $22,000
Joseph Weber ............. $8,400 None None $22,000
</TABLE>
2
<PAGE>
- --------------
(1) During 1995, Mr. Fenster served on the Board or Committee of 4
Prudential-related investment companies. Of his 1995 compensation,
$5,600 was paid by Prudential, and $16,400 was paid by Prudential-related
investment companies.
(2) During 1995, Mr. McDonald served on the Board or Committee of 4
Prudential-related investment companies. Of his 1995 compensation,
$5,600 was paid by Prudential, and $16,400 was paid by Prudential-related
investment companies.
(3) During 1995, Mr. Weber served on the Board or Committee of 5
Prudential-related investment companies. Of his 1995 compensation,
$8,400 was paid by Prudential, and $16,400 was paid by Prudential-related
investment companies.
No director or officer of the Fund who is also an officer, director or employee
of The Prudential or its subsidiaries receives any remuneration for his or her
services to the Fund. In addition to Mr. Melzer the following are officers of
the Fund:
<TABLE>
<CAPTION>
NAME AND POSITION WITH THE FUND PRINCIPAL OCCUPATION FOR THE LAST FIVE YEARS
- ------------------------------- --------------------------------------------
<S> <C>
Eugene S. Stark First Vice President, Prudential Mutual Fund Management, Inc.
Comptroller since 5/01/96 since 1990.
(age 38)
Thomas C. Castano Assistant General Counsel of The Prudential
Secretary and Treasurer since 1990.
since 9/9/92
(age 49)
</TABLE>
INVESTMENT MANAGEMENT AND ADMINISTRATION
Prudential is the Fund's investment adviser. Prudential has entered into a
service agreement with its wholly-owned subsidiary. The Prudential Investment
Corporation ("PIC"), Prudential Plaza, Newark, New Jersey 07102, pursuant to
which PIC provides substantially all investment management services for the
Fund, subject to Prudential's supervision. Prudential continues to have
reponsibility for all investment advisory services under its investment
management agreement with the Account. Pursuant to the service agreement between
Prudential and PIC, Prudential reimburses PIC for its costs and expenses.
Prudential Mutual Fund Investment Management, a division of PIC, supplies the
investment services with respect to equity securities.
Pruco Securities Corporation, 1111 Durham Avenue, South Plainfield, New Jersey
07080, a wholly-owned indirect subsidiary of Prudential, is the principal
underwriter of the Fund's shares.
The Prudential pays all expenses of the Fund not covered by the investment
management agreement (except for the fees and expenses of members of the Fund's
Board of Directors who are not officers or employees of The Prudential, brokers'
commissions, transfer taxes and other charges and fees attributable to
investment transactions, and any other local, state or federal taxes).
2. RATIFICATION OF THE BOARD'S SELECTION OF INDEPENDENT PUBLIC
ACCOUNTANT
In August, 1996, the Fund's Board of Directors voted to employ Price Waterhouse
LLP as independent public accountant for the Fund. Price Waterhouse LLP has no
direct or material indirect financial interest in the Fund.
Price Waterhouse LLP replaces Deloitte & Touche LLP who resigned as the Fund's
independent public accountant subsequent to a decision by The Prudential to
change its independent public accountant from Deloitte & Touche LLP to Price
Waterhouse LLP. These actions were not taken because of any disagreement between
The Prudential and Deloitte & Touche LLP or between Deloitte & Touche LLP and
the Fund. Deloitte & Touche LLP's reports for the last two years did not contain
any adverse
3
<PAGE>
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. No disagreement of a type
that an independent public accountant would refer to in its report occurred
between Deloitte & Touche LLP and Prudential or the Fund. Price Waterhouse LLP's
auditing charges (which are paid by Prudential for the Fund) are approximately
the same as those of Deloitte & Touche LLP.
The Board of Directors has no formal audit or similar committee. Nonetheless,
those directors of the Fund who are not interested persons of the Fund
periodically meet at their discretion with representatives of the Fund's
independent public accountant. No interested person of the Fund or The
Prudential is present at such meetings.
Currently, a decision of the Board concerning the selection or continuance of
the employment of the Fund's independent public accountant is subject to annual
ratification or rejection by shareholders at the annual meeting. If the
recommended Agreement of Merger as described below in Proposal 3 is approved,
the By-laws of the Fund will be amended so that ratification or rejection of the
selection of an independent public accountant selected by the Board will occur
only at annual meetings that by applicable law are required to be held. The
Board recommends ratification of Price Waterhouse LLP as the Fund's independent
public accountant. It is anticipated that one or more representatives of Price
Waterhouse LLP will attend this year's annual meeting, that they will have an
opportunity to make a statement if they desire to do so, and that they will also
be available to respond to appropriate questions. It is not anticipated that
representives of Deloitte & Touche LLP will attend the meeting.
3. APPROVAL OF AN AGREEMENT OF MERGER REINCORPORATING THE FUND UNDER THE LAWS
OF THE STATE OF MARYLAND
GENERAL
The Board of Directors of the Fund has approved and recommends that the
stockholders of the Fund approve the Agreement of Merger (the "Agreement of
Merger"), a copy of which is attached as Exhibit A to this Proxy Statement,
which would change the Fund's state of incorporation from Delaware to Maryland
(the "Reincorporation").
