<PAGE>
Reg. No. 2-32685
Reg. No. 811-01660
As filed with the Securities and Exchange Commission on April, 2000
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. 43 [X]
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and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 43 [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:
C. Christopher Sprague
Assistant 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, 2000 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, 2000
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, the Securities and Exchange Commission has not
approved or disapproved the Fund's shares nor has the SEC determined that this
prospectus is complete or accurate. It is a criminal offense to state
otherwise.
[Prudential Investments Logo]
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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 interest rate 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.
Annual Returns*
[BAR GRAPH]
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- -2.8% 34.4% 17.6% 23.79% -1.33% 19.13% 27.13% 18.88% 25.89% 38.92%
BEST QUARTER: 28.94% (4th quarter of 1998)
WORST QUARTER: (14.06)% (3rd quarter of 1998)
1 These annual returns do not include contact 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 12/31/99)
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<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Fund shares 38.92% 25.79% 19.44%
S&P 500** 21.03% 28.54% 18.19%
Lipper Average*** 22.40% 25.53% 16.72%
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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) Large-Cap Core Funds Average is calculated by Lipper Inc.
and reflects the investment return of certain portfolios underlying
variable life and annuity contracts. The returns are net of investment fees
and Fund expenses but not contract 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, 1999, Prudential had total assets under management of
approximately $364 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. Prudential is working toward
completing this process in 2001 and currently expects adoption by the Board of
Directors to take place in the latter part of 2000. However, there is no
certainty that the demutualization will be completed in this timeframe or that
the necessary approvals will be obtained. Also it is possible that after
careful review, Prudential could decide not to demutualize or could decide to
delay its plans.
The plan of reorganization, which has not been fully 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 types, amounts and
issue years of the policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, provided that their
policies were in force on the date Prudential's Board of Directors adopted a
plan of reorganization, while mutual fund customers and customers of the
company's subsidiaries (such as the Pruco Life insurance companies) would not
be. It has not yet been determined whether any exceptions to that general rule
will be made with respect to policyholders and contractholders of Prudential's
subsidiaries. This does not constitute a proposal, offer, solicitation or
recommendation regarding any plan of reorganization that may be proposed or a
recommendation regarding the ownership of any stock that could be issued in
connection with any such demutualization.
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 1999 expenses as a percentage of the Fund's
average net assets:
1999 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 contracts. 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 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 Planholders, under most contracts, 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.
7
<PAGE>
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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 four years ended 12/31/99 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 year ended 12/31/95 was audited by another independent
auditor whose report was also unqualified.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 12/31
PER SHARE OPERATING PERFORMANCE: 1999 1998 1997 1996 1995(A)
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<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.43 $10.95 $11.43 $10.14 $ 9.40
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .10 .12 .22 .16 .18
Net realized and unrealized gain (loss) on
investment transactions 4.57 2.61 1.84 2.56 1.65
------ ------ ------ ------ ------
Total from investment operations 4.67 2.73 2.06 2.72 1.83
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LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.12) (.21) (.15) (.17)
Distributions from net realized gains (1.34) (1.13) (2.33) (1.28) (.92)
------ ------ ------ ------ ------
Total distributions (1.43) (1.25) (2.54) (1.43) (1.09)
------ ------ ------ ------ ------
Net asset value, end of year $15.67 $12.43 $10.95 $11.43 $10.14
TOTAL RETURN(B) 38.92% 25.89% 18.88% 27.13% 19.13%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA 1999 1998 1997 1996 1995
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Net assets, end of year (000) $451,289 $362,507 $325,919 $301,297 $261,223
Ratios to average net assets:
Expenses .13% .13% .15% .16% .14%
Net investment income .63% .96% 1.56% 1.38% 1.68%
Portfolio turnover 39% 105% 101% 97% 105%
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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: In Person:
Securities and Exchange Commission Public Reference Room
Public Reference Section in Washington, DC
Washington, DC 20549-6009 (For hours of operation, call 1 (800)
SEC-0330.)
(The SEC charges a fee to copy documents.)
Via the Internet:
http://www.sec.gov
SEC File No. 811-01660
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PRESORTED
[LOGO] Prudential STANDARD
The Prudential Insurance Company of America U.S.
751 Broad Street POSTAGE
Newark, NJ 07102-3777 PAID PERMIT
8048 NY, NY
GIB1 (05/01/2000)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION (SAI)
May 1, 2000
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, 2000.
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
Code of Ethics...............................................................12
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 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 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*
John R. Strangfeld--Chairman of the Board, Director, President--Executive Vice
President, Global Asset Management, since 1998; Chief Executive Officer,
Private Asset Management Group (PAMG) from 1996 to 1998; President, PAMG, from
1994 to 1996; prior to 1994, Senior Managing Director.
Saul K. Fenster, 67, Director - President of New Jersey Institute of
Technology. Address: 323 Martin Luther King Boulevard, Newark, New Jersey
07102.
W. Scott McDonald, Jr., 63, 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, 76, Director - Vice President, Interclass (international
corporate learning). Address: 37 Beachmont Terrace, North Caldwell, New Jersey
07006.
Officers who are not Directors
David R. Odeneth, Jr., Vice President--Chief Executive Officer and Chief
Operating Officer, Prudential Investments Fund Management LLC, since 1999.
Prior to 1999, Senior Vice President of Paine Webber Group, 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.
Lee D. Augsburger, Secretary--Assistant General Counsel of Prudential since
1997; prior to 1997, Consultant with Price Waterhouse LLP.
William V. Healey, Assistant Secretary--Vice President and Associate General
Counsel of Prudential and Chief Legal Officer of Prudential Investments since
1998; Director, ICI, Mutual Insurance Company since 1999. Prior to 1998,
Associate General Counsel of the Dreyfus Corporation (Dreyfus), a subsidiary of
Mellon Bank N.A. (Mellon Bank).
C. Christopher Sprague, Assistant Secretary--Assistant General Counsel of
Prudential since 1994.
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. Effective January 1, 2000, a single annual retainer fee
of $55,000 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 (an additional $2,000 annual retainer fee is
paid to the Chairman of the Fund's audit committee). (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, 1999 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, 1999.
- --------
*Certain actions of the Board of Directors, 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 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 $3,050 None N/A $35,000(5/21)
W. Scott McDonald $3,050 None N/A $35,000(5/21)
Joseph Weber $3,050 None N/A $35,000(5/21)
</TABLE>
- --------
*Indicates number of funds (including the Fund) and the number of portfolios
within those Funds to which aggregate compensation relates.
