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Reg. No. 2-32685
Reg. No. 811-01660
As filed with the Securities and Exchange Commission on April 28, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 42 [X]
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and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 42 [X]
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PRUDENTIAL'S GIBRALTAR FUND, INC.
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(Exact Name of Registrant as specified in Charter)
751 Broad Street
Newark, New Jersey 07102-3777
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (800) 437-4016
Names and Address of Agent for Service:
Caren Cunningham
Secretary
Prudential's Gibraltar Fund, Inc.
751 Broad Street
Newark, New Jersey 07102-3777
Copies to:
Christopher Palmer
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Approximate Date of Proposed Public Offering: continuous
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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x on April 30, 1999 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of rule 485.
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If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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Title of Securities Being Registered: capital stock
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PROSPECTUS
May 1, 1999
PRUDENTIAL'S GIBRALTAR FUND, INC.
You may invest in the Fund only through the systematic investment plan
contracts and the variable annuity contracts issued as part of Prudential's
Financial Security Program and Prudential's Annuity Plan Account-2.
The contracts are no longer sold. Planholders still owning contracts may make
additional investments in accordance with their contract.
As with all mutual funds, filing this prospectus with the SEC does not mean
that the SEC has judged this Fund a good investment, nor has the SEC determined
that this prospectus is complete or accurate. It is a criminal offense to state
otherwise.
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SUMMARY OF INVESTMENT OBJECTIVES, STRATEGIES AND RISK
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Growth of capital to an extent compatible with a concern for
OBJECTIVE: preservation of principal. Current income is a secondary
consideration.
STRATEGY: The Fund invests primarily in common stock and other securities
convertible into common stock. Those investments can include
American Depository Receipts, which are dollar-denominated
certificates representing a right to receive securities of a
foreign issuer.
The Fund may invest in preferred stock, bonds and other fixed
income investments. Usually, the Fund does not invest more than
15% of its assets in these instruments.
The Fund may invest in money market instruments, such as short-
term debt securities.
RISKS: Although we try to invest wisely, all investments involve risk.
Common stock is subject to company risk. The stock of a particular
company can vary based on a variety of factors, such as the
company's financial performance, changes in management and product
trends, and the potential for takeover and acquisition. Common
stock is also subject to market risk stemming from factors
independent of any particular security. Investment markets
fluctuate. All markets go through cycles and market risk involves
being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and
the mood of the investing public. You can see market risk in
action during large drops in the stock market. If investor
sentiment turns gloomy, the price of all stocks may decline. It
may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market
is dropping, the values of all stocks are likely to drop.
Since the Fund also invests in debt obligations, there is the risk
that the value of a particular obligation could decrease. Debt
obligations may involve credit risk -the risk that the borrower
will not repay an obligation, and market risk - the risk that
interest rates may change and affect the value of the obligation.
There is also risk involved in the investment strategies we may
use. Some of our strategies require us to try to predict whether
the price or value of an underlying investment will go up or down
over a certain period of time. There is always the risk that
investments will not perform as we thought they would. Like any
mutual fund, an investment in the Fund could lose value, and you
could lose money.
2
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PERFORMANCE
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The two tables below show the Fund's annual returns and its long term
performance. The first table shows you how the Fund's performance varied from
year to year. The second table compares the Fund's performance over time to
that of the S&P 500, a widely recognized unmanaged index of stock performance,
and a group of similar mutual funds. These tables provide an indication of the
risk of investing in the Fund and how returns can change. As with all mutual
funds, past performance does not mean that the Fund will achieve similar
results in the future.
[BAR GRAPH]
Annual Returns/1/
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1989 1990 1991 1992 1992 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
22.30% -2.80% 34.40% 17.60% 23.79% -1.33% 19.13% 27.13% 18.88% 25.89%
BEST QUARTER: 28.94% (4th quarter of 1998)
WORST QUARTER: (14.08)% (3rd quarter of 1998)
/1/ These annual returns do not include Contract charges. If Contract charges
were included, the annual returns would be lower than those shown. See your
contract for additional information about contract charges.
Average Annual Returns* (as of 12/31/98)
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<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Fund shares 25.89% 17.47% 17.92%
S&P 500** 28.60% 24.05% 19.19%
Lipper Average*** 24.56% 20.08% 17.74%
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</TABLE>
* The Fund's returns are after deduction of Fund expenses. They do not include
any charges under the investment contracts or variable annuity contracts. If
those contract charges were included, the annual returns would be lower than
those shown.
** The Standard and Poor's 500 Stock Index (S&P 500) - an unmanaged index of
500 stocks of large U.S. companies - gives a broad look at how stock prices
performed. These returns do not include the effect of any investment
management expenses.
*** The Lipper (VIP) Growth Average is calculated by Lipper Inc. and reflects
the investment return of certain portfolios underlying variable life and
annuity products. The returns are net of investment fees and Fund expenses
but not product charges.
3
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INVESTMENT OBJECTIVE AND STRATEGIES
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The Fund's objective is growth of capital to an extent compatible with a
concern for preservation of principal. Current income is a secondary
consideration.
In an effort to meet that objective, the Fund invests primarily in common stock
and other securities convertible into common stock.
The Fund may also invest in American Depository Receipts (ADRs). ADRs are U.S.
dollar-denominated certificates issued by a United States bank or trust
company. They represent the right to receive securities of a foreign issuer
deposited in a domestic bank or foreign branch of a United States bank and
traded on a United States exchange or in an over-the-counter market.
Investment in ADRs has certain advantages over direct investment in the
underlying foreign securities. They are easily transferable, have readily
available market quotations, and the foreign issuers are usually subject to
comparable auditing, accounting and financial reporting standards as domestic
issuers. Nevertheless, as foreign securities, ADRs involve certain risks. These
risks include political or economic instability in the country of the issuer,
the difficulty of predicting international trade patterns, and the fact that
there may be less publicly available information about a foreign company than
about a domestic company.
The Fund may also invest in preferred stock, bonds, debenture notes and other
evidences of indebtedness of a character customarily acquired by institutional
investors. These investments may or may not be convertible into stock or
accompanied by warrants or rights to acquire stock. These investments may or
may not be publicly traded. The Fund generally invests no more than 15% of its
assets in these instruments. Investment in these instruments may exceed 15%
when the portfolio manager determines that it is appropriate, based on economic
conditions or general levels of common stock prices.
The Fund may also invest in money market instruments, such as short-term debt
securities. The Fund usually invests only a moderate proportion of its assets
in money market instruments to facilitate purchases and redemptions and
portfolio trading. The Fund may, at times, adopt a temporary defensive position
in which it invests a greater proportion, up to 100%, of the Fund's assets in
money market instruments. Investing heavily in these securities limits our
ability to achieve growth of capital, but can help to preserve the Fund's
assets when markets are unstable.
The Fund may lend its securities, invest in warrants, and hold up to 10% of its
assets in illiquid securities. The Fund is subject to certain investment
restrictions that are fundamental policies, which means they cannot be changed
without shareholder approval. For more information about these restrictions,
see the Statement of Additional Information ("SAI").
The Fund generally seeks long-term growth of capital rather than short-term
trading profits. Thus, the Fund does not generally engage in active and
frequent trading of portfolio securities.
However, during any period when changing economic or market conditions are
anticipated, the Fund's portfolio manager may determine that more frequent
trading is appropriate. Frequent trading usually increases the Fund's brokerage
costs.
4
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FUND MANAGEMENT
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The Prudential Insurance Company of America ("Prudential" or the "Company")
serves as the investment adviser for the Fund. Prudential was founded in 1875.
As of December 31, 1998, Prudential had total assets under management of
approximately $334 billion.
Prudential is currently considering reorganizing itself into a publicly traded
stock company through a process known as "demutualization." On February 10,
1998, the Company's Board of Directors authorized management to take the
preliminary steps necessary to allow the company to demutualize. On July 1,
1998, legislation was enacted in New Jersey that would permit this conversion
to occur and that specified the process for conversion. Demutualization is a
complex process involving development of a plan of reorganization, adoption of
a plan by the Company's Board of Directors, a public hearing, voting by
qualified policyholders and regulatory approval, all of which could take two or
more years to complete. Prudential's management and Board of Directors have not
yet determined to demutualize and it is possible that, after careful review,
Prudential could decide not to go public.
The plan of reorganization, which has not been developed and approved, would
provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally, the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including the types, amounts and
issue years of their policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, while mutual fund
customers and customers of the Company's subsidiaries would not be. It has not
yet been determined whether any exceptions to that general rule will be made
with respect to policyholders and contract owners of Prudential's subsidiaries.
Subject to Prudential's supervision, substantially all of the investment
management services provided by Prudential are furnished by its wholly-owned
subsidiary, Prudential Investment Corporation ("PIC"). Prudential reimburses
PIC for its costs and expenses. Both Prudential and PIC are located at 751
Broad Street, Newark, NJ 07102.
Jeffrey Rose, CFA, Managing Director of PIC, has been portfolio manager for the
Fund since March, 1998. Mr. Rose also co-manages the Prudential Balanced Fund
and other accounts. Mr. Rose served as an equity analyst for PIC from June 1994
through October 1996 when he became a co-manager of a Prudential mutual fund.
From May 1992 through June 1994, he co-managed a portfolio of private debt and
equity securities for Prudential Capital Group.
The table below lists the Fund's 1998 expenses as a percentage of the Fund's
average net assets:
1998 FUND EXPENSES*
(as a percentage of the Fund's average net assets)
<TABLE>
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<S> <C>
Investment Management Fee 0.125%
Other Expenses 0.005%
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TOTAL FUND EXPENSES 0.130%
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</TABLE>
* This table shows only Fund expenses. This table does not show
charges that are imposed by the variable contract. See your
contract for additional information about contract charges.
5
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PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
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PURCHASE
You may invest in the Fund only through the systematic investment plan
contracts and the variable annuity contracts issued as part of Prudential's
Financial Security Program and Prudential's Annuity Plan Account-2. The
contracts are no longer sold. Planholders still owning contracts may make
additional investments in accordance with their contract.
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund.
REDEMPTION
Shares are redeemed for cash within 7 days of receipt of a proper notice of
redemption or sooner if required by law. There is no redemption charge. We may
suspend the right to redeem shares or receive payment when the New York Stock
Exchange is closed (other than weekends or holidays), when trading on the New
York Stock Exchange is restricted, or as permitted by the SEC.
PRICING - NET ASSET VALUE
The price of a Fund share is known as the net asset value or NAV per share. The
price at which a purchase or redemption is made is based on the next
calculation of the NAV after the order is placed. The NAV per share is
determined once a day - at 4:15 p.m. New York Time - on each day the New York
Stock Exchange is open for business. If the New York Stock Exchange closes
early on a day, the Fund's NAV will be calculated some time between the closing
time and 4:15 p.m. on that day.
The NAV is determined by a simple calculation. It is the total value of the
Fund (assets minus liabilities) divided by the total number of shares
outstanding.