There are two primary purposes for the Reincorporation. First, the
Reincorporation will eliminate the Fund's annual franchise tax payment. In
fiscal 1995, the Fund paid the State of Delaware franchise taxes of $39,033. The
State of Maryland has no franchise tax. Second, the Reincorporation will
eliminate the need for annual stockholder meetings on routine matters. While
Delaware corporations must always hold annual stockholder meetings, Maryland
corporations that are registered under the 1940 Act, such as the Fund, need only
hold annual meetings when required by the 1940 Act.
The Reincorporation will not result in a change in the Fund's business,
management, directors, location of principal executive office, capitalization,
assets, liabilities or net asset value. The Fund will have new articles of
incorporation and by-laws which, as described below, differ from its current
articles and by-laws.
To effect the Reincorporation, the Fund (sometimes referred to as
"PGF-Delaware") will be merged into a new Maryland corporation, named
Prudential's Gibraltar Fund, Inc. ("PGF-Maryland") (the "Merger"). The addition
of "Inc." to the Fund's name satisfies a requirement of Maryland law. Prior to
the Merger, PGF-Maryland will issue 100 shares, all of them to PGF-Delaware.
PGF-Delaware, as sole shareholder of PGF-Maryland, will (1) elect the directors
of PGF-Delaware as directors of PGF-Maryland, (2) ratify the selection of
PGF-Delaware's independent accountant as the independent accountant for
PGF-Maryland, and (3) approve agreements for PGF-Maryland that are identical to
the current agreements in effect for PGF-Delaware, including the investment
advisory agreement with The Prudential, the Administrative Services Agreement
with The Prudential, the distribution agreement with Pruco Securities
Corporation, and the custody agreement with Chemical Bank. A vote to approve
this proposal constitutes approval of these proposed actions by PGF-Delaware,
which are designed to ensure that PGF-Maryland operates in the same manner as
PGF-Delaware.
4
<PAGE>
When the Merger becomes effective, (i) PGF-Delaware will cease to exist, (ii)
PGF-Maryland will succeed, to the fullest extent permitted by law, to all of the
business, assets and liabilities of PGF-Delaware, and (iii) each share of Common
Stock of PGF-Delaware ("PGF-Delaware Common Stock") will be automatically
converted into a corresponding share of the Class A Common Stock of PGF-Maryland
("PGF-Maryland Common Stock") and the outstanding shares of PGF-Maryland held by
PGF-Delaware will be surrendered and extinguished. As noted above, PGF-Maryland
will operate under advisory, administrative, custodial and other agreements that
are identical to the current agreements, except that PGF-Maryland, rather than
PGF-Delaware, will be the party to those agreements.
Under the Agreement of Merger, the Board of Directors retains discretion to
abandon or terminate the Reincorporation after receipt of stockholder approval,
but prior to filing the necessary documentation with the States of Delaware and
Maryland, if the Board of Directors determines the Reincorporation is no longer
in the best interest of the Fund and its stockholders.
Following the Merger, the Fund will be a Maryland corporation and the rights of
its stockholders, directors and officers will be governed by Maryland law and by
PGF-Maryland's articles of incorporation (the "Maryland Charter") and by-laws
(the "Maryland By-Laws"), rather than by Delaware law and the Fund's existing
Restated Certificate of Incorporation, as amended, and Amended and Restated
By-Laws (the "Delaware Charter" and the "Delaware By-Laws," respectively). A
copy of the Maryland Charter is attached hereto as Exhibit B. Copies of the
Delaware Charter, the Maryland By-Laws and the Delaware By-Laws are available
for inspection at the principal offices of the Fund and will be sent to
stockholders at no charge upon request directed to the Fund's Secretary at
Prudential Plaza, Newark, New Jersey 07102.
DIFFERENCES BETWEEN PGF-DELAWARE AND PGF-MARYLAND
A discussion of the material differences between PGF-Delaware and PGF-Maryland
appears below. This discussion is not intended to be complete and is qualified
in its entirety by reference to Exhibit B attached hereto and to the Delaware
Charter, the Delaware By-Laws, the Maryland By-Laws, and Delaware and Maryland
law.
Annual Meeting. As noted above, Delaware law requires that all corporations hold
annual meetings of stockholders. Maryland law, by contrast, has a special rule
applicable to registered investment companies, such as the Fund. A Maryland
corporation registered under the 1940 Act need only hold an annual meeting in a
year in which the 1940 Act requires that directors be elected. Currently, the
1940 Act requires that if at any time less than a majority of the directors
holding office have been elected by stockholders, then the board or a proper
officer shall cause to be held as promptly as possible (and in any event less
than 60 days) a stockholders' meeting for the purpose of electing directors to
fill any existing vacancies, unless the Securities and Exchange Commission shall
by order extend such period. Currently, the 1940 Act permits a board to fill
vacancies on the board if immediately after filling such vacancy at least
two-thirds of the directors then holding office have been elected by
stockholders.