As of April 30, 2000, 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, 1999, 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 12/31/99
--------------------------- -------------------------
<S> <C>
Prudential's Investment Plan Account 82%
Prudential's Annuity Plan Account 1%
Prudential's Annuity Plan Account-2 17%
</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 $480,403 in 1999, $404,800 in 1998, and $390,676 in 1997.
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.
State Street Bank and Trust Company (State Street), 801 Pennsylvania, Kansas
City, Missouri 64105-1716, is the custodian of the assets held by the Fund. As
custodian, State Street is responsible for safeguarding the assets of the Fund.
State Street 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>
1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Commissions $361,199 $792,461 $329,585
- ---------------------------------------------------------------------------------------------
Commissions paid to PSI $ 9,043 $ 22,016 $ 24,750
- ---------------------------------------------------------------------------------------------
</TABLE>
During 1999, 2.5% of total Fund commissions were paid to PSI, and PSI effected
1.78% of Fund transactions involving the payment of commissions (calculated
based on the dollar amount of those transactions).
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics. In addition,
Prudential, PIC, and PIMS have each adopted a Code of Ethics (the "Codes"). The
Codes permit personnel subject to the Codes to invest in securities, including
securities that may be purchased or held by the Fund. However, the protective
provisions of the Codes prohibit certain investments and limit such personnel
from making investments during periods when the Fund is making such
investments. The Codes are on public file with, and are available from, the
SEC.
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
12
<PAGE>
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 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, 1999
ASSETS
Investments, at value (cost: $284,957,735) ........ $451,283,532
Receivable for investments sold ................... 569,981
Interest and dividends receivable ................. 193,622
-----------
Total Assets .................................. 452,047,135
===========
LIABILITIES
Payable to Bank ................................... 569,773
Payable to investment adviser ..................... 125,507
Accrued expenses .................................. 62,404
-----------
Total Liabilities .............................. 757,684
-----------
NET ASSETS .......................................... $451,289,451
===========
Net assets were comprised of:
Common stock, at $1 par value ..................... $ 28,806,311
Paid-in capital, in excess of par ................. 237,266,916
-----------
266,073,227
Accumulated net realized gains on investments ....... 18,890,427
Net unrealized appreciation on investments .......... 166,325,797
-----------
Net assets, December 31, 1999 ....................... $451,289,451
===========
Net asset value and redemption price per share,
28,806,311 outstanding shares of common
stock (authorized 75,000,000 shares) .............. $ 15.67
===========
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
INVESTMENT INCOME
Dividends ........................................ $2,325,435
Interest ......................................... 573,151
-----------
2,898,586
-----------
EXPENSES
Investment advisory fee .......................... 480,403
Directors' fees .................................. 8,500
Custodian expense ................................ 1,000
-----------
Total Expenses ................................... 489,903
Less: custodian fee credit ....................... (1,567)
-----------
Net expenses ..................................... 488,336
-----------
NET INVESTMENT INCOME............................... 2,410,250
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments ................. 48,396,443
Net change in unrealized appreciation on
investments ...................................... 79,517,050
-----------
NET GAIN ON INVESTMENTS............................. 127,913,493
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................................... $130,323,743
===========
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998
---- ----
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
OPERATIONS:
Net investment income .......................................................... $ 2,410,250 $ 3,126,992
Net realized gain on investments ............................................... 48,396,443 33,966,363
Net change in unrealized appreciation on investments ........................... 79,517,050 41,144,598
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... 130,323,743 78,237,953
------------ ------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income ........................................... (2,491,343) (3,149,824)
Distributions from net realized capital gains .................................. (35,800,340) (30,374,602)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS .............................................. (38,291,683) (33,524,426)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Capital stock issued in reinvestment of dividends and
distributions [2,578,010 and 2,790,053 shares, respectively] ................. 36,911,543 32,290,798
Capital stock repurchased [(2,927,759) and (3,405,733) shares, respectively] ... (40,160,866) (40,416,358)
------------ ------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK TRANSACTIONS ............. (3,249,323) (8,125,560)
------------ ------------
TOTAL INCREASE IN NET ASSETS ..................................................... 88,782,737 36,587,967
NET ASSETS:
Beginning of year .............................................................. 362,506,714 325,918,747
------------ ------------
End of year (a) ................................................................ $451,289,451 $362,506,714
============ ============
(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, 1999
LONG-TERM INVESTMENTS -- 96.9%
Value
COMMON STOCKS Shares (Note 1)
------ --------
Advertising -- 2.4%
Young & Rubicam, Inc. (a) ......................... 153,400 $10,853,050
-----------
Aerospace -- 1.4%
Honeywell International, Inc. ..................... 111,300 6,420,619
-----------
Banks and Savings & Loans -- 4.5%
Chase Manhattan Corp. ............................. 71,100 5,523,581
Providian Financial Corp. ......................... 123,650 11,259,878
Wells Fargo Co. ................................... 82,800 3,348,225
-----------
20,131,684
-----------
Broadcasting Services -- 1.7%
Infinity Broadcasting Corp. (a) ................... 207,600 7,512,525
-----------
Computer Services -- 19.2%
America Online, Inc. (a) .......................... 120,700 9,105,306
BMC Software, Inc. (a) ............................ 103,700 8,289,519
Cisco Systems, Inc. (a) ........................... 175,600 18,811,150
Comverse Technology, Inc. (a) ..................... 32,000 4,632,000
EMC Corp. (a) ..................................... 131,800 14,399,150
Microsoft Corp. (a) ............................... 114,900 13,414,575
Oracle Corp. (a) .................................. 162,250 18,182,141
-----------
86,833,841
-----------
Cosmetics & Soaps -- 3.5%
Colgate-Palmolive Co. ............................. 78,000 5,070,000
Gillette Co. ...................................... 67,600 2,784,275
Procter & Gamble Co. .............................. 73,400 8,041,887
-----------
15,896,162
-----------
Diversified Operations -- 3.0%
General Electric Co. .............................. 87,600 13,556,100
-----------
Drugs and Medical Supplies -- 6.4%
Abbott Laboratories ............................... 179,500 6,518,094
Bristol-Myers Squibb Co. .......................... 133,400 8,562,612
Cardinal Health, Inc. ............................. 69,750 3,339,281
Merck & Co., Inc. ................................. 108,900 7,303,106
Pfizer, Inc. ...................................... 103,200 3,347,550
-----------
29,070,643
-----------
Electronics -- 17.9%
Altera Corp. (a) .................................. 117,500 5,823,594
Applied Materials, Inc. (a) ....................... 54,300 6,879,131
Broadcom Corp. (Class ''A'' Stock) ................ 26,600 7,245,175
Intel Corp. ....................................... 164,600 13,548,637
JDS Uniphase Corp. (a) ............................ 142,600 23,003,162
LSI Logic Corp. (a) ............................... 104,600 7,060,500
Motorola, Inc. .................................... 115,800 17,051,550
-----------
80,611,749
-----------
Financial Services -- 2.3%
MBNA Corp. ........................................ 387,100 10,548,475
-----------
Food & Beverage -- 2.4%
Coca Cola Enterprises, Inc. ....................... 93,300 1,877,662
PepsiCo, Inc. ..................................... 260,000 9,165,000
-----------
11,042,662
-----------
Gas Pipelines -- 1.2%
Williams Companies, Inc. .......................... 169,300 5,174,231
-----------
Hospitals/ Hospital Management -- 1.1%
IMS Health, Inc. .................................. 174,300 4,738,781
-----------
Insurance -- 2.8%
American International Group, Inc. ................ 116,727 12,621,107
-----------
Manufacturing -- 4.3%
Illinois Tool Works, Inc. ......................... 107,000 7,229,187
Tyco International Ltd. ........................... 308,400 11,989,050
-----------
19,218,237
-----------
December 31, 1999
Value
COMMON STOCKS Shares (Note 1)
(Continued) ------ --------
Media -- 7.6%
CBS Corp. (a) ..................................... 234,100 $14,967,769
Clear Channel Communications,
Inc. (a) ......................................... 81,700 7,291,725
Interpublic Group of Companies, Inc ............... 136,600 7,880,113
New York Times Co. ................................