To determine the Fund's NAV, its holdings are valued as follows:
Equity securities are generally valued at the last sale price on an exchange or
NASDAQ, or if there is no sale, at the mean between the most recent bid and
asked prices on that day. If there is no asked price, the security will be
valued at the bid price. Equity securities that are not sold on an exchange or
NASDAQ are generally valued by an independent pricing agent or principal market
maker.
Debt securities which mature in more than 60 days are valued using an
independent pricing service. Debt securities that mature in 60 days or less are
valued at amortized cost. This means that the security is valued initially at
its purchase price (or its value on the 60th day prior to maturity) and then
decreases (or increases when a security is purchased at a discount) in value by
equal amounts each day until the security matures. Amortization is used widely
by mutual funds and almost always results in a value that is extremely close to
the actual market value. The Fund's Board of Directors has established
procedures to monitor whether any material deviation occurs and if so, will
promptly consider what action, if any, should be taken to prevent unfair
results to Planholders.
Securities for which no market quotations are available will be valued at fair
value by Prudential under the direction of the Fund's Board of Directors.
6
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OTHER INFORMATION
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DIVIDENDS AND DISTRIBUTIONS
The Fund periodically distributes substantially all of its net investment
income and its net realized capital gains in accordance with rules applicable
to mutual funds. For most Planholders, dividends and distributions are
automatically reinvested in additional Fund shares. Planholders under certain
non-qualified contracts may choose to receive dividends and distributions in
cash.
FEDERAL INCOME TAXES
The federal income tax rules applicable to Planholders vary depending on the
contract and whether a tax qualified plan is involved. You should consult with
your plan sponsor or a qualified tax adviser for tax information applicable to
you.
The Fund intends to comply with certain requirements of the Internal Revenue
Code applicable to investment companies selling their shares to insurance
company separate accounts. By meeting these requirements, Prudential--but not
the variable contract owners--should be subject to tax on distributions by the
Fund to the separate accounts.
YEAR 2000
The services provided to the Fund and the shareholders by Prudential, PIC, and
the Fund's distributor, transfer agent and custodian depend on the smooth
functioning of their computer systems and those of outside service providers.
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. Such
event could have a negative impact on handling securities trades, payments of
interest and dividends, pricing and account services. Although, at this time,
there can be no assurance that there will be no adverse impact on the Fund,
Prudential, PIC and the Fund's distributor, transfer agent and custodian have
advised the Fund that they have been actively working on necessary changes to
their computer systems to prepare for the year 2000. The Fund and its Directors
receive and have received since mid-1998 satisfactory quarterly reports from
the principal service providers as to their preparations for year 2000
readiness, although there can be no assurance that the service providers (or
other securities market participants) will successfully complete the necessary
changes in a timely manner or that there will be no adverse impact on the Fund.
Moreover, the Fund at this time has not considered retaining alternative
service providers or directly undertaken efforts to achieve year 2000
readiness, the latter of which would involve substantial expenses without an
assurance of success.
Additionally, issuers of securities generally as well as those purchased by the
Fund may confront year 2000 compliance issues which, if material and not
resolved, could have an adverse impact on securities markets and/or a specific
issuer's performance and result in a decline in the value of the securities
held by the Fund.
7
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FINANCIAL HIGHLIGHTS
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The financial highlights will help you evaluate the financial performance of
the Fund. The Total Return in the table represents the rate that a Fund
shareholder earned on an investment, assuming reinvestment of all dividends and
other distributions. The table does not reflect charges under any variable
contract. The information is for each Fund share for the periods indicated.
This information for the three years ended 12/31/98 has been audited by
PricewaterhouseCoopers LLP, whose report, along with the financial statements,
appear in the SAI, which is available upon request.
The information for the two years ended 12/31/95 was audited by other
independent auditors whose report was also unqualified.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 12/31
PER SHARE OPERATING PERFORMANCE: 1998 1997 1996 1995(A) 1994(A)
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<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.95 $11.43 $10.14 $ 9.40 $ 11.29
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .12 .22 .16 .18 .21
Net realized and unrealized gain
(loss) on investment transactions 2.61 1.84 2.56 1.65 (.40)
Total from investment operations 2.73 2.06 2.72 1.83 (.19)
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LESS DISTRIBUTIONS:
Dividends from net investment
income (.12) (.21) (.15) (.17) (.22)
Distributions from net realized
gains (1.13) (2.33) (1.28) (.92) (1.48)
Total distributions (1.25) (2.54) (1.43) (1.09) (1.70)
Net asset value, end of year $12.43 $10.95 $11.43 $ 10.14 $ 9.40
TOTAL RETURN(B) 25.89% 18.88% 27.13% 19.13% (1.33)%
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1995 1994
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Net assets, end of year (000) $362,507 $325,919 $301,297 $261,223 $242,504
Ratios to average net assets:
Expenses .13% .15% .16% .14% .15%
Net investment income .96% 1.56% 1.38% 1.68% 1.98%
Portfolio turnover 105% 101% 97% 105% 93%
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</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
8
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FOR MORE INFORMATION
Additional information about the Fund can be obtained upon request
without charge and can be found in the following documents:
Statement of Additional Information (SAI)
(incorporated by reference into this prospectus)
Annual Report
(including a discussion of market conditions and
strategies that significantly affected the Fund's
performance during the previous year)
Semi-Annual Report
To obtain these documents, to ask any questions about the Fund, or to obtain a
copy of the Consolidated Financial Statements of The Prudential Insurance
Company of America and Subsidiaries without charge:
-Call toll-free 1-800-437-4016
-Write to Prudential's Gibraltar Fund, Inc.,
751 Broad Street, Newark, NJ 07102-3777
You can also obtain copies of Fund documents from the Securities and
Exchange Commission as follows:
By Mail:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)
In Person:
Public Reference Room
in Washington, DC
(For hours of operation, call 1 (800) SEC-0330.)
Via the Internet:
http://www.sec.gov
SEC File No. 811-01660
GIB1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION (SAI)
May 1, 1999
Prudential's Gibraltar Fund, Inc.
You may invest in the Fund only through the systematic investment plan
contracts and the variable annuity contracts issued as part of Prudential's
Financial Security Program and Prudential's Annuity Plan Account-2. The
contracts are no longer sold. Planholders still owning contracts may make
additional investments in accordance with their contract.
This is not a prospectus. This SAI should be read in conjunction with the
Fund's prospectus dated May 1, 1999.
To obtain a copy of the Fund prospectus:
-Call toll-free 1-800-437-4016; or
-Write to Prudential's Gibraltar Fund, Inc.
751 Broad Street, Newark, NJ 07102-3777
GIB1B
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Fund History .................................................................3
Fund Investments and Risks....................................................3
Investment Restrictions.......................................................5
State Law Limitations.........................................................6
Fund Management...............................................................7
Principal Shareholders........................................................9
Investment Advisory and Other Services........................................9
Brokerage Allocation and Other Practices.....................................10
Capital Stock................................................................12
Taxation of the Fund.........................................................12
Financial Statements.........................................................14
</TABLE>
2
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FUND HISTORY
The Fund was originally incorporated in the State of Delaware on March 14, 1968
and was reincorporated in the State of Maryland effective May 1, 1997. It is
registered with the Securities and Exchange Commission (SEC) as a diversified
open-end management investment company.
FUND INVESTMENTS AND RISKS
We provide more detail about four investment strategies listed in the
prospectus.
SECURITIES LENDING
The Fund may lend portfolio securities to broker-dealers, qualified banks and
certain institutional investors, provided such loans do not exceed in the
aggregate 33% of the Fund's total assets. All securities loans will be made
pursuant to a written agreement and continuously secured by collateral in the
form of cash, U.S. Government securities or irrevocable standby letters of
credit in an amount equal or greater than the market value of the loaned
securities plus the accrued interest and dividends. While a security is loaned,
the Fund will continue to receive the interest and dividends on the loaned
security while also receiving a fee from the borrower or earning interest on
the investment of the cash collateral. Upon termination of the loan, the
borrower will return to the Fund a security identical to the loaned security.
The Fund will not have the right to vote a security that is on loan, but would
be able to terminate the loan and retain the right to vote if that were
considered important with respect to the investment.
The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly advancing in price.
In this event, if the borrower fails to return the loaned security, the
existing collateral might be insufficient to purchase back the full amount of
the security loaned, and the borrower would be unable to furnish additional
collateral. The borrower would be liable for any shortage but the Fund would be
an unsecured creditor with respect to any shortfall and might not be able to
recover all or any of it. However, this risk can be decreased by the careful
selection of borrowers and securities to be lent. The Fund will not lend
securities to entities affiliated with Prudential.
ILLIQUID SECURITIES
The Fund may hold up to 10% of its assets in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable in securities
markets either within or outside of the United States. Repurchase agreements
subject to demand are deemed to have a maturity equal to the applicable notice
period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the Securities Act),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer
3
<PAGE>
or in the secondary market. Mutual funds do not typically hold a significant
amount of restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have
an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the unregistered
security can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A established a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
and foreign previously government-owned utility company securities will expand
further as a result of this new regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. (NASD).
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and privately placed commercial paper for which there is a
readily available market are treated as liquid only when deemed liquid under
procedures established by the Board of Directors. The Fund's investment in Rule
144A securities could have the effect of increasing illiquidity to the extent
that qualified institutional buyers become, for a limited time, uninterested in
purchasing Rule 144A securities. The investment adviser will monitor the
liquidity of such restricted securities subject to the supervision of the Board
of Directors. In reaching liquidity decisions, the investment adviser will
consider, among others, the following factors (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (for example, the time needed
to dispose of the security, the method of soliciting offers and the mechanics
of the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (a) it
must be rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations (NRSRO), or if only one
NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable
quality in the view of the investment adviser; and (b) it must not be "traded
flat" (that is, without accrued interest) or in default as to principal or
interest.
4
<PAGE>
The staff of the SEC has taken the position that purchased OTC options and the
assets used as "cover" for written OTC options are illiquid securities unless
the Fund and the counterparty have provided for the Fund, at the Fund's
election, to unwind the OTC option. The exercise of such an option ordinarily
would involve the payment by the Fund of an amount designed to reflect the
counterparty's economic loss from an early termination, but does allow the Fund
to treat the assets used as "cover" as "liquid."
WARRANTS
The Fund may invest in warrants or rights to acquire stock. The Fund will not
purchase any such warrants or rights if after giving effect to such purchase
the total cost to the Fund of all warrants and rights then held by it will
exceed 3% of the value of Fund assets. Warrants are options to purchase
securities at a specified price during a specified period of time. The risk
associated with warrants is that the market price of the underlying stock will
stay below the exercise price of the warrant during the exercise period. If
this occurs, the warrant becomes worthless and the investor loses the money he
or she paid for the warrant.