Stockholders' Inspection Rights. Delaware law allows any stockholder to inspect
the corporation's stock ledger, stockholders' list and other books and records
for a purpose reasonably related to such person's interest as a stockholder,
provided that the stockholder complies with the statutory requirement of a
written demand. During the ten days preceding a stockholder meeting, a
stockholder may inspect the stockholders' list for any purpose germane to that
meeting. Under Maryland law, one or more stockholders who together are and for
at least six months have been stockholders of record or holders of voting trust
certificates of at least 5% of the outstanding stock of any class may inspect
the corporation's books of account and stock ledger, request a statement of the
corporation's affairs and request a stockholders' list. Any stockholder may
inspect the by-laws, minutes of proceedings of the stockholders, annual
statements of affairs and voting trust agreements on file of a Maryland
corporation and may request a statement showing all stock and securities issued
by the corporation during a specified period of not more than 12 months before
the date of the request. Consequently, under Maryland law, stockholders may not
have access to the corporation's books of account and stock ledger or request a
statement of the corporation's affairs or a stockholders' list, which are
5
<PAGE>
available to any stockholder under Delaware law, unless the stockholder owns a
significant amount of stock or joins with other stockholders in making such a
request.
Stockholder Action Without a Meeting. Delaware law allows stockholders to take
action without a meeting, without prior notice and without a vote, if written
consents signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
is delivered to the corporation. Maryland law provides that stockholders may
take such action only upon unanimous written consent.
Indemnification. Under Delaware law, directors and officers, as well as other
employees and agents of a corporation, may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with threatened, pending or completed actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than a
"derivative action," which is an action by or in the right of the corporation),
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceedings, had no reasonable cause to believe their conduct
was unlawful. A similar standard applies with regard to derivative actions,
except that indemnification is permitted only for expenses (including attorneys'
fees) incurred in connection with defense or settlement of such action.
In contrast, Maryland law provides that a director, officer, employee or agent
may be indemnified for such service unless it is established that (i) the act or
omission of the person was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the person actually received an improper personal benefit in
money, property, or services; or (iii) in the case of any criminal proceeding,
the person had reasonable cause to believe that the act or omission was
unlawful. The standard under Maryland law, which permits indemnification unless
the person commits a "bad act," may give the Board of Directors greater
discretion to indemnify directors, officers, employees and agents than the "good
faith" standard of conduct under Delaware law.
Additional Classes of Shares. PGF-Delaware has only one class of shares. The
Maryland Charter currently authorizes the issuance of shares of one class, which
are equivalent to the existing PGF-Delaware shares. The Maryland Charter,
however, also establishes ten additional classes without any authorized shares.
The Board of Directors could authorize the issuance of shares of those ten
classes, but there is no current intention to do so. The additional classes
could be used, for example, to create separate investment funds, technically
separate series of a series investment company. For most purposes, each fund
(i.e., series) would be treated under the federal securities law as a separate
investment company. Election of directors and ratification of accountants would
continue to be voted on by stockholders of all classes as a whole.
Investment Restrictions. Article 9 of the Delaware By-Laws lists a variety of
restrictions imposed by the 1940 Act and New Jersey Insurance law. While the
Maryland By-Laws contain no similar provisions, PGF-Maryland is required to, and
will, continue to operate in accordance with the investment objective, policies
and restrictions set forth in the prospectus as well as applicable law.
Amendment of By-Laws. The Delaware By-Laws permit the Board of Directors to
amend most by-laws without shareholder approval, but require shareholder
approval to amend certain by-laws relating to the investment objective,
purchases and redemption of shares, and amendment of the by-laws. The Maryland
By-Laws permit the Board of Directors to amend any of the by-laws without
shareholder approval.
Redemption of Shares. Neither the Delaware Charter nor the Delaware By-Laws
expressly authorize PGF-Delaware to redeem shares unless the shareholder
requests their redemption. The Maryland Charter authorizes PGF-Maryland to
redeem shares without shareholder authorization under certain limited
circumstances: (i) to prevent PGF-Delaware from being deemed a "personal holding
company" under the tax law; (ii) if the value of the shares in an account is
less than $1000, and the shareholder owning that account does not purchase
additional shares to raise the value to $1000 within sixty days of being given
notice that the value of the account has fallen below $1000; or (iii) if the net
income with
6
<PAGE>
respect to a class of shares should be negative. The authority to redeem shares
under these circumstances is beneficial to the Fund for purposes of maintaining
favorable tax treatment, complying with the requirements of the 1940 Act, and
securing the efficient administration of the Fund.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
Counsel has advised the Fund that, for federal income tax purposes, the Merger
will constitute a reorganization under Section 368 of the Internal Revenue Code
of 1986, as amended, no gain or loss will be recognized by the holders of
PGF-Delaware Common Stock as a result of the Merger, no gain or loss will be
recognized by PGF-Delaware or PGF-Maryland as a result of the Merger, and
PGF-Maryland will succeed, without adjustment, to the tax attributes of
PGF-Delaware. Each stockholder will have the same basis in the shares of
PGF-Maryland Common Stock received in the Merger as in the shares of
PGF-Delaware Common Stock held immediately prior to the time the Merger becomes
effective. The holding period of the shares of the PGF-Maryland Common Stock
will include the period during which the corresponding shares of PGF-Delaware
Common Stock were held, provided that such corresponding shares were held as a
capital asset at the time of effectiveness of the Merger.