(Class ''A'' Stock) .............................. 82,300 4,042,988
-----------
34,182,595
-----------
Mineral Resources -- 0.9%
Burlington Resources, Inc. ........................ 121,200 4,007,175
-----------
Miscellaneous - Basic Industry -- 2.3%
AES Corp. ......................................... 139,900 10,457,525
-----------
Oil & Gas -- 2.1%
Anadarko Petroleum Corp. .......................... 185,300 6,323,363
Noble Affiliates, Inc ............................. 138,000 2,958,375
9,281,738
-----------
Oil & Gas Services -- 3.4%
Baker Hughes, Inc. ................................ 156,400 3,294,175
Enron Corp. ....................................... 274,200 12,167,625
15,461,800
-----------
Restaurants -- 1.6%
McDonald's Corp. .................................. 184,300 7,429,594
-----------
Retail -- 1.3%
CVS Corp. ......................................... 145,000 5,790,938
-----------
Telecommunications -- 3.6%
Lucent Technologies, Inc. ......................... 57,400 4,294,238
MCI Worldcom, Inc. (a) ............................ 225,000 11,939,063
-----------
16,233,301
-----------
TOTAL LONG-TERM INVESTMENTS
(cost $270,748,735)................................ 437,074,532
-----------
Principal
SHORT-TERM Amount
INVESTMENT -- 3.1% (000)
-----
Time Deposit
Bank of Montreal,
5.00%, 01/03/00 ................................... $14,209 14,209,000
-----------
(cost $14,209,000)
TOTAL INVESTMENTS -- 100.0%
(cost $284,957,735; Note 3)......................... 451,283,532
OTHER ASSETS IN EXCESS OF LIABILITIES ............... 5,919
-------------
TOTAL NET ASSETS -- 100.0%........................... $ 451,289,451
=============
(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 investment
objective of the fund is growth of capital to the extent compatible
with a concern for preservation of principal by investing in common
stocks and other securities convertible into common stock. 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: NASDAQ National Market System equity securities
and securities for which the primary market is an exchange are
generally valued at the last sale price on such system or exchange on
that day or, in the absence of recorded sales, at the mean between the
most recently quoted bid and asked prices on that day or the bid price
on such day in the absence of an asked price. Other over-the-counter
equity securities are valued by an independent pricing agent or
principal market maker. Debt obligations with maturities of less than
60 days are valued at amortized cost. Portfolio securities or assets
for which market quotations are not readily available will be valued
at fair value as determined in good faith by or under authority of the
Fund's Board of Directors.
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. Some dividends may be 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.
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.
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
16
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUDENTIAL'S GIBRALTAR FUND, INC.
effect of applying this statement was to decrease accumulated realized
gain on investments and increase net investment income by $27,780.
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, 1999, Prudential Securities
Incorporated, an affiliate of The Prudential, earned approximately
$9,000 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, 1999 aggregated
$140,131,026 and $188,633,018, respectively.
The federal income tax basis of the Fund's investments at December 31,
1999 was $284,998,822 and, accordingly, net unrealized appreciation
for federal income tax purposes was $166,284,710 (gross unrealized
appreciation $176,669,423; gross unrealized depreciation $10,384,713).
17
<PAGE>
FINANCIAL HIGHLIGHTS
PRUDENTIAL'S GIBRALTAR FUND, INC.
<TABLE>
<CAPTION>
Year ended
December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, beginning of year ..................... $ 12.43 $ 10.95 $ 11.43 $ 10.14 $ 9.40
--------- -------- --------- --------- --------
Income From Investment Operations
Net investment income .................................. 0.10 0.12 0.22 0.16 0.18
Net realized and unrealized gains
(losses) on investments .............................. 4.57 2.61 1.84 2.56 1.65
--------- -------- --------- --------- --------
Total from investment operations ................... 4.67 2.73 2.06 2.72 1.83
--------- -------- --------- --------- --------
Less Distributions:
Dividends from net investment income ................... (0.09) (0.12) (0.21) (0.15) (0.17)
Distributions from net realized gains .................. (1.34) (1.13) (2.33) (1.28) (0.92)
--------- -------- --------- --------- --------
Total distributions .................................... (1.43) (1.25) (2.54) (1.43) (1.09)
--------- -------- --------- --------- --------
Net Asset Value, end of year ........................... $ 15.67 $ 12.43 $ 10.95 $ 11.43 $ 10.14
========= ======== ========= ========= ========
Total Investment Return(b) ............................. 38.92% 25.89% 18.88% 27.13% 19.13%
Ratios/Supplemental Data:
Net assets, end of year (in millions) .................. $ 451.3 $ 362.5 $ 325.9 $ 301.3 $ 261.2
Ratios to average net assets:
Expenses ............................................. 0.13% 0.13% 0.15% 0.16% 0.14%
Net investment income ................................ 0.63% 0.96% 1.56% 1.38% 1.68%
Portfolio turnover rate ................................ 39% 105% 101% 97% 105%
</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, 1999, 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 four years in the
period then ended, in conformity with accounting principles generally accepted
in the United States. 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 auditing standards generally accepted in
the United States 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above. The accompanying financial highlights for the year 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 23, 2000
19
<PAGE>
PART C: OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23 Exhibits
- ----------------
<S> <C>
Exhibit 1 Articles of Incorporation (1)
Exhibit 2 By-laws - as amended February 29, 2000 (7)
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 7(a) Supplement to Custody Agreement between registrant and Investors Fiduciary Trust Company (6)
Exhibit 7(b) Supplement to Custody Agreement (6)
Exhibit 7(c) First Amendment of Custody Agreement between Series Fund, Gibraltar and State Street Bank (6)
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 8(c) Investment Accounting Agreement (6)
Exhibit 8(d) First Amendment to Investment Accounting Agreement (6)
Exhibit 8(e) Second Amendment to Investment Accounting Agreement (6)
Exhibit 8(f) Supplement to Investment Accounting Agreement (7)
Exhibit 9 Legal opinion (5)
Exhibit 10 Consent of Accountants (7)
Exhibit 11 Not Applicable
Exhibit 12 Not Applicable
Exhibit 13 Not Applicable
Exhibit 15 Not Applicable
Exhibit 16 Powers of Attorney (4)
Exhibit 17 Codes of Ethics (7)
</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 Post-Effective Amendment No. 37 to Form N1-A,
the Prudential's Series Fund, Reg. No. 2-80896, filed April __, 2000.