TEMPORARY DEFENSIVE POSITION
The Fund may, at times, adopt a temporary defensive position in which it
invests a greater proportion, up to 100%, of its assets in money market
instruments, including short-term government and corporate debt obligations,
commercial paper and bank obligations (such as certificates of deposit, time
deposits and bankers acceptances). When the Fund purchases money market
securities, it may on occasion enter into a repurchase agreement with the
seller wherein the seller and the buyer agree at the time of sale to a
repurchase of the security at a mutually agreed upon time and price. The period
of maturity is usually quite short, possibly overnight or a few days, although
it may extend over a number of months. The resale price is in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money is invested in the security, and is not related to the
coupon rate of the purchase security. Repurchase agreements may be considered
loans of money to the seller of the underlying security, which are
collateralized by the securities underlying the repurchase agreement. The Fund
will not enter into repurchase agreements unless the agreement is fully
collateralized (i.e., the value of the securities is, and during the entire
term of the agreement remains, at least equal to the amount of the loan
including interest). The Fund will take possession of the securities underlying
the agreement and will value them daily to assure that this condition is met.
In the event that a seller defaults on a repurchase agreement, the Fund may
incur loss in the market value of the collateral, as well as disposition costs;
and, if a party with whom the Fund has entered into a repurchase agreement
becomes involved in a bankruptcy proceeding, the Fund's ability to realize on
the collateral may be limited or delayed and a loss may be incurred if the
collateral securing the repurchase agreement declines in value during the
bankruptcy proceeding.
INVESTMENT RESTRICTIONS
We list below certain fundamental investment restrictions of the Fund. They may
not be changed without the vote of a majority of the Fund's outstanding voting
securities.
5
<PAGE>
The Fund does not:
(1) underwrite the securities of other insurers, except where it may be deemed
to be an "underwriter" for purposes of the Securities Act of 1933, as
amended, in connection with the registration and/or sale of any illiquid
securities it holds;
(2) buy or sell commodities or commodity contracts;
(3) sell short or buy on margin, or buy, sell or write put or call options or
combinations of such options;
(4) invest for the purpose of exercising control or management;
(5) buy or hold the securities of any issuer if those officers and directors of
the Fund or officers of its investment adviser who own individually more
than one-half of 1% of the securities of such issuer or together own more
than 5% of the securities of such issuer;
(6) with respect to 75% of the value of its assets, buy the securities of an
issuer if the purchase would cause more than 5% of the value of the Fund's
total assets to be invested in the securities of any one issuer (except for
obligations of the United States government and its instrumentalities) or
result in the Fund owning more than 10% of the voting securities of such
issuer;
(7) concentrate its investments in any one industry (no more than 25% of the
value of the Fund's assets will be invested in any one industry);
(8) borrow money;
(9) buy or sell real estate, although the Fund may purchase shares of a real
estate investment trust;
(10) invest in the securities of other investment companies; or
(11) issue senior securities.
STATE LAW LIMITATIONS
The investments of the Fund are generally subject to certain additional
restrictions under the laws of the State of New Jersey. In the event of future
amendments to the applicable New Jersey statutes, the Fund will comply, without
the approval of the shareholders, with the statutory requirements as so
modified. The pertinent provisions of New Jersey law as they stand are, in
summary form, as follows:
1. The Fund may not purchase any evidence of indebtedness issued, assumed
or guaranteed by any institution created or existing under the laws of
the U.S., any U.S. state or territory, District of Columbia, Puerto
Rico, Canada or any Canadian province, if such evidence of indebtedness
is in default as to interest. "Institution" includes any corporation,
joint stock association, business trust, business joint venture,
business partnership, savings and loan association, credit union or
other mutual savings institution.
2. The Fund may not purchase the stock of a corporation unless: (i) the
corporation has paid a cash dividend on the class of stock during each
of the
6
<PAGE>
past 5 years preceding the time of purchase; or (ii) during the 5-year
period the corporation had aggregate earnings available for dividends on
such class of stock sufficient to pay average dividends of 4% per year
computed upon the par value of such stock or upon stated value if the
stock has no par value. This limitation does not apply to any class of
stock which is preferred as to dividends over a class of stock whose
purchase is not prohibited.
3. Any common stock purchased must be: (i) listed or admitted to trading on
a securities exchange in the United States or Canada; or (ii) included
in the National Association of Securities Dealers' national price
listings of "over-the-counter" securities; or (iii) determined by the
Commissioner of Insurance of New Jersey to be publicly held and traded
and have market quotations available.
4. A security of a corporation may not be purchased if after the purchase
more than 10% of the market value of the assets of the Fund would be
invested in the securities of such corporation.
As a result of these currently applicable requirements of New Jersey law,
which impose substantial limitations on the ability of the Fund to invest in
the stock of companies whose securities are not publicly traded or who have
not recorded a 5-year history of dividend payments or earnings sufficient to
support such payments, the Fund will not generally hold the stock of newly
organized corporations. Nonetheless, an investment not otherwise eligible
under items 1 or 2 above may be made if, after giving effect to the
investment, the total cost of all such non-eligible investments does not
exceed 5% of the aggregate market value of the assets of the Fund.
Investment limitations also arise under the insurance laws and regulations of
other states. Although compliance with the requirements of New Jersey law set
forth above will ordinarily result in compliance with any applicable laws of
other states, under some circumstances the laws of other states could impose
additional restrictions on the Fund.
FUND MANAGEMENT
The Board of Directors of the Fund is responsible for the overall management
of the Fund. It reviews the actions of the Fund's investment adviser and
decides upon matters of general policy.
Listed below for each director and major officer of the Fund are his or her
name, age and principal occupation during the last 5 years are shown below.
Unless otherwise stated, the address of each director and officer is 751 Broad
Street, Newark, New Jersey 07102-3777.
DIRECTORS OF THE FUND*
Saul K. Fenster, 66, Director - President of New Jersey Institute of
Technology. Address: 323 Martin Luther King Boulevard, Newark, New Jersey
07102.
W. Scott McDonald, Jr., 62, Director - Vice President, Kaludis Consulting
Group since 1997; Prior to 1996: Principal, Scott McDonald & Associates; Prior
to 1995: Executive
7
<PAGE>
Vice President of Fairleigh Dickinson University. Address: 9 Zamrok Way,
Morristown, New Jersey 07960
Joseph Weber, 75 Director - Vice President, Interclass (international corporate
learning). Address: 37 Beachmont Terrace, North Caldwell, New Jersey 07006.
OFFICERS WHO ARE NOT DIRECTORS
E. Michael Caulfield, President - Executive Vice President, Prudential
Financial Management since 1998; 1995 to 1998: Chief Executive Officer of
Prudential Investments; 1995: Chief Executive Officer, Prudential Preferred
Financial Services; prior to 1995: President, Prudential Preferred Financial
Services.
Caren A. Cunningham, Secretary - Assistant General Counsel of Prudential
Investments Fund Management LLC since 1997; Prior to 1997: Vice President and
Associate General Counsel of Smith Barney Mutual Fund Management Inc.
Grace C. Torres, Treasurer and Principal Financial and Accounting Officer -
First Vice President of Prudential Investments Fund Management LLC since 1996;
Prior to 1996: First Vice President of Prudential Securities Inc.
Stephen M. Ungerman, Assistant Treasurer - Vice President and Tax Director of
Prudential Investments since 1996; Prior to 1996: First Vice President of
Prudential Investment Mutual Fund Management, Inc.
No director or officer of the Fund who is also an officer, director or employee
of Prudential or its affiliates is paid by the Fund for services as one of its
directors or officers. A single annual retainer fee of $35,000 is paid to each
of the directors who is not an interested person of the Fund for services
rendered to five different Prudential investment companies, including this
Fund. (The amount paid in respect of each investment company is determined on
the basis of the relative average net assets of the investment companies.) The
Directors who are not interested persons of the Fund are also reimbursed for
all expenses incurred in connection with the attendance at meetings.
The following table sets forth the aggregate compensation paid by the Fund to
the directors who are not affiliated with Prudential for the fiscal year ended
December 31, 1998 and the aggregate compensation paid to such directors for
service on the Fund's Board and the Boards of any other investment companies
managed by Prudential for the calendar year ended December 31, 1998.
- --------
*Certain actions of the Committee, including the annual continuance of the
Agreement for Investment Management Services between the Fund and Prudential,
must be approved by a majority of the directors who are not interested persons
of Prudential, its affiliates or the Fund as defined in the Investment Company
Act of 1940 (the "1940 Act"). Messrs. Fenster, McDonald, and Weber are not
interested persons of Prudential, its affiliates, or the Fund. However, Mr.
Fenster is President of the New Jersey Institute of Technology. Prudential has
issued a group annuity contract to the Institute and provides group life and
group health insurance to its employees.
8
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR ESTIMATED RELATED TO
AGGREGATE RETIREMENT ANNUAL FUNDS
COMPENSATION FROM BENEFITS UPON BENEFITS UPON MANAGED BY
NAME & POSITION GIBRALTAR FUND RETIREMENT RETIREMENT PRUDENTIAL (*)
--------------- ----------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Saul K. Fenster $2,833 None N/A $27,200(5)
W. Scott McDonald $2,833 None N/A $27,200(5)
Joseph Weber $2,833 None N/A $27,200(5)
</TABLE>
- --------
*Indicates number of funds (including the Fund) to which aggregate compensation
relates.
As of April 30, 1999, the directors and officers of the Fund, as a group,
beneficially owned less than one percent of the outstanding shares of the Fund
capital stock.
PRINCIPAL SHAREHOLDERS
As of December 31, 1998, all Fund shares are held by three separate accounts of
Prudential. The address of each separate account is 751 Broad Street, Newark,
NJ 07102-3777. These separate accounts are used in connection with certain
systematic investment plan contracts and variable annuity contracts.
<TABLE>
<CAPTION>
PERCENTAGE OF FUND SHARES
PRUDENTIAL SEPARATE ACCOUNT HELD AS OF 12/31/98
--------------------------- -------------------------
<S> <C>
Prudential's Investment Plan Account 81.79%
Prudential's Annuity Plan Account 0.72%
Prudential's Annuity Plan Account-2 17.49%
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
PRUDENTIAL
The Prudential Insurance Company of America ("Prudential") serves as the
investment adviser for the Fund. As investment adviser, Prudential is
responsible for the day-to-day investment management of the Fund, including
selecting investments. Prudential is a mutual insurance company, founded in
1875 under the laws of the State of New Jersey. Prudential is currently
considering reorganizing itself into a stock company. See the prospectus for
more details.
Under the Investment Advisory Agreement, the Fund pays Prudential an advisory
fee equal to 0.125% per year of the average daily net assets of the Fund. The
Fund paid Prudential $404,800 in 1998, $390,676 in 1997, and $349,118 in 1996.
Subject to Prudential's supervision, substantially all of the investment
management services provided by Prudential are furnished by its wholly-owned
subsidiary, Prudential Investment Corporation ("PIC"). Prudential, not the
Fund, reimburses PIC for its costs and expenses. Both Prudential and PIC are
located at 751 Broad Street, Newark, NJ 07102.
Under the Investment Advisory Agreement, Prudential bears the expenses for
investment advisory services incurred in connection with the purchase and sale
of securities (but not the brokers' commissions and transfer taxes and other
charges and
9
<PAGE>
fees attributable to investment transactions), the salaries and expenses of all
officers and employees reasonably necessary for the Fund's operations
(excluding members of the Fund's Board of Directors who are not officers or
employees of Prudential), and the office facilities of the Fund.