CONSEQUENCES IF PROPOSAL IS NOT APPROVED
If this Proposal is not approved by the stockholders, the Fund will continue to
operate as a Delaware corporation, pay Delaware franchise taxes and hold annual
meetings. In the future, the Fund's Board of Directors may seek certain
amendments to the Delaware Charter or re-submit a proposal to the stockholders
asking them to approve the reincorporation of the Fund in the State of Maryland.
REQUIRED VOTE
Approval of the proposed Reincorporation will require the affirmative vote of a
majority of the outstanding stock entitled to vote thereon. For this purpose,
abstentions will have the effect of a vote to disapprove the proposed
Reincorporation.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE TO "APPROVE" THE AGREEMENT OF MERGER
REINCORPORATING THE FUND UNDER THE LAWS OF THE STATE OF MARYLAND.
4. OTHER MATTERS
Management is not currently aware of any other matters that will be considered
at the meeting. However, unless authority is withheld, The Prudential may vote
properly executed voting instructions forms in accordance with its best judgment
on any other business that properly comes before the meeting.
NOTE FOR 1997 ANNUAL MEETING
In the event that Proposal 3 is not approved by stockholders, any proposal which
a Planholder under a Systematic Investment Plan or Variable Annuity Contract
issued in connection with the Accounts of the Prudential Financial Security
Program intends to be presented at the 1997 Annual Meeting of the Fund, must be
received by The Prudential at its administrative offices located at 213
Washington Street, Newark, New Jersey 07102-2992, no later than June 1, 1997,
for possible inclusion in the proxy materials for that meeting. If Proposal 3 is
approved by stockholders, the Fund will no longer hold annual meetings and all
proposals received from Planholders will be retained for possible inclusion in
the proxy materials for the next stockholders meeting.
7
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
OF
PRUDENTIAL'S GIBRALTAR FUND
(A DELAWARE CORPORATION)
AND
PRUDENTIAL'S GIBRALTAR FUND, INC.
(A MARYLAND CORPORATION)
AGREEMENT OF MERGER entered into on __________ by PRUDENTIAL'S GIBRALTAR FUND
("Gibraltar-Delaware"), a Delaware corporation, and PRUDENTIAL'S GIBRALTAR FUND,
INC. ("Gibraltar-Maryland"), a Maryland corporation.
WHEREAS Gibraltar-Delaware is a business corporation of the State of Delaware
with its registered office therein located at No. 100 West Tenth Street, City of
Wilmington, County of New Castle; and
WHEREAS the total number of shares of stock which Gibraltar-Delaware has
authority to issue is seventy-five-million (75,000,000), all of which are of one
class and of a par value of $1 each; and
WHEREAS the Board of Directors of Gibraltar-Delaware by resolution adopted on
August 14, 1996 approved this Agreement of Merger; and
WHEREAS Gibraltar-Maryland is a business corporation of the State of Maryland
with its principal office therein located at c/o CSC--Lawyers Incorporating
Service Company, 11 East Chase Street, City of Baltimore; and
WHEREAS the total number of shares of stock which Gibraltar-Maryland has
authority to issue is seventy-five-million (75,000,000), of which
seventy-five-million (75,000,000) are of one class and of a par value of $0.01
each, and of which zero (0) are of ten other classes; and
WHEREAS the Board of Directors of Gibraltar-Maryland by resolution adopted on
___________ approved this Agreement of Merger; and
WHEREAS the General Corporation Law of the State of Delaware permits a merger of
a business corporation of the State of Delaware with and into a business
corporation of another jurisdiction; and
WHEREAS Maryland law permits the merger of a business corporation of another
jurisdiction with and into a business corporation of the State of Maryland; and
WHEREAS Gibraltar-Delaware and Gibraltar-Maryland and the respective Boards of
Directors thereof deem it advisable and to the advantage, welfare, and best
interests of said corporations and their respective stockholders to merge
Gibraltar-Delaware with and into Gibraltar-Maryland pursuant to the provisions
of the General Corporation Law of the State of Delaware and pursuant to the
provisions of Maryland law upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual agreement of
the parties hereto, being thereunto duly entered into by Gibraltar-Delaware and
approved by a resolution adopted by its Board of Directors and being thereunto
duly entered into by Gibraltar-Maryland and approved by a resolution adopted by
its Board of Directors, the Agreement of Merger and the terms and conditions
thereof and the mode of carrying the same into effect, together with any
provisions required or permitted to be set forth therein, are hereby determined
and agreed upon as hereinafter set forth in this Agreement.
<PAGE>
1. Gibraltar-Delaware and Gibraltar-Maryland shall, pursuant to the provisions
of the General Corporation Law of the State of Delaware and to the
provisions of Maryland law, be merged with and into a single corporation,
to wit, Gibraltar-Maryland which shall be the surviving corporation from
and after the effective time of the merger, and which is sometimes
hereinafter referred to as the "surviving corporation," and which shall
continue to exist as said surviving corporation under its present name
pursuant to the provisions of Maryland law. The separate existence of
Gibraltar-Delaware, which is sometimes hereinafter referred to as the
"terminating corporation," shall cease at said effective time in accordance
with the provisions of the General Corporation Law of the State of
Delaware.