(5) Incorporated by reference to Post-Effective Amendment No. 42 to Form N-1A,
Prudential's Gibraltar Fund, Inc., Reg. No. 2-32685, filed April 28, 1999.
(6) Incorporated by Reference to Post-Effective Amendment No. 37 to Form N-1A,
the Prudential Series Fund, Inc., Reg. No. 2-80896 filed April __, 2000.
(7) 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. Most of the other 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. 37 to Form N-1A, The Prudential Series Fund, Inc., Reg. No. 2-
80896, filed on or about April 27, 2000, 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. to Registration Statement, The Prudential Variable
Appreciable Account, Reg. No. 33-2000, filed on April _, 2000 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. 37
to Form N-1A, The Prudential Series Fund, Inc., Reg. No. 2-80896, filed on
or about April 27, 2000.
(b) Incorporated by Reference to Item 27(b) of Post-Effective Amendment No. 37
to Form N-1A, The Prudential Series Fund, Inc., Reg. No. 2-80896, filed on
or about April 27, 2000.
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, State Street Bank and Trust Company,
801 Pennsylvania, 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 27th day of April, 2000.
PRUDENTIAL'S GIBRALTAR FUND, INC.
By: /s/* JOHN R. STRANGFELD
-----------------------------
JOHN R. STRANGFELD
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 43 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/* JOHN R. STRANGFELD April 27, 2000
- -------------------------
John R. Strangfeld
Chairman, Director, President
/s/ GRACE TORRES
- ----------------
Grace Torres
Treasurer and Principal
Financial and Accounting Officer
/s/* SAUL K. FENSTER *By: /s/ C. CHRISTOPHER SPAGUE
- -------------------- ------------------------------
Saul K. Fenster C. Christopher Spague
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>
<S> <C>
2 By-Laws
8(f) Supplement to Investment Accounting Agreement
10 Consent of Accountants
17 Codes of Ethics
</TABLE>
<PAGE>
EXHIBIT 99.2
PRUDENTIAL'S GIBRALTAR FUND, INC.
BY-LAWS
ARTICLE I
---------
STOCKHOLDERS
------------
SECTION 1. Annual Meetings. Annual meetings of the stockholders of
---------------
the Corporation shall be held at the registered office of the Corporation, or at
such other place within the United States as may be determined by the Board of
Directors and as shall be designated in the notice of said meeting, for the
purpose of electing Directors and for the transaction of such other business as
may properly be brought before the meeting; provided, however, the Corporation
shall not be required to hold an annual meeting in any year in which the
election of directors is not required to be acted upon by stockholders under the
Investment Company Act of 1940. If an annual meeting is held, such meeting
shall be held during the month of April on such date and at such time as shall
be specified by the Board of Directors; provided, however, that if the
Corporation is required under this Section 1 to hold a meeting to elect
directors, the meeting shall be held as provided in Section 10 of Article II or
as otherwise required under law.
SECTION 2. Special Meetings. Special meetings of the stockholders
----------------
for any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Articles of Incorporation ("Charter"), may be held at any place
within the United States, and may be called at any time by the Board of
Directors or by the President, and shall be called by the President or Secretary
at the request in writing of a majority of the Board of Directors or by the
Secretary at the request in writing of stockholders entitled to cast at least
twenty-five percent (25%) of the votes entitled to be cast at such meeting.
Such request shall state the purpose or purposes of the proposed meeting.
SECTION 3. Notice of Meetings. Written or printed notice of the
------------------
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing such notice in
the mail at least ten days, but not more than ninety (90) days, and in any event
within the period prescribed by law, prior to the date named for the meeting
addressed to each stockholder at his or her address appearing on the books of
the Corporation or supplied by him or her to the Corporation for the purpose of
notice. The notice of every meeting of stockholders may be accompanied by a
form of proxy approved by the Board of Directors in favor of such actions
<PAGE>
or persons as the Board of Directors may select.
SECTION 4. Record Date. The Board of Directors may fix a date not
-----------
more than ninety (90) days preceding the date of any meeting of stockholders, or
the date fixed for the payment of any dividend, or the date of the allotment of
rights or the date when any change or conversion or exchange of shares shall go
into effect, as a record date for the determination of stockholders entitled to
notice of, or to vote at, any such meeting or entitled to receive payment of any
dividend, or to receive such allotment of rights, or to exercise such rights, as
the case may be. In such case, only stockholders of record at the close of
business on the date so fixed shall be entitled to vote, to receive notice, or
receive rights, or to exercise rights, notwithstanding any subsequent transfer
on the books of the Corporation. The Board of Directors shall not close the
books of the Corporation against transfers of shares during the whole or any
part of such period. In the case of a meeting of stockholders, the record date
shall be fixed not less than ten (10) days prior to the date of the meeting. In
no case shall the record date be prior to the close of business on the day the
record date is fixed.