An Administrative Services Agreement between Prudential and the Fund provides
that, as long as the Fund sells its shares only to Prudential, its separate
accounts or organizations approved by it, Prudential will pay all expenses of
the Fund not covered by the Investment Advisory Agreement (except for the fees
and expenses of members of the Fund's Board of Directors who are not officers
or employees of Prudential, brokers' commissions, transfer taxes and other
charges and fees attributable to investment transactions, any other local,
state or federal taxes, and fidelity bond and insurance premiums).
OTHER SERVICE PROVIDERS
Prudential Investment Management Services LLC ("PIMS"), an indirect wholly-
owned subsidiary of Prudential, acts as the principal underwriter of the Fund.
Fund shares are sold only to certain separate accounts of Prudential. The
offering of Fund shares is continuous. PIMS is a limited liability corporation
organized under Delaware law in 1996. PIMS is a registered broker-dealer under
the Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The principal business address of PIMS is 751 Broad
Street, Newark, New Jersey 07102-3777. The Fund does not pay any fee to PIMS.
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City,
Missouri 64105-1716, is the custodian of the assets held by the Fund. As
custodian, IFTC is responsible for safeguarding the assets of the Fund. IFTC is
also the Fund's transfer agent and dividend-paying agent.
PricewaterhouseCoopers LLP ("PWC") is the Fund's independent accountant. PWC's
principal business address is 1177 Avenue of the Americas, New York, New York
10036. PWC provides audit and accounting services for the Fund.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Prudential, as the Fund's investment adviser, is responsible for decisions to
buy and sell securities for the Fund. Prudential is also responsible for the
selection of brokers and dealers to effect the transactions and the negotiation
of brokerage commissions, if any. Broker-dealers may receive brokerage
commissions on Fund transactions. Orders may be directed to any broker-dealer
including, to the extent and in the manner permitted by applicable law,
Prudential Securities Incorporated ("PSI"), an indirect wholly-owned subsidiary
of Prudential.
Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount
of compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities
10
<PAGE>
may be purchased directly from the issuer, in which case no commissions or
discounts are paid. The Fund will not deal with PSI in any transaction in which
PSI acts as principal.
Fund securities may not be purchased from any underwriting or selling syndicate
of which PSI, during the existence of the syndicate, is a principal underwriter
(as defined in the 1940 Act) except in accordance with rules of the SEC. This
limitation, in the opinion of the Fund, will not significantly affect the
Fund's current ability to pursue its respective investment objective. However,
in the future it is possible that the Fund may, under other circumstances, be
at a disadvantage because of this limitation in comparison to other funds not
subject to such a limitation.
In placing orders for portfolio securities of the Fund, Prudential's overriding
objective is to obtain the best possible combination of price and execution.
Prudential seeks to effect each transaction at a price and commission that
provides the most favorable total cost or proceeds reasonably attainable in the
circumstances. The factors that Prudential may consider in selecting a
particular broker-dealer firm are: Prudential's knowledge of negotiated
commission rates currently available and other transaction costs; the nature of
the portfolio transaction; the size of the transaction; the desired timing of
the trade; the activity existing and expected in the market for the particular
transaction; confidentiality; the execution, clearance and settlement
capabilities of the firm; the availability of research and research related
services provided through such firm; Prudential's knowledge of the financial
stability of the firm; Prudential's knowledge of actual or apparent operational
problems of firm; and the amount of capital, if any, that would be contributed
by firm executing the transaction. Given these factors, the Fund may pay
transaction costs in excess of that which another firm might have charged for
effecting the same transaction.
When Prudential selects a firm that executes orders or is a party to portfolio
transactions, relevant factors taken into consideration are whether that firm
has furnished research and research related products and/or services, such as
research reports, research compilations, statistical and economic data,
computer data bases, quotation equipment and services, research oriented
computer-software, hardware and services, reports concerning the performance of
accounts, valuations of securities, investment related periodicals, investment
seminars and other economic services and consultants. Such services are used in
connection with some or all of Prudential's investment activities; some of such
services, obtained in connection with the execution of transactions for one
investment account may be used in managing other accounts, and not all of these
services may be used in connection with the Fund.
Subject to the above considerations, PSI may act as a securities broker for the
Fund. In order for PSI to effect any transactions for the Fund, the commissions
received by PSI must be reasonable and fair compared to the commissions
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. This standard would allow PSI to receive no more
than the remuneration that would be expected to be received by an unaffiliated
broker in a commensurate arm's-length transaction. Furthermore, the Board of
Directors of the Fund, including a majority of the directors who are not
"interested" persons, has adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid
11
<PAGE>
to PSI are consistent with the foregoing standard. In accordance with Rule
11a2-2(T) under the Securities Exchange Act of 1934, PSI may not retain
compensation for effecting transactions on a national securities exchange for
the Fund unless the Fund has expressly authorized the retention of such
compensation in a written contract executed by the Fund and PSI. Rule 11a2-2(T)
provides that PSI must furnish to the Fund at least annually a statement
setting forth the total amount of all compensation retained by PSI from
transactions effected for the Fund during the applicable period. Brokerage
transactions with PSI are also subject to such fiduciary standards as may be
imposed by applicable law.
COMMISSIONS PAID DURING LAST THREE YEARS
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Commissions $792,461 $329,585 $662,074
- ---------------------------------------------------------------------------------------------
Commissions paid to PSI $ 22,016 $ 24,750 $ 19,301
- ---------------------------------------------------------------------------------------------
</TABLE>
During 1998, 2.8% of total Fund commissions were paid to PSI, and PSI effected
3.6% of Fund transactions involving the payment of commissions (calculated
based on the dollar amount of those transactions).
CAPITAL STOCK
All shares of Fund stock are entitled to participate equally in dividends and
distributions of the Fund and in its net assets remaining upon liquidation
after satisfaction of outstanding liabilities. Fund shares are fully paid and
nonassessable when issued and have no preemptive, conversion or exchange
rights. Such shares are redeemable upon request, except under the circumstances
described in the prospectus.
Each share of common stock outstanding is entitled to one vote. Fund shares are
held only by separate accounts of Prudential (Prudential's Annuity Plan
Account-2, Prudential's Investment Plan Account and Prudential's Annuity Plan
Account). Fund shares are voted by Prudential in accordance with voting
instructions received from participants in those accounts. If there are Fund
shares held in an account for which voting instructions are not received,
Prudential will vote those shares on each matter in the same proportion as it
votes the Fund shares held in that account for which it received instructions.
TAXATION OF THE FUND
The Fund intends to qualify under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In any year in which the Fund qualified as
regulated investment companies and distributes substantially all of its net
investment income and net capital gains, the Fund generally will not be subject
to federal income tax to the extent it distributes to shareholders such income
and capital gains in the manner required under the Code. If the Fund does not
qualify under Subchapter M of the Code, the Fund will be subject to Federal
income tax.
To comply with regulations under Section 817(h) of the Code which contains
certain diversification requirements, the Fund will be required to diversify
its investments so that on the last day of each quarter of a calendar year, no
more than 55% of the value
12
<PAGE>
of its assets is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four investments.
Generally, securities of a single issuer are treated as one investment and
obligations of each U.S. Government agency and instrumentality (such as the
Government National Mortgage Association) are treated for purposes of Section
817(h) as issued by separate issuers. In addition, any security issued,
guaranteed or insured (to the extent so guaranteed or insured) by the U.S. or
an instrumentality of the U.S. will be treated as security issued by the U.S.
Government or its instrumentality, whichever is applicable.
13
<PAGE>
FINANCIAL STATEMENTS OF
PRUDENTIAL'S GIBRALTAR FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS
Investments, at value (cost: $271,821,175) .... $ 358,629,922
Cash .......................................... 1,230
Receivable for investments sold................. 5,362,658
Interest and dividends receivable............... 180,564
--------------
Total Assets ................................. 364,174,374
--------------
LIABILITIES
Payable for investments purchased ............. 1,513,909
Payable to investment adviser .................. 99,277
Accrued expenses ............................... 54,474
--------------
Total Liabilities ............................ 1,667,660
--------------
NET ASSETS ....................................... $ 362,506,714
==============
Net assets were comprised of:
Common stock, at $1 par value................... $ 29,156,060
Paid-in capital, in excess of par .............. 240,166,490
--------------
269,322,550
Undistributed net investment income............... 81,093
Accumulated net realized gains on investments ... 6,294,324
Net unrealized appreciation on investments ....... 86,808,747
--------------
Net assets, December 31, 1998................... $ 362,506,714
==============
Net asset value and redemption price per
share, 29,156,060 outstanding shares
of common stock (authorized 75,000,000
shares) ...................................... $ 12.43
==============
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
INVESTMENT INCOME
Dividends (net of $12,089 foreign withholding
tax) ............................ $ 2,871,893
Interest ........................... 668,586
----------------
3,540,479
----------------
EXPENSES
Investment advisory fee ................ 404,800
Directors' fees ...................... 8,500
Custodian expense ................... 1,000
----------------
Total expenses..................... 414,300
Less custodian fee credit............... (813)
----------------
Net expenses....................... 413,487
----------------
NET INVESTMENT INCOME.............. 3,126,992
----------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments.......... 33,966,363
Net change in unrealized appreciation on
investments....................... 41,144,598
----------------
NET GAIN ON INVESTMENTS ............ 75,110,961
----------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................... $ 78,237,953
================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................................................... $ 3,126,992 $ 4,863,953
Net realized gain on investments........................................................ 33,966,363 50,505,594
Net change in unrealized appreciation on investments.................................... 41,144,598 547,282
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................... 78,237,953 55,916,829
------------- -------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income.................................................... (3,149,824) (5,623,695)
Distributions from net realized capital gains........................................... (30,374,602) (59,469,378)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS......................................................... (33,524,426) (65,093,073)
------------- -------------
CAPITAL TRANSACTIONS:
Capital stock sold [-0- and 232,480 shares, respectively]............................... -- 3,000,000
Capital stock issued in reinvestment of dividends and distributions [2,790,053 and
5,819,002 shares, respectively]....................................................... 32,290,798 63,060,874
Capital stock repurchased [(3,405,733) and (2,645,935) shares, respectively]............ (40,416,358) (32,262,504)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS................. (8,125,560) 33,798,370
------------- -------------
TOTAL INCREASE IN NET ASSETS.............................................................. 36,587,967 24,622,126
NET ASSETS:
Beginning of year....................................................................... 325,918,747 301,296,621
------------- -------------
End of year (a)......................................................................... $ 362,506,714 $ 325,918,747
============= =============
(a) Includes undistributed net investment income of:.................................... $ 81,093 $ --
------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
SCHEDULE OF INVESTMENTS
PRUDENTIAL'S GIBRALTAR FUND, INC.