2. Annexed hereto and made a part hereof is a copy of the Articles of
Incorporation of the surviving corporation as the same shall be in force
and effect at the effective time in the State of Maryland of the merger
herein provided for; and said Articles of Incorporation shall continue to
be the Articles of Incorporation of said surviving corporation until
amended and changed pursuant to the provisions of Maryland law.
3. The present By-Laws of the surviving corporation will be the By-Laws of
said surviving corporation and will continue in full force and effect until
changed, altered, or amended as therein provided and in the manner
prescribed by the Articles of Incorporation of the surviving corporation
and the provisions of Maryland law.
4. The directors and officers in office of the terminating corporation at the
effective time of the merger shall be the members of the first Board of
Directors and the first officers of the surviving corporation, all of whom
shall hold their directorships and offices until the election and
qualification of their respective successors or until their tenure is
otherwise terminated in accordance with the Articles of Incorporation and
By-Laws of the surviving corporation.
5. Each issued share of the terminating corporation shall, from and after the
effective time of the merger, be converted into one (1) Class A share of
the surviving corporation. The issued shares of the surviving corporation,
all of which are held by the terminating corporation, shall be surrendered
and extinguished and returned to the status of authorized but unissued
shares of the surviving corporation.
6. The surviving corporation does hereby agree that it may be served with
process in the State of Delaware in any proceeding for enforcement of any
obligation of the terminating corporation, as well as for enforcement of
any obligation of the surviving corporation arising from the merger herein
provided for, including any suit or other proceeding to enforce the right
of any stockholder of the terminating corporation as and when determined in
appraisal proceedings pursuant to the provisions of Section 262 of the
General Corporation Law of the State of Delaware; does hereby irrevocably
appoint the Secretary of State of the State of Delaware as its agent to
accept service of process in any such suit or other proceedings; and does
hereby specify the following address without the State of Delaware to which
a copy of such process shall be mailed by the Secretary of State of the
State of Delaware: Prudential's Gibraltar Fund, Inc., c/o The Prudential
Insurance Company of America, Prudential Plaza, Newark, New Jersey 07102.
7. In the event that this Agreement of Merger shall have been fully approved
and adopted upon behalf of the terminating corporation in accordance with
the provisions of the General Corporation Law of the State of Delaware and
upon behalf of the surviving corporation in accordance with the provisions
of Maryland law, the said corporations agree that they will cause to be
executed and filed and recorded any document or documents prescribed by the
laws of the State of Delaware and by the laws of the State of Maryland, and
that they will cause to be performed all necessary acts within the State of
Delaware and the State of Maryland and elsewhere to effectuate the merger
herein provided for.
8. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation are hereby authorized,
empowered, and directed to do any and all acts and things, and to make,
execute, deliver, file, and record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to
carry out or put into effect any of the provisions of this Agreement of
Merger or of the merger herein provided for.
A-2
<PAGE>
9. Notwithstanding the full approval and adoption of this Agreement of Merger,
the said Agreement of Merger may be terminated at any time prior to the
filing thereof of a certificate of merger with the Secretary of State of
the State of Delaware or at any time prior to the filing of any requisite
merger documents with the Secretary of State of Maryland in the event that
the Board of Directors determines that the proposed merger is no longer in
the best interests of Gibraltar-Delaware.
IN WITNESS WHEREOF, this Agreement of Merger is hereby executed upon behalf of
each of the constituent corporations parties thereto.
Date: __________
PRUDENTIAL'S GIBRALTAR FUND
(Delaware)
By:
-----------------------------------
PRUDENTIAL'S GIBRALTAR FUND, INC.
(Maryland)
By:
-----------------------------------
A-3
<PAGE>
EXHIBIT B
ARTICLES OF INCORPORATION
OF
PRUDENTIAL'S GIBRALTAR FUND, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, Michael K. Isenman, whose post office address is 1800
Massachusetts Avenue, N.W., Washington, DC 20036, being at least eighteen years
of age, does hereby act as an incorporator, under and by virtue of the General
Laws of the State of Maryland authorizing the formation of corporations and with
the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
PRUDENTIAL'S GIBRALTAR FUND, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as an open-end
diversified management investment company under the Investment Company Act of
1940, as amended.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other investments
or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and on such
terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner
and to the extent now or hereafter permitted by law and by these Articles
of Incorporation.
(4) To enter into a written contract or contracts with any person or persons
providing for a delegation of the management of all or part of this
Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to
the direction of the Board of Directors. Any such contract or contracts may
be made with any person even though such person may be an officer, other
employee, director or stockholder of this Corporation or a corporation,
partnership, trust or association in which any such officer, other
employee, director or stockholder may be interested.
(5) To enter into a written contract or contracts appointing one or more
distributors or agents or both for the sale of the shares of the
Corporation on such terms and conditions as the Board of Directors of this
Corporation may deem reasonable and proper, and to allow such person or
persons a commission on the sale of such shares. Any such contract or
contracts may be made with any person even though such person may be an
officer, other employee, director or stockholder of this Corporation or a
corporation, partnership, trust or association in which any such officer,
other employee, director or stockholder may be interested.