SECTION 5. Quorum. Except as otherwise provided by statute or by the
------
Charter, the presence in person or by proxy of stockholders of the Corporation
entitled to cast at least a majority of the votes to be cast shall constitute a
quorum at each meeting of the stockholders and all questions shall be decided by
majority vote of the shares so represented in person or by proxy at the meeting
and entitled to vote. In the absence of a quorum, the stockholders present in
person or by proxy, by majority vote and without notice other than by
announcement, may adjourn the meeting from time to time as provided in Section 7
of this Article I until a quorum shall attend. The stockholders present at any
duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
SECTION 6. Organization. At every meeting of the stockholders, the
------------
Chairman of the Board, or in his or her absence, the President, or in his or her
absence, a Vice President, or in the absence of the President and all the Vice
Presidents, a chairman chosen by the stockholders, shall act as chairman; and
the Secretary, or in his or her absence, a person appointed by the chairman,
shall act as Secretary.
SECTION 7. Adjournment. Any meeting of the stockholders may be
-----------
adjourned from time to time, without notice other than by announcement at the
meeting at which such adjournment is taken, and at any such adjourned meeting
any action may be taken that could have been taken at the meeting originally
called; provided that, the meeting may not be adjourned to a date more than 120
days after the original record date for the meeting, and if after the
adjournment a new record
<PAGE>
-3-
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the adjourned
meeting.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
SECTION 1. Election and Powers. The number of directors shall be
-------------------
fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number of
directors shall in no event be less than three nor more than fifteen. The
business, affairs and property of the Corporation shall be managed under the
direction of the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Charter or by these By-laws required to be exercised or done by the
stockholders. The members of the Board of Directors shall be elected by the
stockholders at their annual meeting and each Director shall hold office until
the annual meeting next after his or her election and until his or her successor
shall be duly chosen and qualified, until he or she shall have resigned, or
until he or she shall have been removed as provided in Section 11 hereof.
SECTION 2. First Regular Meeting. After each meeting of the
---------------------
stockholders at which a Board of Directors shall have been elected, the Board of
Directors so elected shall meet as soon as practicable for the purpose of
organization and the transaction of other business, at such time and place as
may be designated by the President. No notice of such first meeting shall be
necessary if held immediately following the annual meeting of stockholders and
in the same place.
SECTION 3. Additional Regular Meetings. In addition to the first
---------------------------
regular meeting, regular meetings of the Board of Directors shall be held on
such dates as may be fixed, from time to time, by the Board of Directors.
SECTION 4. Special Meetings. Special meetings of the Board of
----------------
Directors shall be held whenever called by the President or by a majority of the
directors either in writing or by vote at a meeting.
SECTION 5. Place of Meetings. The Board of Directors may hold its
-----------------
regular and special meetings at such place or places within or without the State
of Maryland as it may from time to time determine.
SECTION 6. Notice of Meetings. Notice of the place, day and hour of
------------------
every regular and special meeting shall, at least
<PAGE>
-4-
one day before the meeting, be either: (i) delivered personally to each
director; (ii) mailed, telegraphed, or cabled to each director at his or her
address listed in the books of the Corporation; (iii) sent by facsimile
transmission to each director at his or her facsimile number listed in the books
of the Corporation; or (iv) communicated personally to each director over the
telephone. It shall not be requisite to the validity of any meeting of the Board
of Directors that notice thereof shall have been given to any director who is
present thereat, or, if absent, waives notice thereof in writing filed with the
records of the meeting either before or after the holding thereof. No notice of
any adjourned meeting of the Board of Directors need be given.
SECTION 7. Quorum. One-third of the members of the Board of
------
Directors then in office, but in no case less than two (2) directors, shall be
necessary to constitute a quorum for the transaction of business at every
meeting of the Board of Directors and the action of a majority of the directors
present at a meeting at which a quorum is present shall be the action of the
Board; but if at any meeting there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time, but not for a period
over thirty (30) days at any one time, without notice other than by announcement
at the meeting until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified.
SECTION 8. Chairman. The Board of Directors may at any time appoint
--------
one of its members as Chairman of the Board, who shall serve at the pleasure of
the Board and who shall perform and execute such duties and powers as the Board
shall from time to time prescribe, but who shall not by reason of performing and
executing these duties and powers, be deemed an officer or employee of the
Corporation.
SECTION 9. Organization. At every meeting of the Board of Directors,
------------
the Chairman of the Board, if one has been selected and is present, and, if not,
the President, or in the absence of the Chairman of the Board and the President,
a chairman chosen by a majority of the directors present shall preside; and the
Secretary, or in his or her absence, a person appointed by the chairman, shall
act as secretary.
SECTION 10. Vacancies. If any vacancies occur in the Board of
---------
Directors by reason of resignation, removal or otherwise (except by reason of
increase in the number of directors), the Directors then in office shall
continue to act, and such vacancies may be filled by a majority of the Directors
then in office, whether or not the Directors constitute a quorum
<PAGE>
-5-
under Section 7 of this Article; and if the authorized number of Directors is
increased, such vacancies may be filled by a majority of the entire Board of
Directors; provided that, immediately after filling such vacancy, at least two-
thirds of the Directors then holding office shall have been elected to such
office by the stockholders of the Corporation. In the event that at any time,
other than the time preceding the first meeting of stockholders, less than a
majority of the Directors of the Corporation holding office at that time were
elected by the stockholders, a meeting of the stockholders shall be held
promptly, and in any event within sixty (60) days, for the purpose of electing
Directors to fill any existing vacancies on the Board of Directors unless the
Securities and Exchange Commission shall by order extend such period. But in no
event shall such period be extended for more than an additional 60 days. Subject
to Section 11 of this Article, any Director chosen to fill a vacancy shall hold
office until the next annual meeting of stockholders and until his or her
successor shall have been duly elected and qualified.
SECTION 11. Removal. Any director may be removed from office, with
-------
or without cause, by the stockholders by written declaration or the affirmative
vote of a majority of all the votes entitled to be cast for the election of
directors, and another may be elected in place of the person so removed, to
serve the remainder of his or her term. The Secretary shall promptly call a
meeting of stockholders for the purpose of voting on the question of removal of
a director when requested in writing to do so by stockholders entitled to cast
not less than ten percent (10%) of the votes.
SECTION 12. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the entire Board, designate one or more committees of
the Board of Directors, each consisting of two or more directors. To the extent
provided in such resolution, and permitted by law, such committee or committees
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required. The members of a committee present at any meeting,
whether or not they constitute a quorum, may appoint a director to act in the
place of an absent member.
SECTION 13. Telephone Conference. Members of the Board of
--------------------
Directors or any committee thereof may participate in a meeting of the Board or
such committee by means of a conference
<PAGE>
-6-
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at the meeting.