DECEMBER 31, 1998
LONG-TERM INVESTMENTS -- 98.6%
COMMON STOCKS Value
Shares (Note 1)
ADVERTISING -- 3.5% ------ --------------
Interpublic Group of Companies, Inc. ... 90,600 $ 7,225,350
Young & Rubicam, Inc.(a)................ 169,300 5,481,087
--------------
12,706,437
--------------
BANKS AND SAVINGS & LOANS -- 3.0%
Chase Manhattan Corp.................... 107,500 7,316,719
Wells Fargo Co.......................... 85,000 3,394,687
--------------
10,711,406
--------------
CHEMICALS -- 0.7%
Du Pont (E.I.) de Nemours & Co.......... 46,300 2,456,794
--------------
COMPUTER SERVICES -- 13.5%
America Online, Inc.(a)................. 23,300 3,728,000
BMC Software, Inc.(a)................... 81,000 3,609,562
Cisco Systems, Inc.(a).................. 110,250 10,232,578
EMC Corp.(a)............................ 87,300 7,420,500
HBO & Co................................ 156,600 4,492,463
Microsoft Corp.(a)...................... 43,000 5,963,562
Oracle Corp.(a)......................... 95,100 4,101,187
Unisys Corp............................. 273,400 9,415,212
--------------
48,963,064
--------------
COMPUTERS -- 3.2%
Compaq Computer Corp.................... 277,900 11,654,431
--------------
COSMETICS & SOAPS -- 8.2%
Avon Products, Inc...................... 121,500 5,376,375
Colgate-Palmolive Co.................... 62,500 5,804,687
Dial Corp............................... 183,300 5,292,787
Estee Lauder Companies
(Class "A" Stock)................... 46,000 3,933,000
Gillette Co............................. 69,400 3,352,887
Procter & Gamble Co..................... 66,200 6,044,888
--------------
29,804,624
--------------
DIVERSIFIED OPERATIONS -- 2.7%
General Electric Co..................... 96,800 9,879,650
--------------
DRUGS AND MEDICAL SUPPLIES -- 13.4%
Abbott Laboratories..................... 162,700 7,972,300
Bristol-Myers Squibb Co................. 74,600 9,982,413
Cardinal Health, Inc.................... 106,750 8,099,656
IMS Health, Inc......................... 89,500 6,751,656
Merck & Co., Inc........................ 68,100 10,057,519
Pfizer, Inc............................. 44,400 5,569,425
--------------
48,432,969
--------------
ELECTRONICS -- 8.3%
Altera Corp.(a)......................... 114,700 6,982,363
Applied Materials, Inc.(a).............. 83,600 3,568,675
Intel Corp.............................. 84,500 10,018,531
Uniphase Corp.(a)....................... 137,500 9,539,063
--------------
30,108,632
--------------
FINANCIAL SERVICES -- 11.4%
Citigroup, Inc.......................... 77,899 3,856,001
Federal National Mortgage
Association........................... 182,800 13,527,200
MBNA Corp............................... 428,100 10,675,744
Providian Financial Corp................ 177,450 13,308,750
--------------
41,367,695
--------------
FOOD & BEVERAGES -- 2.0%
PepsiCo, Inc............................ 176,600 7,229,563
--------------
Value
COMMON STOCKS Shares (Note 1)
(Continued) ------ ------------
GAS PIPELINES -- 1.2%
Williams Companies, Inc................. 143,500 $ 4,475,406
------------
HOSPITALS/HOSPITAL MANAGEMENT-- 1.6%
Healthsouth Corp. (a)................... 378,100 5,836,919
------------
INSURANCE -- 2.9%
American International Group, Inc....... 108,582 10,491,736
------------
LEISURE -- 0.9%
Walt Disney Co.......................... 111,500 3,345,000
------------
MANUFACTURING -- 3.5%
Illinois Tool Works, Inc................ 76,300 4,425,400
Tyco International Ltd.................. 107,200 8,086,900
------------
12,512,300
------------
MEDIA -- 4.4%
CBS Corp.(a)............................ 258,000 8,449,500
Fox Entertainment Group, Inc
(Class "A" Stock)(a)................ 104,900 2,642,169
Infinity Broadcasting Corp
(Class "A" Stock)(a)................. 182,400 4,993,200
------------
16,084,869
------------
OIL & GAS -- 1.9%
Exxon Corp.............................. 92,500 6,764,063
------------
OIL & GAS SERVICES -- 2.4%
Enron Corp.............................. 155,600 8,878,925
------------
RESTAURANTS -- 1.7%
McDonald's Corp......................... 80,600 6,175,975
------------
RETAIL -- 3.5%
CVS Corp................................ 127,500 7,012,500
Rite Aid Corp........................... 113,600 5,630,300
------------
12,642,800
------------
TELECOMMUNICATIONS -- 3.5%
MCI WorldCom, Inc.(a)................... 178,900 12,836,075
------------
UTILITY - ELECTRIC-- 1.2%
Duke Energy Corp........................ 67,200 4,305,000
------------
TOTAL LONG-TERM INVESTMENTS
(cost $270,855,586)..................... 357,664,333
------------
Principal
SHORT-TERM Amount
INVESTMENTS -- 0.3% (000)
COMMERCIAL PAPER ----------------
Xerox Capital Corp.,
5.10%, 01/04/99
(cost $965,589) .............$ 966 965,589
TOTAL INVESTMENTS -- 98.9% --------------
(cost $271,821,175; Note 3) .................. 358,629,922
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES--
1.1% ......................................... 3,876,792
--------------
TOTAL NET ASSETS-- 100.0% ......................$ 362,506,714
==============
(a) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUDENTIAL'S GIBRALTAR FUND, INC.
GENERAL
Prudential's Gibraltar Fund, Inc. (the "Fund") was originally
incorporated in the State of Delaware on March 14, 1968 and was
reincorporated in the State of Maryland effective May 1, 1997. It
is registered as an open-end, diversified management investment
company under the Investment Company Act of 1940, as amended. The
Fund was organized by The Prudential Insurance Company of America
(The Prudential) to serve as the investment medium for the
variable contract accounts of The Prudential Financial Security
Program. The Fund does not sell its shares to the public. The
accounts will redeem shares of the Fund to the extent necessary to
provide benefits under the contracts or for such other purposes as
may be consistent with the contracts.
NOTE 1: ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the fund in the preparation of its financial
statements.
Securities Valuation: Securities traded on a national securities
exchange are valued at the last sales price (or the last bid price
if there were no sales of the security that day) on the New York
Stock Exchange, or if not traded on such exchange, such last sales
or bid price at the time of close of the New York Stock Exchange
on the principal exchange on which such securities are traded. For
any securities not traded on a national securities exchange but
traded in the over-the-counter market, the value is the last bid
price available, except that securities for which quotations are
furnished through a nationwide automated quotation system approved
by the National Association of Securities Dealers, Inc. (NASDAQ)
are valued at the closing bid price on the date of valuation
provided by a pricing service which utilizes NASDAQ quotations.
Short-term securities which mature in more than 60 days are valued
at current market quotations. Short-term securities which mature
in 60 days or less are valued at amortized cost which approximates
market value.
Repurchase Agreements: In connection with transactions in
repurchase agreements with U.S. financial institutions, it is the
Fund's policy that its custodian or designated subcustodians, as
the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction,
including accrued interest. If the seller defaults and the value
of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization
of the collateral by the Fund may be delayed or limited.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and
losses on sales of investments are calculated on the identified
cost basis. Dividend income is recorded on the ex-dividend date
and interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain
estimates by management.
Dividends and Distributions: Dividends from net investment income
are declared and paid semi-annually. The Fund will distribute at
least annually net capital gains in excess of capital loss
carryforwards, if any. Dividends and distributions are recorded on
the ex-dividend date. Dividends from net investment income and net
realized capital gains of the Fund will normally be declared and
reinvested in additional full and fractional shares twice a year.
Some dividends are paid in cash.
Income distributions and capital gain distributions are determined
in accordance with income tax regulations which may differ from
generally accepted accounting principles.
Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable net
income to its shareholders. Therefore, no federal income tax
provision is required. State franchise taxes were paid for the
period that the Fund was incorporated in Delaware. No such
commitments exist following reincorporation in Maryland.
Withholding taxes on foreign dividends have been provided for in
accordance with the Fund's understanding of the applicable
country's tax rules and rates.
16
<PAGE>
Reclassification of Capital Accounts: The Fund accounts and
reports for distributions to shareholders in accordance with
A.I.C.P.A. Statement of Position 93.2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The
effect of applying this statement was to increase undistributed
net investment income by $103,925 and decrease net realized gains
by $103,925 due to recharacterization of distributions. Such
reclassification had no effect on net assets, results of
operations, or net asset value per share.
NOTE 2: INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee: The investment advisory fee, which is
computed daily at an effective annual rate of 0.125% of the
average net assets of the Fund, is payable quarterly to The
Prudential Insurance Company of America ("The Prudential") as
required under the investment advisory agreement. The Prudential
pays all expenses of the Fund except for fees and expenses of
those members of the Fund's Board of Directors who are not
officers or employees of The Prudential and its affiliates;
transfer and any other local, state or federal taxes; and brokers'
commissions and other fees and charges attributable to investment
transactions including custodian fees.
During the year ended December 31, 1998, Prudential Securities
Incorporated, an affiliate of The Prudential, earned approximately
$22,000 in brokerage commissions as a result of executing
transactions in portfolio securities on behalf of the Fund.
NOTE 3: PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than
short-term investments, for the year ended December 31, 1998
aggregated $330,566,397 and $357,953,019, respectively.
The federal income tax basis of the Fund's investments at December
31, 1998was $272,052,674 and, accordingly, net unrealized
appreciation for federal income tax purposes was $86,577,248
(gross unrealized appreciation $92,605,740; gross unrealized
depreciation $6,028,492).
17
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year ended
December 31,
------------------------------------------------------
1998 1997 1996 1995(a) 1994(a)
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year.....$ 10.95 $ 11.43 $ 10.14 $ 9.40 $11.29
------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................ 0.12 0.22 0.16 0.18 0.21
Net realized and unrealized gains
(losses) on investments ............. 2.61 1.84 2.56 1.65 (0.40)
------- ------- ------- ------- ------
Total from investment operations... 2.73 2.06 2.72 1.83 (0.19)
------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.12) (0.21) (0.15) (0.17) (0.22)
Distributions from net realized gains.. (1.13) (2.33) (1.28) (0.92) (1.48)
------- ------- ------- ------- ------
Total distributions ............... (1.25) (2.54) (1.43) (1.09) (1.70)
------- ------- ------- ------- ------
Net Asset Value, end of year ..........$ 12.43 $ 10.95 $ 11.43 $ 10.14 $ 9.40
======= ======= ======= ======= ======
TOTAL INVESTMENT RETURN(B)............. 25.89% 18.88% 27.13% 19.13% (1.33)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions).. $362.5 $325.9 $301.3 $261.2 $242.5
Ratios to average net assets:
Expenses............................. 0.13% 0.15% 0.16% 0.14% 0.15%
Net investment income................ 0.96% 1.56% 1.38% 1.68% 1.98%
Portfolio turnover rate .............. 105% 101% 97% 105% 93%
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Prudential's Gibraltar Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential's Gibraltar Fund, Inc.