<PAGE>
(6) To enter into a written contract or contracts employing such custodian or
custodians for the safekeeping of the property of the Corporation and of
its shares, such accounting services agent or agents, such dividend
disbursing agent or agents, and such transfer agent or agents and registrar
or registrars for its shares, on such terms and conditions as the Board of
Directors of this Corporation may deem reasonable and proper for the
conduct of the affairs of the Corporation, and to pay the fees and
disbursements of such custodians, accounting services agents, dividend
disbursing agents, transfer agents, and registrars out of the income and/or
any other property of the Corporation. Notwithstanding any other provisions
of these Articles of Incorporation or the By-laws of the Corporation, the
Board of Directors may cause any or all of the property of the Corporation
to be transferred to, or to be acquired and held in the name of, a
custodian so appointed or any nominee or nominees of this Corporation or
nominee or nominees of such custodian satisfactory to the Board of
Directors.
(7) To employ the same person, partnership (general or limited), association,
trust or corporation in any multiple capacity under Sections (4), (5) and
(6) of this Article, who may receive compensation from the Corporation in
as many capacities in which such person, partnership (general or limited),
association, trust or corporation shall serve the Corporation.
(8) To do any and all such further acts or things and to exercise any and all
such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the General
Laws of the State of Maryland now or hereafter in force, and the enumeration of
the foregoing shall not be deemed to exclude any powers, rights or privileges so
granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in the State
of Maryland is c/o CSC--Lawyers Incorporating Service Company, 11 East Chase
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is CSC--Lawyers Incorporating Service Company, a
corporation of this State, and the post office address of the resident agent is
11 East Chase Street, Baltimore, Maryland 21202.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation shall
have authority to issue is Seventy Five Million (75,000,000) shares, of the
par value of One Cent ($0.01) per share and of the aggregate par value of
Seven Hundred Fifty Thousand Dollars ($750,000). The shares shall be
divided into eleven classes of Common Stock, with Class A shares to consist
of Seventy Five Million (75,000,000) shares and each of the remaining ten
classes of Zero (0) shares. The Board of Directors may designate the name
of each such class. The Board of Directors, without stockholder approval,
may increase or decrease the aggregate number of shares of stock of any
class as permitted by Maryland law.
(2) Any fractional share shall carry proportionately all the rights of a whole
share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and
the right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of these Articles of Incorporation and the
By-laws of the Corporation.
(4) Unless otherwise provided by the Board of Directors pursuant to Section (6)
of this Article VI, the stockholders of the Corporation shall be entitled
to one vote for each share of stock of the Corporation, irrespective of the
class, then standing in his or her name on the books of the Corporation and
on any matter submitted to a vote of stockholders, all shares of the
Corporation
B-2
<PAGE>
then issued and outstanding and entitled to vote shall be voted in the
aggregate and not by class except that: (i) when expressly required by law,
shares shall be voted by individual class and (ii) only shares of the
respective classes affected by a matter shall be entitled to vote on any
such matter.
(5) Unless otherwise provided by the Board of Directors pursuant to Section (6)
of this Article VI or unless otherwise provided by these Articles of
Incorporation, each class of stock of the Corporation shall have the
following powers, preferences or other special rights, and the
qualifications, restrictions, and limitations thereof shall be as follows:
(i) the shares of each class shall have no preference, preemptive,
conversion, exchange or similar rights and shall be freely
transferable.
(ii) the Board of Directors may from time to time declare and pay dividends
or distributions, in stock or in cash, on any or all classes of stock,
the amount of such dividends and distributions and the payment thereof
shall be wholly in the discretion of the Board of Directors. Dividends
or distributions on shares of any class of stock shall be paid only
out of the earned surplus or other lawfully available assets belonging
to such class.
(6) The Board of Directors shall have authority by resolution to reclassify any
authorized but unissued shares of capital stock from time to time by
setting or changing in any one or more respects the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of the capital stock.
Subject to the provisions of Sections (7), (8), and (9) of this Article VI
and applicable law, the power of the Board of Directors to reclassify any
of the shares of capital stock shall include, without limitation, authority
to reclassify any such stock into a class or classes of capital stock and
to divide and classify shares of any class into one or more series of such
class, by determining, fixing or altering one or more of the following:
(i) The distinctive designation of such class or series; provided that,
unless otherwise prohibited by the terms of such class or series, the
number of shares of any class or series may be decreased by the Board
of Directors in connection with any reclassification of unissued
shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
reclassification, and any shares of any class or series which have
been redeemed, purchased or otherwise acquired by the Corporation
shall remain part of the authorized capital stock and be subject to
reclassification as provided herein.
(ii) Whether or not and, if so, the rates, amounts and times at which, and
the conditions under which, dividends shall be payable on shares of
such class or series.
(iii) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so,
the terms of such voting rights.
(iv) The rights of the holders of shares of such class or series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation.
(v) Any other rights, restrictions, including restrictions on
transferability, and qualifications of shares of such class or series,
not inconsistent with law and these Articles of Incorporation.
(7) All consideration received by the Corporation for the issue or sale of
stock of any class, together with all income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class of shares of stock with respect to which
such assets, payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be so handled
upon the books of account of the Corporation. Such assets, income,
earnings, profits and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein referred to as
"assets belonging to" such class.