SECTION 14. Compensation of Directors. Each director shall be
-------------------------
entitled to receive such compensation, if any, as may from time to time be fixed
by the Board of Directors, including a fee, if any is so fixed, for each meeting
of the Board or any committee thereof, regular or special, attended by him or
her. Directors may also be reimbursed by the Corporation for all reasonable
expenses incurred in traveling to and from the place of each meeting of the
Board of any such committee. Directors need not abstain from voting on matters
that affect their own compensation.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. Number. The officers of the Corporation shall be a
------
President, a Secretary and a Treasurer, and may include one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as the Board of Directors may from time to time
determine.
SECTION 2. Election and Term of Office. The officers of the
---------------------------
Corporation shall be elected by the Board of Directors and, subject to earlier
termination of office, each officer shall hold office for one year and until his
or her successor shall have been elected and qualified.
SECTION 3. Resignations. Any officer may resign at any time by
------------
giving written notice to the Board of Directors or to the President, or the
Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. Removal. Any officer elected by the Board of Directors
-------
may be removed at any time by the affirmative vote of a majority of the Board of
Directors, upon a finding that the best interests of the corporation will be
served by such removal.
SECTION 5. President. The President shall be the chief executive
---------
officer of the Corporation and shall have general supervision over the business
and operations of the Corporation, subject, however, to the control of the Board
of Directors. The President, or such person as the President shall designate,
shall
<PAGE>
-7-
sign, execute and acknowledge, in the name of the Corporation, deeds, mortgages,
bonds, contracts and other instruments authorized by the Board of Directors,
except in the case where the signing and execution thereof shall be delegated by
the Board to some other officer or agent of the Corporation; and the President
shall perform such other duties as from time to time may be assigned to the
President by the Board.
SECTION 6. The Vice Presidents. In the absence or disability of the
-------------------
President or when so directed by the President, any Vice President designated by
the Board of Directors may perform all the duties of the President, and, when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President; provided, however, that no Vice President shall act as a
--------
member of or as chairman of any special committee of which the President is a
member or chairman by designation of ex-officio, except when designated by the
Board. The Vice Presidents shall perform such other duties as from time to time
may be assigned to them respectively by the Board or the President.
SECTION 7. The Secretary. The Secretary shall record all the votes
-------------
of the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors in a book or books to be kept for
that purpose; the Secretary shall see that notices of meetings of the
stockholders and the Board are given and that all records and reports are
properly kept and filed by the Corporation as required by law; the Secretary
shall be the custodian of the seal of the Corporation; and, in general, the
Secretary shall perform all duties incident to the office of Secretary, and such
other duties as may from time to time be assigned to the Secretary by the Board
or the President.
SECTION 8. Assistant Secretaries. In the absence or disability of
---------------------
the Secretary or when so directed by the Secretary, any Assistant Secretary may
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them respectively by the Board of Directors, the President, or
the Secretary.
SECTION 9. The Treasurer. Subject to the provisions of any contract
-------------
which may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
its funds and securities; the Treasurer shall have full authority to receive and
give receipts for all money due and payable to the Corporation, and to endorse
checks, drafts and warrants, in its name and on its behalf and to give full
discharge for the same;
<PAGE>
-8-
the Treasurer shall deposit all funds of the Corporation, except such as may be
required for current use, in such banks or other places of deposit as the Board
of Directors may from time to time designate; and, in general, the Treasurer
shall perform all duties incident to the office of Treasurer and such other
duties as may from time to time be assigned to the Treasurer by the Board or the
President.
SECTION 10. Assistant Treasurers. In the absence or disability of
--------------------
the Treasurer or when so directed by the Treasurer, any Assistant Treasurer may
perform all the duties of the Treasurer, and, when so acting, shall have all the
powers of and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform all such other duties as from time to time
may be assigned to them respectively by the Board of Directors, the President or
the Treasurer.
SECTION 11. Compensation of Officers and Others. The Compensation
-----------------------------------
of all officers shall be fixed from time to time by the Board of Directors, or
any committee or officer authorized by the Board so to do. No officer shall be
precluded from receiving such compensation by reason of the fact that he or she
is also a director of the Corporation.
ARTICLE IV
----------
STOCK
-----
SECTION 1. Certificates. Each stockholder shall be entitled upon
------------
written request to a stock certificate or certificates, certifying the number
and kind of whole shares owned by him or her, signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer, which signatures may be
either manual or facsimile signatures, and sealed with the seal of the
Corporation, which seal may be either facsimile or any other form of seal.
Stock certificates shall be in such form, not inconsistent with law or with the
Charter as shall be approved by the Board of Directors.
SECTION 2. Transfer of Shares. Transfers of shares shall be made on
------------------
the books of the Corporation at the direction of the person named as the holder
thereof on the Corporation's books or named in the certificate for shares (if
issued), or by such person's duly authorized attorney, and upon surrender of the
certificate for such shares (if issued) properly endorsed, together with a
proper request for redemption, to the Corporation or its redemption agent, with
such evidence of the authenticity of such transfer, authorization and other
matters as the Corporation or its agents may reasonably require, and subject to
such other reasonable conditions and requirements as may be required by the
Corporation or its agents, or, if the Board of
<PAGE>
-9-
Directors shall by resolution so provide, transfer of shares may be made in any
other manner provided by law.
SECTION 3. Transfer Agents and Registrars. The Corporation may have
------------------------------
one or more transfer agents and one or more registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a transfer agent, if
the Corporation shall have a transfer agent, or until registered by the
registrar, if the Corporation shall have a registrar. The duties of transfer
agent and registrar may be combined.
SECTION 4. Mutilated, Lost or Destroyed Certificates. The Board of
-----------------------------------------
Directors, by standing resolution or by resolutions with respect to particular
cases, may authorize the issue of new stock certificates in lieu of stock
certificates lost, destroyed or mutilated, upon such terms and conditions as the
Board may direct. The Board may in its discretion refuse to issue such new
certificates, unless ordered to do so by a court of competent jurisdiction.
SECTION 5. Stock Ledgers. The Corporation shall not be required to
-------------
keep original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the respective offices
of the transfer agents of the Corporation's capital stock, or at such other
office of the Corporation as the Board of Directors may designate from time to
time.
ARTICLE V
---------
SEAL
----
The seal of the Corporation shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI
----------
SUNDRY PROVISIONS
-----------------
SECTION 1. Amendments.
----------
(a) By Stockholders. These By-laws may be amended or repealed in the
---------------
manner provided in Section 5 of Article I hereof at any annual or special
meeting of the stockholders.
(b) By Directors. These By-laws may be amended or repealed in the
------------
manner provided in Section 7 of Article II hereof at any regular meeting of the
Board of Directors, or at any special meeting thereof if notice of such
<PAGE>
-10-
amendment or repeal be contained in the notice of such special meeting.