(the "Fund") at December 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. The accompanying financial highlights for each of the two years in the
period ended December 31, 1995 were audited by other independent accountants,
whose opinion dated February 15, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
February 18, 1999
19
<PAGE>
PART C: OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23 Exhibits
- ----------------
<S> <C>
Exhibit 1 Articles of Incorporation (1)
Exhibit 2 By-laws (1)
Exhibit 3 See exhibits 1 and 2 above.
Exhibit 4(a) Investment Advisory Agreement between Registrant and Prudential (5)
Exhibit 4(b) Amendment No. 1 to Investment Advisory Agreement between Registrant and Prudential (5)
Exhibit 4(c) Amendment No. 2 to Investment Advisory Agreement between Registrant and Prudential (5)
Exhibit 4(d) Service Agreement between Prudential and Prudential Investment Corporations (2)
Exhibit 5 Distribution Agreement between Registrant and Prudential Investment Management Services, Inc. (5)
Exhibit 6 Not Applicable
Exhibit 7 Custody Agreement between Registrant and Investors Fiduciary Trust Company (3)
Exhibit 8(a) Administrative Services Agreement between Registrant and Prudential (5)
Exhibit 8(b) Amendment to Administrative Services Agreement between Registrant and Prudential (5)
Exhibit 9 Legal opinion (5)
Exhibit 10 Consent of Accountants (5)
Exhibit 11 Not Applicable
Exhibit 12 Not Applicable
Exhibit 13 Not Applicable
Exhibit 14 Financial Data Schedules (5)
Exhibit 15 Not Applicable
Exhibit 16 Powers of Attorney (4)
</TABLE>
(1) Incorporated by reference to Exhibit 24 to Post-Effective Amendment No. 39
to Form S-6, Prudential's Investment Plan Account, Reg. No. 2-52715, filed
May 2, 1997.
(2) Incorporated by reference to Post-Effective Amendment No. 33 to Form N-1A,
The Prudential Series Fund, Inc., Reg. No. 2-80896, (filed April 28, 1997).
(3) Incorporated by reference to Exhibit (viii) to Post-Effective Amendment No.
40 to Form S-6, Prudential's Investment Plan Account, Reg. No. 2-52715,
filed April 30, 1998.
C-1
<PAGE>
(4) Incorporated by reference to Exhibit (xvi) to Post-Effective Amendment No.
40 to Form S-6, Prudential's Investment Plan Account, Reg. No. 2-52715,
filed April 30, 1998.
(5) Filed herewith.
ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
- ------- -----------------------------------------------------------
All of the shares of Prudential's Gibraltar Fund, Inc. are held by three
separate accounts of The Prudential Insurance Company of America: Prudential's
Investment Plan Account, Prudential's Annuity Plan Account and Prudential's
Annuity Plan Account-2. Prudential also holds directly and in certain other
separate accounts shares of The Prudential Series Fund, Inc., a Maryland
corporation. The balance of the shares of The Prudential Series Fund, Inc. are
held separate accounts of Pruco Life Insurance Company, a direct wholly-owned
subsidiary of Prudential, and Pruco Life Insurance Company of New Jersey, an
indirect wholly-owned subsidiary of Prudential. All of the separate accounts
referred to above are unit investment trusts registered under the Investment
Company Act of 1940. Prudential's Gibraltar Fund, Inc. and The Prudential Series
Fund, Inc. are registered as open-end, diversified management investment
companies under the Investment Company Act of 1940. In accordance with current
legal requirements, the shares of the investment companies are voted in
accordance with the instructions of persons having an interest in the unit
investment trusts, and Prudential, Pruco Life Insurance Company and Pruco Life
Insurance Company of New Jersey will vote the shares they hold directly in the
same manner that they vote the shares that they hold in their separate accounts.
Registrant may also be deemed to be under common control with The Prudential
Variable Contract Account-2, The Prudential Variable Contract Account-10 and The
Prudential Variable Contract Account-11, separate accounts of Prudential
registered as open-end, diversified management investment companies under the
Investment Company Act of 1940.
The subsidiaries of Prudential are listed under Item 24 in Post-Effective
Amendment No. 36 to Form N-1A, The Prudential Series Fund, Inc., Reg. No. 2-
80896, filed on or about April 27, 1999, the text of which is hereby
incorporated by reference.
ITEM 25 INDEMNIFICATION
- ------- ---------------
The Registrant's Articles of Incorporation provide that "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."
The Registrant, in connection with other Prudential-advised funds, maintains a
directors and officers errors and omissions policy, which provides the
Registrant and its directors and officers with coverage against losses due to
any breach of duty, neglect, error, misstatement, misleading statement or
omission, and for costs and expenses incurred in the defense of any insured
claim.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C-2
<PAGE>
ITEM 26 BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
- ------- --------------------------------------------------------
Prudential is involved in insurance, reinsurance, securities, pension services,
real estate and banking.
The Prudential Investment Corporation ("PIC") is the investment unit of
Prudential and actively engages in the business of giving investment advice. The
officers and directors of Prudential and PIC who are engaged directly or
indirectly in activities relating to the Registrant have no other business,
profession, vocation, or employment of a substantial nature, and have not had
such other connections during the past two years.
The business and other connections of Prudential's Directors are listed in the
Pre-Effective Amendment No. 1 to Form S-6, The Prudential Variable Appreciable
Account, Reg. No. 333-64957, filed Dec. 23, 1998, the text of which is hereby
incorporated by reference.
ITEM 27 PRINCIPAL UNDERWRITERS
- ------- ----------------------
(a) Incorporated by Reference to Item 27(a) of Post-Effective Amendment No. 36
to Form N-1A, The Prudential Series Fund, Inc., Reg. No. 2-80896, filed on
or about April 27, 1999.
(b) Incorporated by Reference to Item 27(b) of Post-Effective Amendment No. 36
to Form N-1A, The Prudential Series Fund, Inc., Reg. No. 2-80896, filed on
or about April 27, 1999.
ITEM 28 LOCATION OF ACCOUNTS AND RECORDS
- ------- --------------------------------
All accounts, books or other documents required to be maintained by Section 31
(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are maintained by the Registrant, Gateway Center Three, 100 Mulberry Street, 9th
Floor, Newark, New Jersey 07102-4077; the Registrant's investment adviser, The
Prudential Insurance Company of America, Prudential Plaza, Newark, New Jersey
07102-3777; or the Registrant's custodian, Investors Fiduciary Trust Company,
127 West 10th Street, Kansas, Missouri 64105-1716.
ITEM 29 MANAGEMENT SERVICES
- ------- -------------------
Not applicable.
ITEM 30 UNDERTAKINGS
- ------- ------------
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement under Rule 485(b)
under the Securities Act of 1933 and has duly caused this registration statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Newark, and the State of New Jersey on the 23rd day of April, 1999.
PRUDENTIAL'S GIBRALTAR FUND, INC.
By: /s/ E. MICHAEL CAULFIELD
----------------------------
E. Michael Caulfield
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 42 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
SIGNATURE AND TITLE DATE
/s/ E. MICHAEL CAULFIELD April 23, 1999
- ------------------------
E. Michael Caulfield
President
/s/ GRACE TORRES
- ----------------
Grace Torres
Treasurer and Principal
Financial and Accounting Officer
/s/* SAUL K. FENSTER *By: /s/ CAREN CUNNINGHAM
- -------------------- -------------------------
Saul K. Fenster Caren Cunningham
Director (Attorney-in-Fact)
/s/* W. SCOTT MCDONALD, JR.
- ---------------------------
W. Scott McDonald, Jr.
Director
/s/* JOSEPH WEBER
- -----------------
Joseph Weber
Director
C-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
4(a) Investment Advisory Agreement between Registrant and Prudential C-6
4(b) Amendment No. 1 to Investment Advisory Agreement between Registrant
and Prudential C-9
4(c) Amendment No. 2 to Investment Advisory Agreement between Registrant
and Prudential C-10
5 Distribution Agreement between Registrant and Prudential Investment
Management Services, Inc. C-11
8(a) Administrative Services Agreement between Registrant and Prudential C-17
8(b) Amendment to Administrative Services Agreement between Registrant
and Prudential C-19
9 Legal opinion C-20
10 Consent of Accountants C-21
14 Financial Data Schedules C-22
</TABLE>
C-5
<PAGE>
Exhibit 4(a)
INVESTMENT ADVISORY CONTRACT
----------------------------
AGREEMENT dated as of the 28th day of May, 1968, by and between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA (hereinafter referred to as
"Prudential"), and PRUDENTIAL'S GIBRALTAR FUND (hereinafter referred to as the
"Fund").
WHEREAS, Prudential adopted its name in 1877 and has continuously used
it in connection with its insurance business throughout the United States and
Canada since that time; and
WHEREAS, the word "Prudential" is a registered service mark of
Prudential, United States Registration No. 693,628, registered February 23,
1960, and that word has been used in conjunction with the word "Gibraltar" for
many years in connection with Prudential's business; and
WHEREAS, a design (hereinafter referred to as the "Design") of a rock
representing the Rock of Gibraltar, within a circle and without legend, is also
a registered service mark of Prudential, United States Registration No. 792,738,
registered July 13, 1965, used in connection with Prudential's business;
WHEREAS, Prudential has caused the Fund to be organized as an open-end
management investment company (as that term is defined in the Investment Company
Act of 1940) in which to invest funds from certain of its separate accounts, and
the Fund will be registered as such an investment company with the Securities
and Exchange Commission; and
WHEREAS, Prudential has the capacity and is prepared to render
investment advisory services and investment management services to the Fund; and
WHEREAS, the Fund adopted the words "Prudential's Gibraltar" as part
of its corporate name upon the agreement of Prudential and the Fund that a
license to use such words and the Design would be entered into on the following
terms;
NOW, THEREFORE, Prudential and the Fund hereby agree as follows:
1. Prudential shall act as investment adviser for the Fund and as such
will manage the investment and reinvestment of the assets of the Fund, subject
to the control of the Board of Directors of the Fund.
2. Prudential shall be guided by the Fund's investment policies and
restrictions set forth in its certificate of incorporation, by-laws and such
registration statements and exhibits as from time to time may be on file with
the Securities and Exchange Commission.
3. Prudential shall determine what securities shall be purchased or sold
for the Fund and shall arrange for the necessary placement of orders and
execution of transactions. All brokers' commissions, taxes or governmental fees
attributable to transactions for the Fund and all other applicable taxes arising
out of the investment operations of the Fund, including income and capital gains
taxes, if any, shall be charged against the Fund.
4. At least once each month Prudential shall furnish the Fund with a
schedule of the investments held by the Fund and shall include therein a
statement of all purchases and sales made on behalf of the Fund during the
period since the preceding report.
5. Prudential shall, at its expense, provide the Fund with office
facilities, including furniture and equipment and all personnel reasonably
necessary for the Fund's operations. Prudential shall provide persons
satisfactory to the Fund's Board of Directors to serve as officers and employees
if elected or appointed, as the case may be. Prudential shall pay the
reasonable compensation of all such persons. Any fees or other compensation to
a member of the Board of Directors of the Fund, in his capacity as such, will be
borne by the Fund.