B-3
<PAGE>
(8) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class shall be entitled to receive, as a class, out of
the assets of the Corporation available for distribution to stockholders,
but other than general assets not belonging to any particular class of
stock, the assets belonging to such class; and the assets so distributable
to the stockholders of any class shall be distributed among such
stockholders in proportion to the number of shares of such class held by
them and recorded on the books of the Corporation. In the event that there
are any general assets not belonging to any particular class of stock and
available for distribution, such distribution shall be made to the holders
of stock of all classes in proportion to the asset value of the respective
classes determined as hereinafter provided.
(9) The assets belonging to any class of stock shall be charged with the
liabilities in respect to such class, and shall also be charged with such
class's share of the general liabilities of the Corporation, in proportion
to the asset value of the respective classes determined as hereinafter
provided. The determination of the Board of Directors shall be conclusive
as to the amount of such liabilities, including the amount of accrued
expenses and reserves; as to any allocation of the same to a given class;
and as to whether the same, or general assets of the Corporation, are
allocable to one or more classes. The liabilities so allocated to a class
are herein referred to as "liabilities belonging to" such class.
ARTICLE VII
(1) The number of directors of the Corporation shall be five (5), which number
may be increased or decreased pursuant to the By-laws of the Corporation
but shall never be less than three (3). The names of the directors who
shall act until the first meeting of stockholders and until their
successors are duly elected and qualify are:
Mendel A. Melzer;
Jonathan M. Greene;
Saul K. Fenster;
W. Scott McDonald, Jr.; and
Joseph Weber.
(2) No holder of stock of the Corporation shall, as such holder, have any right
to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or
sell (whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such
right, if any, as the Board of Directors, in its discretion, may determine.
(3) Each director and each officer of the Corporation shall be indemnified by
the Corporation to the full extent permitted by the General Laws of the
State of Maryland and the Investment Company Act of 1940, now or hereafter
in force, including the advance of related expenses.
ARTICLE VIII
(1) To the extent the Corporation has funds or other property legally available
therefor, each holder of shares of capital stock of the Corporation shall
be entitled to require the Corporation to redeem all or any part of the
shares of capital stock of the Corporation standing in the name of such
holder on the books of the Corporation, and all shares of capital stock
issued by the Corporation shall be subject to redemption by the
Corporation, at the redemption price of such shares as in effect from time
to time as may be determined by the Board of Directors of the Corporation
in accordance with the provisions hereof, subject to the right of the Board
of Directors of the Corporation to suspend the right of redemption of
shares of capital stock of the Corporation or postpone the date of payment
of such redemption price in accordance with provisions of applicable law.
Without limiting
B-4
<PAGE>
the generality of the foregoing, the Corporation shall, to the extent
permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of capital stock of the Corporation (i) if such
redemption is, in the opinion of the Board of Directors of the Corporation,
desirable in order to prevent the Corporation from being deemed a "personal
holding company" within the meaning of the Internal Revenue Code, as
amended, (ii) if the value of such shares in the account maintained by the
Corporation or its transfer agent for any class of stock is less than
$1,000.00 (One Thousand Dollars); provided, however, that each stockholder
shall be notified that the value of his account is less than $1,000.00 and
allowed sixty days to make additional purchases of shares before such
redemption is processed by the Corporation, or (iii) if the net income for
dividend purposes with respect to any particular class of shares should be
negative or it should otherwise be appropriate to carry out the
Corporation's responsibilities under the Investment Company Act of 1940, in
each case subject to such further terms and conditions as the Board of
Directors of the Corporation may from time to time adopt. The redemption
price of shares of capital stock of the Corporation shall, except as
otherwise provided in this section, be the net asset value thereof as
determined by the Board of Directors of the Corporation from time to time
in accordance with the provisions of applicable law, less such redemption
fee or other charge, if any, as may be fixed by resolution of the Board of
Directors of the Corporation. Payment of the redemption price shall be made
in cash by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation
unless, in the opinion of the Board of Directors, which shall be
conclusive, conditions exist which make payment wholly in cash unwise or
undesirable; in such event the Corporation may make payment wholly or
partly in securities or other property included in the assets belonging or
allocable to the class of the shares redemption of which is being sought,
the value of which shall be determined as provided herein. When the net
income for dividend purposes with respect to any particular class of shares
is negative or whenever deemed appropriate by the Board of Directors in
order to carry out the Corporation's responsibilities under the Investment
Company Act of 1940, the Corporation may, without payment of monetary
compensation but in consideration of the interest of the Corporation and
the stockholders in maintaining a constant net asset value per share of
such class, redeem pro rata from each stockholder of record on such day,
such number of full and fractional shares of the Corporation's common stock
of such class, as may be necessary to reduce the aggregate number of
outstanding shares in order to permit the net asset value thereof to remain
constant.