SECTION 2. Indemnification of Directors and Officers.
-----------------------------------------
(a) Indemnification. The Corporation shall indemnify present and
---------------
former directors, officers, employees and agents of the Corporation (each a
"Covered Person") against judgments, fines, settlements and expenses to the
fullest extent authorized, and in the manner permitted, by applicable federal
and state law.
(b) Advances. The Corporation shall advance the expenses of Covered
--------
Persons who are parties to any Proceeding to the fullest extent authorized, and
in the manner permitted, by applicable federal and state law. For purposes of
this paragraph, "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative.
(c) Procedure. Pursuant and subject to paragraphs (a) and (b), the
---------
Corporation shall indemnify each Covered Person against, or advance the expenses
of any Covered Person for, the amount of any deductible provided in any
liability insurance policy maintained by the Corporation.
SECTION 3. Independent Accountant. In accordance with the Investment
----------------------
Company Act of 1940, the Corporation shall employ an independent public
accountant or firm of independent public accountants as its accountant to
examine the accounts of the Corporation and to sign and certify financial
statements of the Corporation.
SECTION 4. Conflict. When a provision in these By-laws is in
--------
conflict with any valid federal law, rule, regulation, or order, technical
compliance with the provision shall yield to the dictates of such law, rule,
regulation, or order.
<PAGE>
[LOGO] STATE STREET 801 Pennsylvania
Serving Institutional Investors Worldwide/SM/ Kansas City, MO 64105
February 16, 2000 Telephone: (816) 871-4100
Mr. Christopher Sprague, Assistant General Counsel
Prudential Insurance Company of America
Gateway Center 3, 4th Floor
Newark, NJ 07102-5096
Re: The following agreements by and between Investors Fiduciary Trust Company
and The Prudential Insurance Company of America:
. Custody Agreement dated 9/16/96, as amended 12/1/96 and 6/1/97, related
Funds Transfer Operating Guidelines and Security Procedures, and Pledge
Agreement dated October 29, 1997 with Goldman, Sachs & Co.
. Investment Accounting Agreement dated 1/2/96, as amended 6/1/97 and
7/1/98
Dear Mr. Sprague:
As you are aware, we are completing the acquisition process that began
in 1995 when State Street purchased Investors Fiduciary Trust Company. The State
Street/IFTC combination has been truly beneficial, particularly in the areas of
product offerings, technology and customer service. In order to support
continued growth and to meet the changing needs of our clients, we will be
assigning all IFTC custody and fund accounting contracts to State Street Bank
and Trust Company as soon as possible.
We request your agreement to such assignment and to the assumption of
all rights, duties and obligations of the above-referenced contracts by State
Street Bank and Trust Company, effective January 1, 2000. In all respects other
than the assignment to State Street, the terms and conditions of the
above-referenced agreements will remain unchanged.
Please indicate your company's consent to the assignment and assumption
by signing the enclosed copy of this letter and returning it to me in the
enclosed pre-addressed envelope. Thank you for your prompt response, and please
do not hesitate to call me at (816) 871-9313 if I can provide any further
information or be of assistance in any way.
Sincerely,
/s/ Julie A. Rohling
Julie A. Rohling
APPROVED AND AGREED TO:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Kenneth H. Montgomery
-----------------------------
Title: Senior Vice President
--------------------------
Date: February __, 2000
<PAGE>
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated February 23, 2000, relating to the financial statements and
financial highlights of Prudential's Gibraltar Fund, Inc., which appears in such
Registration Statement. We also consent to the references to us under the
headings "Investment Advisory and Other Services" and "Financial Highlights" in
such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
April 27, 2000
<PAGE>
EXHIBIT 99.17
GIBRALTAR FUND
(the Fund)
Code of Ethics Adopted Pursuant to Rule 17j-1
Under the Investment Company Act of 1940
(the Code)
1. Purposes
--------
The Code has been adopted by the Board of Directors/Trustees of the Fund,
in accordance with Rule 17j-1(c) under the Investment Company Act of 1940 (the
Act) and in accordance with the following general principles:
(1) The duty at all times to place the interests of shareholders
first.
Investment company personnel should scrupulously avoid serving
their own personal interests ahead of shareholders' interests in any
decision relating to their personal investments.
(2) The requirement that all personal securities transactions be
conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility.
Investment company personnel must not only seek to achieve
technical compliance with the Code but should strive to abide by its
spirit and the principles articulated herein.
(3) The fundamental standard that investment company personnel should
not take inappropriate advantage of their positions.
Investment company personnel must avoid any situation that might
compromise, or call into question, their exercise of fully independent
judgment in the interest of shareholders, including, but not limited
to the receipt of unusual investment opportunities, perquisites, or
gifts of more than a de minimis value from persons doing or seeking
business with the Fund.
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to a purchase or sale of a security held or to be
acquired (as such term is defined in Section 2.) by an investment company, if
effected by an associated person of such company.
<PAGE>
The purpose of the Code is to establish procedures consistent with the Act
and Rule 17j-1 to give effect to the following general prohibitions as set forth
in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or Principal
Underwriter for a registered investment company, or any affiliated person
of an investment adviser of or principal underwriter for a registered
investment company in connection with the purchase or sale, directly or
indirectly, by such person of a security held or to be acquired, by such
registered investment company:
(1) To employ any device, scheme or artifice to defraud such
registered investment company;
(2) To make to such registered investment company any untrue
statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such
registered investment company; or
(4) To engage in any manipulative practice with respect to such
registered investment company.
2. Definitions
-----------
(a) "Access Person" means any director/trustee, officer, general
partner or Advisory Person (including any Investment Personnel, as that
term is defined herein) of the Fund, the Manager, the Adviser/Subadviser,
or the Principal Underwriter.
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund
or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or
Adviser/Subadviser (or of any company in a control relationship to the
Fund, Manager or Adviser/Subadviser) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a control relationship
to the Fund who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of a security.
(d) "Beneficial Ownership" will be interpreted in the same manner as
it would be under Securities Exchange Act Rule 16a-1(a)(2) in determining
which security holdings of a
2
<PAGE>
person are subject to the reporting and short- swing profit provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that the determination of direct or indirect
beneficial ownership will apply to all securities which an Access Person
has or acquires (Exhibit A).
---------
(e) "Complex" means the group of registered investment companies for
which Prudential Investments Fund Management LLC serves as Manager;
provided, however, that with respect to Access Persons of the Subadviser
(including any unit or subdivision thereof), "Complex" means the group of
registered investment companies in the Complex advised by the Subadviser or
unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager,
the Adviser/Subadviser, or Principal Underwriter (including his or her
designee) as having responsibility for compliance with the requirements of
the Code.