C-6
<PAGE>
6. As full compensation for all services rendered by Prudential hereunder,
the Fund shall pay Prudential quarterly at the close of business on the last
business day of each calendar quarter in each year a fee, which shall accrue
daily at the annual rate of 0.125% (1/8th of 1%), computed on the daily closing
value of the Fund's net assets during each day of the then concluding calendar
quarter. For this purpose the value of the Fund's net assets shall be computed
in the manner specified in the Fund's certificate of incorporation. In no event
shall Prudential's compensation be on the basis of a share of the capital gains
upon, or the capital appreciation of, the assets of the Fund or any portion
thereof to the extent prohibited by Section 49:3-52 of the Revised Statutes of
New Jersey.
7(a). The Fund shall have a license to use the words "Prudential's
Gibraltar" in its corporate name "Prudential's Gibraltar Fund", and a license to
use such words and the Design, in connection with its operation as an investment
company. The license herein granted to the Fund is on a royalty-free, non-
exclusive basis.
(b). Prudential retains the rights to use, or license the use of, the words
"Prudential's Gibraltar" (and either of them and every combination and
derivative thereof) in connection with other investment companies, subject to
the requirements of the Investment Company Act of 1940, or any other business
enterprise during the continuance in force of this Agreement.
(c). The Fund acknowledges that the words "Prudential's Gibraltar" and the
Design represent good will of great substantial value to Prudential and that
Prudential must be able to protect and preserve such good will by terminating
the license herein granted if Prudential, in its sole discretion, decides that
it is necessary to do so or if Prudential decides that it is no longer in a
position to assure that high quality standards will be associated with the use
of the words and the Design. Accordingly, if the holders of the outstanding
voting securities of the Fund fail to approve this Agreement, or if at any time
after such approval Prudential or a company controlled by it ceases to be
investment adviser of the Fund, Prudential shall have the absolute right to
terminate the license herein granted forthwith upon written notice to the Fund.
Prudential shall have the absolute right to terminate the license herein granted
for any other reason upon 60 days' written notice of such termination to the
Fund, but in such event this Agreement shall terminate on the 120th day
following receipt by the Fund of such notice unless on or prior to such day the
holders of a majority of the outstanding voting securities of the Fund shall
have voted in favor of Prudential (or a company controlled by it) continuing to
act as investment adviser to the Fund hereunder in accordance with the terms
hereof notwithstanding the termination of the license herein granted.
(d). Upon termination of the license herein granted, the Fund shall
immediately change its corporate name to one which does not include the words
"Prudential's Gibraltar" or either of them, or any combination or derivative
thereof, and will discontinue all use by it of such words, the Design or
anything resembling the Design, in connection with its business.
(e). The terms of the license herein granted shall inure to the benefit of
and be binding upon any successors or assigns of the Fund or Prudential.
8. This Agreement supersedes the Investment Advisory Contract dated May
28, 1968 and the License Agreement dated June 27, 1968 between the parties
hereto, shall remain in force until the first meeting of stockholders of the
Fund held after January 1, 1969, and, if it is approved at such meeting by a
majority of the outstanding voting securities of the Fund, shall continue in
force from year to year thereafter, but only so long as such continuance is
approved at least annually by the Board of Directors of the Fund, including the
specific approval of a majority of the Directors who are not persons affiliated
with Prudential, or by a vote of a majority of the outstanding voting securities
of the Fund. Notwithstanding the foregoing, this Agreement may be terminated at
any time, without payment of any penalty, by the Board of Directors of the Fund
or by a vote of a majority of the outstanding voting securities of the Fund on
60 days' written notice to Prudential. Subject to the provisions of paragraph 7
hereof, this Agreement may be terminated by Prudential on 90 days' notice to the
Fund.
9. This Agreement may not be assigned by Prudential, with or without the
consent of the Fund, and shall terminate automatically in the event of any such
assignment. The term "assignment" shall have the meaning set forth in the
Investment Company Act of 1940 and Section 49:3-53(c) of the Revised Statutes of
New Jersey.
C-7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly authorized officers as of the date first above
mentioned.
THE PRUDENTIAL INSURANCE COMPANY
Attest: OF AMERICA
/S/ By /S/
- ---------------------------- --------------------------
Secretary Sr. Vice President
Attest: PRUDENTIAL'S GIBRALTAR FUND
/S/ By /S/
- ---------------------------- --------------------------
Secretary President
C-8
<PAGE>
EXHIBIT 4(B)
AMENDMENT NO. 1 TO
INVESTMENT ADVISORY CONTRACT
Amendment No. 1 dated as of the 15th day of March, 1972 to AGREEMENT dated
as of the 28th day of May, 1968, by and between THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA (hereinafter referred to as "Prudential"), and PRUDENTIAL'S GIBRALTAR
FUND (hereinafter referred to as the "Fund").
WHEREAS, Pruco Securities Corporation (hereinafter referred to as "Pruco
Securities"), is a broker-dealer affiliated with Prudential, and is a member of
the Philadelphia-Baltimore-Washington Stock Exchange, and enjoys preferential
status on the Pacific Coast and Boston Stock Exchanges; and
WHEREAS, Prudential and the Fund desire to provide for the use of Pruco
Securities as broker on certain of the portfolio transactions of the Fund; and
WHEREAS, Prudential and the Fund desire to conform the terms of the
Agreement to recently enacted provisions of the Investment Company Act of 1940;
NOW, THEREFORE, Prudential and the Fund hereby agree as follows:
1. Pruco Securities shall be used as broker on such of the portfolio
transactions of the Fund as Prudential in its discretion determines can be
executed advantageously on any stock exchange of which Pruco Securities is a
member or as to which it enjoys a preferential status. Pruco Securities shall
be paid the appropriate broker's commission for such transactions.
2. With respect to the calendar year 1972 and subsequent years, the amount of
the investment advisory fee payable to Prudential by the Fund pursuant to this
Agreement shall be reduced by an amount equal to the portion of the "net profits
after taxes" of Pruco Securities allocable in accordance with generally accepted
accounting principles to the transactions it has executed on behalf of the Fund.
"Net profits after taxes" shall be determined by subtracting from the gross
brokerage commissions received by Pruco Securities all its expenses attributable
to the earning of such commissions (including capital charges), and by
calculating taxes as those that would be payable if Pruco Securities were to
file a separate tax return, whether or not it does so. The reduction of the
advisory fee described herein shall be determined promptly at the end of each
calendar year and shall be credited against the amount of the fourth quarterly
installment of the advisory fee then payable.
3. Notwithstanding the provisions of Section 8 of the Agreement, this
Agreement shall continue in effect from year to year only so long as such
continuance is approved at least annually by the Board of Directors at a meeting
held in person for the purpose, such approval to include the specific approval
of a majority of the Directors who are not interested persons of Prudential.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on their behalf by their duly authorized officers as of the date first herein
above mentioned.
THE PRUDENTIAL INSURANCE COMPANY
Attest: OF AMERICA
/S/ By /S/
- ----------------------------------- ------------------------------------
Secretary President
Attest: PRUDENTIAL'S GIBRALTAR FUND
/S/ By /S/
- ----------------------------------- ------------------------------------
Secretary President
C-9
<PAGE>
EXHIBIT 4(C)
AMENDMENT NO. 2 TO
INVESTMENT ADVISORY CONTRACT
Amendment No. 2 dated as of the 1st day of October, 1985 to AGREEMENT dated
as of the 28th day of May, 1968, by and between The Prudential Insurance Company
(hereinafter referred to as "Prudential"), and Prudential's Gibraltar Fund
(hereinafter referred to as the "Fund").
Prudential and the Fund hereby agree that Section 4 of the Agreement is
hereby amended to read as follows:
"4. At least once each quarter Prudential shall furnish the Fund with a
schedule of the investments held by the Fund and shall include therein a
statement of all purchases and sales made on behalf of the Fund during the
period since the preceding report."
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on their behalf by their duly authorized officers as of the date first herein
above mentioned.
PRUDENTIAL'S GIBRALTAR FUND
By /S/
--------------------------
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /S/
--------------------------
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<PAGE>
EXHIBIT 5
PRUDENTIAL'S GIBRALTAR FUND, INC.
Distribution Agreement
----------------------
Agreement made as of June 1, 1998, between Prudential's Gibraltar
Fund, Inc. (the Fund), and Prudential Investment Management Services LLC, a
Delaware limited liability company (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and serves as the funding medium for variable
contracts issued by The Prudential Insurance company of America and certain
other insurers (the contracts);
WHEREAS, the shares of the Fund may be divided into classes and/or
series (all such shares being referred to herein as Shares) and the Fund
currently is authorized to offer Shares without class designation;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business of
selling shares of registered investment companies either directly or through
other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the Fund's Shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Shares of the Fund to sell Shares to the public on behalf
of the Fund and the Distributor hereby accepts such appointment and agrees to
act hereunder. The Fund hereby agrees during the term of this Agreement to sell
Shares of the Fund through the Distributor on the terms and conditions set forth
below.
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to
act as principal underwriter and distributor of the Fund's Shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Shares of
the Fund shall not apply to Shares of the Fund issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions or
through the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
C-11
<PAGE>
2.4 Such exclusive rights shall not apply to purchases made through
the Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Shares from the Fund
--------------------------------
3.1 The Distributor shall have the right to buy from the Fund on
behalf of investors the Shares needed, but not more than the Shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Shares placed with the Distributor by investors or registered and qualified
securities dealers and other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the Fund
and delivered by the Distributor or selected dealers, as described in Section
6.4 hereof, to investors at the offering price as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of any or all
classes and/or series of its Shares at times when redemption is suspended
pursuant to the conditions in Section 4.3 hereof or at such other times as may
be determined by the Board. The Fund shall also have the right to suspend the
sale of any or all classes and/or series of its Shares if a banking moratorium
shall have been declared by federal or New Jersey authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such Shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
----------------------------------------------
4.1 Any of the outstanding Shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with the applicable provisions of the Prospectus. The price to be
paid to redeem or repurchase the Shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
on or before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to a contingent
deferred sales charge, any applicable contingent deferred sales charge shall be
paid to the Distributor, and the balance shall be paid to or for the account of
the redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus; and (ii) in the case of all other Shares, proceeds shall be
paid to or for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of any class and/or series of Shares or payment may be
suspended at times when the New York Stock Exchange is closed for other than
customary weekends and holidays, when trading on said Exchange is restricted,
when an emergency exists as a result of which disposal by the Fund
C-12
<PAGE>
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Shares as
provided herein, the Fund agrees to sell its Shares so long as it has Shares of
the respective class and/or series available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, and this shall
include one certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the
necessary approval of the Board and the shareholders, all necessary action to
fix the number of authorized Shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Shares as the Distributor reasonably may
expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to notify such states as the
Distributor and the Fund may approve of its intention to sell any appropriate
number of its Shares; provided that the Fund shall not be required to amend its
Articles of Incorporation or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of its
Shares in any state from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any state or to consent to service of
process in any state other than with respect to claims arising out of the
offering of its Shares. Any such notification may be withheld, terminated or
withdrawn by the Fund at any time in its discretion. As provided in Section 9
hereof, the expense of notification and maintenance of notification shall be
borne by the Fund. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such notifications.