(2) Each holder of any class of stock of the Corporation, who surrenders his
certificate in good delivery form to the Corporation or, if the shares in
question are not represented by certificates, who delivers to the
Corporation a written request in good order signed by the stockholder,
shall, to the extent permitted by the By-laws or by resolution of the
Board of Directors, be entitled to convert the shares in question on the
basis hereinafter set forth, into shares of stock of any other class of
the Corporation. The Corporation shall determine the net asset value, as
provided herein, of the shares to be converted and may deduct therefrom a
conversion cost, in an amount determined within the discretion of the
Board of Directors. The Corporation shall issue to the stockholder such
number of shares of stock of the class desired as, taken at the net asset
value thereof determined as provided herein in the same manner and at the
same time as that of the shares surrendered, shall equal the net asset
value of the shares surrendered, less any conversion cost as aforesaid.
Any amount representing a fraction of a share may be paid in cash at the
option of the Corporation. Any conversion cost may be paid and/or assigned
by the Corporation to the underwriter and/or to any other agency, as it
may elect.
ARTICLE IX
Any determination made in good faith, so far as accounting matters are involved,
in accordance with accepted accounting practices by or pursuant to the direction
of the Board of Directors, as to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as
B-5
<PAGE>
to the time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation or as to
any other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or shares of capital stock of the
Corporation, and any reasonable determination made in good faith by the Board of
Directors as to whether any transaction constitutes a purchase of securities on
"margin," a sale of securities "short," or an underwriting of the sale of, or a
participation in any underwriting or selling group in connection with the public
distribution of, any securities, shall be final and conclusive, and shall be
binding upon the Corporation and all holders of its capital stock, past, present
and future, and shares of the capital stock of the Corporation are issued and
sold on the condition and understanding, evidenced by the purchase of shares of
capital stock or acceptance of share certificates, that any and all such
determinations shall be binding as aforesaid. No provision of these Articles of
Incorporation shall be effective to (i) require a waiver of compliance with any
provision of the Securities Act of 1933, as amended, or the Investment Company
Act of 1940, as amended, or of any valid rule, regulation or order of the
Securities and Exchange Commission thereunder or (ii) protect or purport to
protect any director or officer of the Corporation against any liability to the
Corporation or its stockholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE X
The duration of the Corporation shall be perpetual.
ARTICLE XI
(1) The Corporation reserves the right from time to time to make any amendments
to these Articles of Incorporation which may now or hereafter be authorized
by law, including any amendments changing the terms or contract rights, as
expressly set forth in these Articles of Incorporation, of any of its
outstanding stock by classification, reclassification or otherwise, but no
such amendment which changes such terms or contract rights of any of its
outstanding stock shall be valid unless such amendment shall have been
authorized by not less than a majority of the aggregate number of the votes
entitled to be cast thereon by a vote at a meeting.
(2) Notwithstanding any provision of the General Laws of the State of Maryland
requiring any action to be taken or authorized by the affirmative vote of
the holders of a designated proportion of the votes of all classes or of
any class of stock of the Corporation, such action shall be effective and
valid if taken or authorized by the affirmative vote of the holders of a
majority of the total number of shares outstanding and entitled to vote
thereon, except as otherwise provided herein.
(3) So long as permitted by Maryland law, the books of the Corporation may be
kept outside the State of Maryland at such place or places as may be
designated from time to time by the Board of Directors or in the By-laws of
the Corporation.
(4) In furtherance, and not in limitation, of the powers conferred by the laws
of the State of Maryland, the Board of Directors is expressly authorized:
(i) To make, alter or repeal the By-laws of the Corporation, except where
such power is reserved by the By-laws to the stockholders, and except
as otherwise required by the Investment Company Act of 1940.
(ii) From time to time to determine whether and to what extent and at what
times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by law or authorized
by resolution of the Board of Directors or of the stockholders.
B-6
<PAGE>
(iii) Without the assent or vote of the stockholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities
convertible into shares of its stock of any class or classes, whether
now or hereafter authorized, for such consideration as the Board of
Directors may deem advisable.
(iv) Without the assent or vote of the stockholders, to authorize and issue
obligations of the Corporation, secured and unsecured, as the Board of
Directors may determine, and to authorize and cause to be executed
mortgages and liens upon the property of the Corporation, real or
personal.
(v) Notwithstanding anything in these Articles of Incorporation to the
contrary, to establish in its absolute discretion the basis or method
for determining the value of the assets belonging to any class, the
value of the liabilities belonging to any class, and the net asset
value of each share of any class of the Corporation for purposes of
sales, redemptions, repurchases of shares or otherwise.
(vi) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what
accounting periods shall be used by the Corporation for any purpose,
whether annual or any other period, including daily; to set apart out
of any funds of the Corporation such reserves for such purposes as it
shall determine and to abolish the same; to declare and pay any
dividends and distributions in cash, securities or other property from
surplus or any funds legally available therefor, at such intervals
(which may be as frequently as daily) or on such other periodic basis,
as it shall determine; to declare such dividends or distributions by
means of a formula or other method of determination, at meetings held
less frequently than the frequency of the effectiveness of such
declarations; to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; and to provide for the
payment of declared dividends on a date earlier or later than the
specified payment date in the case of stockholders of the Corporation
redeeming their entire ownership of shares of any class of the
Corporation.
(vii) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of Maryland law, these Articles of Incorporation,
and the By-laws of the Corporation.
B-7
FSP 152 Printed in U.S.A.