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Shares, but shall not be obligated to sell any specific number of
Shares. Sales of the Shares shall be on the terms described in the Prospectus.
The Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as set forth
in the Prospectus.
6.2 In selling the Shares, the Distributor shall use its best efforts
in all respects duly to conform with the requirements of all federal and state
laws relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of Securities Exchange Act Rule 10b-10 and the rules of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected
dealer agreements with
C-12
<PAGE>
registered and qualified securities dealers and other financial institutions of
its choice for the sale of Shares, provided that the Fund shall approve the
forms of such agreements. Within the United States, the Distributor shall offer
and sell Shares only to such selected dealers as are members in good standing of
the NASD or are institutions exempt from registration under applicable federal
securities laws. Shares sold to selected dealers shall be for resale by such
dealers only at the offering price determined as set forth in the Prospectus.
Section 7. Payment of the Distributor under the Plan
-----------------------------------------
7.1 The Fund shall pay to the Distributor as compensation for
services under any Plans adopted by the Fund and this Agreement a distribution
and service fee with respect to the Fund's classes and/or series of Shares as
described in each of the Fund's respective Plans and this Agreement.
7.2 So long as a Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of the commissions and account servicing fees
with respect to the relevant class and/or series of Shares to be paid by the
Distributor to account executives of the Distributor and to broker-dealers,
financial institutions and investment advisers which have dealer agreements with
the Distributor. So long as a Plan (or any amendment thereto) is in effect, at
the request of the Board or any agent or representative of the Fund, the
Distributor shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and the costs
incurred in performing such activities with respect to the relevant class and/or
series of Shares.
Section 8. Allocation of Expenses
----------------------
The Fund shall bear all costs and expenses of the continuous offering of its
Shares, including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required Registration
Statements and/or Prospectuses under the Investment Company Act or the
Securities Act, and all amendments and supplements thereto, and preparing and
mailing annual and periodic reports and proxy materials to shareholders
(including but not limited to the expense of setting in type any such
Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of making notice
filings for the Shares for sale, and, if necessary or advisable in connection
therewith, of qualifying the Fund as a broker or dealer, in such states of the
United States or other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing notification therein until the Fund decides to
discontinue such notification pursuant to Section 5.4 hereof.
Section 9. Indemnification
---------------
9.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which the Distributor,
its officers, members or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or based upon
any untrue statement of a material fact contained in the Registration Statement
or Prospectus or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary to make the
statements in either thereof not misleading, except insofar as such claims,
demands, liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished by the Distributor to the Fund
for use in the Registration Statement or Prospectus; provided, however, that
this indemnity agreement shall not inure to the benefit of any such officer,
member or controlling person unless a court of competent jurisdiction shall
determine in a final decision on the merits, that the person to be indemnified
was not liable by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of
C-14
<PAGE>
directors or directors who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. The Fund's
agreement to indemnify the Distributor, its officers and members and any such
controlling person as aforesaid is expressly conditioned upon the Fund's being
promptly notified of any action brought against the Distributor, its officers or
members, or any such controlling person, such notification to be given by letter
or telegram addressed to the Fund at its principal business office. The Fund
agrees promptly to notify the Distributor of the commencement of any litigation
or proceedings against it or any of its officers or directors in connection with
the issue and sale of any Shares.
9.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which the Fund, its
officers and directors or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished by the Distributor to the Fund for use in the Registration
Statement or Prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or Prospectus or necessary to make
such information not misleading. The Distributor's agreement to indemnify the
Fund, its officers and directors and any such controlling person as aforesaid,
is expressly conditioned upon the Distributor's being promptly notified of any
action brought against the Fund, its officers and directors or any such
controlling person, such notification being given to the Distributor at its
principal business office.
Section 10. Duration and Termination of this Agreement
------------------------------------------
10.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of the Fund, or by the vote of a majority of the
outstanding voting securities of the applicable class and/or series of the Fund,
and (b) by the vote of a majority of those directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of any of the
Fund's Plans or in any agreement related thereto (Independent directors), cast
in person at a meeting called for the purpose of voting upon such approval.
10.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the Independent directors or by vote of
a majority of the outstanding voting securities of the applicable class and/or
series of the Fund, or by the Distributor, on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
10.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of the Fund, or by the vote of a majority
of the outstanding voting securities of the applicable class and/or series of
the Fund, and (b) by the vote of a majority of the Independent directors cast in
person at a meeting called for the purpose of voting on such amendment.
Section 12. Separate Agreement as to Classes and/or Series
----------------------------------------------
The amendment or termination of this Agreement with respect to any
class and/or
C-15
<PAGE>
series shall not result in the amendment or termination of this Agreement with
respect to any other class and/or series unless explicitly so provided.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New Jersey as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New Jersey, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Investment Management Services LLC
By: ________________________
Jonathan M. Greene
Executive Vice President
Prudential's Gibraltar Fund, Inc.
By: ________________________
Mendel A. Melzer, CFA
Chairman
C-16
<PAGE>
Exhibit 8(a)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated the 26th day of June, 1968, by and between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA (hereinafter referred to as
"Prudential"), and PRUDENTIAL'S GIBRALTAR FUND (hereinafter referred to as the
"Fund").
WHEREAS, the Fund is registered with the Securities and Exchange
Commission as an open-end management investment company, and, upon registration
of shares of its capital stock, will continuously offer such shares for sale;
and
WHEREAS, Prudential and the Fund have entered into an Investment
Advisory Contract, dated May 28, 1968, pursuant to which Prudential agreed to
act as investment adviser to the Fund and to provide the Fund with certain
facilities and personnel required in connection with the operation of the Fund;
and
WHEREAS, said Investment Advisory Contract does not provide for the
performance of certain administrative services required in connection with the
operation and conduct of the business of the Fund and the parties wish to
provide for the performance of such services;
NOW, THEREFORE, Prudential and the Fund hereby agree as follows:
1. So long as the Fund sells shares of its capital stock at net asset value
solely to Prudential, Prudential's Investment Plan Account, Prudential's
Annuity Plan Account, such other separate accounts of Prudential as may be
established by Prudential or any other organization or entity specifically
approved by Prudential in writing, Prudential will provide all the
administrative services that may be required for the operations and conduct
of the business of the Fund and, to the extent that such services are
performed by third parties, either at the request of Prudential or at the
request of the Fund, will bear the cost of such services, except to the
extent provided herein, either directly or by reimbursing the Fund for
costs so incurred, without additional compensation being payable by the
Fund beyond that provided by the said Investment Advisory Contract.
2. The services to be provided and expenses or fees to be paid or reimbursed
by Prudential shall include those performed or incurred in connection with:
a. the organization of the Fund;
b. the registration of the Fund and its shares of capital stock for
offer or sale under Federal and State securities laws;
c. the preparation, printing and distribution of prospectuses for the
Fund, and advertising and sales literature referring to the Fund for
use in offering any security to the public;
d. the preparation and distribution of reports and acts of the Fund
required by and under Federal and State securities laws;
e. the legal and auditing services that may be required by the Fund;
f. the conduct of annual and special meetings of the shareholders of
the Fund; and
g. the custodial and safekeeping services that may be required by the
Fund.
3. Prudential shall not, either under this Agreement or under the Investment
Advisory Agreement, be responsible for or chargeable with the following
expenses that may be incurred by the Fund and all such expenses shall be
borne by the Fund:
a. the fees and expenses of members of the Board of Directors of the
Fund who are not officers or employees of Prudential;
b. brokers' commissions, transfer taxes and other charges and fees
directly attributable to the purchase and sale of portfolio securities
of the Fund;
c. federal taxes payable by the Fund; and
d. state and local taxes arising out of or attributable to the
operations and conduct of the business of the Fund.
4. This Agreement may be terminated by Prudential or the Fund on sixty (60)
days' written notice.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf by their duly authorized officers as of the date first
above mentioned.
THE PRUDENTIAL INSURANCE COMPANY
Attest: OF AMERICA
/S/ By /S/
- ------------------------ --------------------------
Secretary Executive Vice President
Attest: PRUDENTIAL'S GIBRALTAR FUND
/S/ By
- ------------------------ --------------------------
Secretary President
C-18
<PAGE>
EXHIBIT 8(B)
AMENDMENT NO. 1 TO
ADMINISTRATIVE SERVICES AGREEMENT
Amendment No. 1, dated as of November 20, 1998, to Administrative
Services Agreement dated as of June 26, 1968, by and between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA (hereinafter referred to as "Prudential") and
PRUDENTIAL'S GIBRALTAR FUND, INC. (hereinafter referred to as the "Fund").
WHEREAS, Prudential and the Fund wish to clarify certain terms of the
Agreement;
NOW, THEREFORE, Prudential and the Fund hereby agree as follows:
1. The expenses and fees to be paid or reimbursed by Prudential pursuant to
Section 2 of the Agreement shall not include premiums paid in respect of
a joint fidelity bond, Directors and Officers/Errors and Omissions
coverage or any type of insurance that the Fund's Board of Directors
shall deem appropriate.
2. The expenses and fees to be borne by the Fund pursuant to Section 2 of
the Agreement shall include premiums paid in respect of a joint fidelity
bond, Directors and Officers/Errors and Omissions coverage or any other
type of insurance that the Fund's Board of Directors shall deem
appropriate.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on their behalf by their duly authorized officers as of the date first written
above.
THE PRUDENTIAL INSURANCE PRUDENTIAL'S GIBRALTAR
COMPANY OF AMERICA FUND, INC.
/s/ ROBERT A. GUNIA /s/ MENDEL A. MELZER
------------------ --------------------
By: Robert F. Gunia By: Mendel A. Melzer, CFA
Title: Vice-President Title: Director & Chairman of the Board
C-19
<PAGE>
EXHIBIT 9
SHEA & GARDNER
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
(202) 828-2000
FAX: (202) 828-2195
April 13, 1999
Prudential's Gibraltar Fund, Inc.
751 Broad Street
Newark, NJ 07102
Ladies & Gentlemen:
We have served as counsel to Prudential's Gibraltar Fund, Inc. (the
"Fund") in connection with various matters relating to the registration of the
Fund's securities under the Securities Act of 1933, as amended, and registration
of the Fund under the Investment Company Act of 1940, as amended.
Based on our examination of the relevant documents contained in the
Fund's registration statement, and in reliance upon certain exhibits to that
registration statement, and assuming that the securities were issued in
accordance with the terms described in the registration statement, and that the
Fund received payment for the securities, we are of the opinion that the
securities are valid, legal and binding obligations of the Fund in accordance
with their terms and are nonassessable.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Fund's registration statement.
Yours truly,
SHEA & GARDNER
By:/s/ Christopher E. Palmer
-------------------------
Christopher E. Palmer
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<PAGE>
Exhibit 99.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 42 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 18, 1999, relating to the financial statements and financial highlights
of Prudential's Gibraltar Fund, Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "Investment Advisory and
Other Services" in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in such Prospectus.
PricewaterhouseCoopers LLP
New York, New York
April 23, 1999
C-21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PRUDENTIAL GIBRALTAR FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
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