(g) "Control" will have the same meaning as that set forth in Section
2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
An interested Director/Trustee who would not otherwise be deemed to be
an Access Person, shall be treated as a Disinterested Director/Trustee for
purposes of compliance with the provisions of the Code.
(i) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the reporting
requirements of sections 13 or 15(d) of the Securities Exchange Act of
1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other
Advisory Persons who provide investment information and/or advice to the
Portfolio Manager(s) and/or help execute the Portfolio Manager's(s')
investment decisions, including securities analysts and traders ; and (b)
any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to the
purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
(l) "Portfolio Manager" means any Advisory Person who has the direct
responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from
registration under the Securities Act of 1933 pursuant to section 4(2) or
section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such
Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of
the Act, except that it will not include shares of registered open-end
investment companies, direct
3
<PAGE>
obligations of the Government of the United States, short-term debt
securities which are "government securities" within the meaning of Section
2(a)(16) of the Act, bankers' acceptances, bank certificates of deposit,
commercial paper and such other money market instruments as are designated
by the Compliance Officer. For purposes of the Code, an "equivalent
Security" is one that has a substantial economic relationship to another
Security. This would include, among other things, (1) a Security that is
exchangeable for or convertible into another Security, (2) with respect to
an equity Security, a Security having the same issuer (including a private
issue by the same issuer) and any derivative, option or warrant relating to
that Security and (3) with respect to a fixed-income Security, a Security
having the same issuer, maturity, coupon and rating.
(o) "Security held or to be acquired" means any Security or any
equivalent Security which, within the most recent 15 days: (1) is or has
been held by the Fund; or (2) is being considered by the Fund or its
investment adviser for purchase by the Fund.
3. Applicability
-------------
The Code applies to all Access Persons and the Compliance Officer shall
provide each Access Person with a copy of the Code. The prohibitions described
below will only apply to a transaction in a Security in which the designated
Access Person has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership. The Compliance Officer will maintain a list of
all Access Persons who are currently, and within the past five years, subject to
the Code.
4. Prohibited Purchases and Sales
------------------------------
A. Initial Public Offerings
No Investment Personnel may acquire any Securities in an initial public
offering. For purposes of this restriction, "Initial Public Offerings" shall not
include offerings of government and municipal securities.
B. Private Placements
No Investment Personnel may acquire any Securities in a private placement
without prior approval.
(i) Prior approval must be obtained in accordance with the
preclearance procedure described in Section 6 below. Such approval will
take into account, among other factors, whether the investment opportunity
should be reserved for the Fund and its shareholders and
4
<PAGE>
whether the opportunity is being offered to the Investment Personnel by
virtue of his or her position with the Fund. The Adviser/Subadviser shall
maintain a record of such prior approval and reason for same, for at least
5 years after the end of the fiscal year in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire
Securities in a private placement must disclose that investment to the
chief investment officer (including his or her designee) of the
Adviser/Subadviser (or of any unit or subdivision thereof) or the
Compliance Officer when they play a part in any subsequent consideration of
an investment by the Fund in the issuer. In such circumstances, the Fund's
decision to purchase Securities of the issuer will be subject to an
independent review by appropriate personnel with no personal interest in
the issuer.
C. Blackout Periods
(i) Except as provided in Section 5 below, Access Persons are
prohibited from executing a Securities transaction on a day during which
any investment company in the Complex has a pending "buy" or "sell" order
in the same or an equivalent Security and until such time as that order is
executed or withdrawn; provided, however, that this prohibition shall not
apply to Disinterested Directors/Trustees except if they have actual
knowledge of trading by any fund in the Complex and, in any event, only
with respect to those funds on whose boards they sit.
This prohibition shall also not apply to Access Persons of the
Subadviser who do not, in the ordinary course of fulfilling his or her
official duties, have access to information regarding the purchase and sale
of Securities for the Fund and are not engaged in the day-to-day operations
of the Fund; provided that Securities investments effected by such Access
Persons during the proscribed period are
5
<PAGE>
not effected with knowledge of the purchase or sale of the same or
equivalent Securities by any fund in the Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase
or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a
Security within seven calendar days before or after the Fund trades in the
same or an equivalent Security. Nevertheless, a personal trade by any
Investment Personnel shall not prevent a Fund in the same Complex from
trading in the same or an equivalent security. However, such a transaction
shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
(ii) above, except as provided in (iv) below with respect to (i) above, any
profits realized on such trades will be promptly required to be disgorged
to the Fund.
(iv) A transaction by Access Persons (other than Investment Personnel)
inadvertently effected during the period proscribed in (i) above will not
be considered a violation of the Code and disgorgement will not be required
so long as the transaction was effected in accordance with the preclearance
procedures described in Section 6 below and without prior knowledge of
trading by any fund in the Complex in the same or an equivalent Security.
D. Short-Term Trading Profits
Except as provided in Section 5 below, Investment Personnel are prohibited
from profiting from a purchase and sale, or sale and purchase, of the same or an
equivalent Security within any 60 calendar day period. If trades are effected
during the proscribed period, any profits realized on such trades will be
immediately required
6
<PAGE>
to be disgorged to the Fund.
E. Short Sales
No Access Person may sell any security short which is owned by any Fund in
the Complex. Access Persons may, however make short sales when he/she owns an
equivalent amount of the same security.
F. Options
No Access Person may write a naked call option or buy a naked put option on
a security owned by any Fund in the Complex. Access Persons may purchase options
on securities not held by any Fund in the Complex, or purchase call options or
write put options on securities owned by any Fund in the Complex, subject to
preclearance and the same restrictions applicable to other Securities. Access
Persons may write covered call options or buy covered put options on a Security
owned by any Fund in the Complex at the discretion of the Compliance Officer.
G. Investment Clubs
No Access Person may participate in an investment club.
5. Exempted Transactions
---------------------
Subject to preclearance in accordance with Section 6 below with respect to
subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C)
and 4(D) will not apply to the following:
(a) Purchases or sales of Securities effected in any account over
which the Access Person has no direct or indirect influence or control or
in any account of the Access Person which is managed on a discretionary
basis by a person other than such Access Person and with respect to which
such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are
not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the
part of either
7
<PAGE>
the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend
reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the extent such
--- ----
rights were acquired from such issuer, and sales of such rights so
acquired.
(f) Any equity Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 500 shares
or less in the aggregate, if (i) the Access Person has no prior knowledge
of activity in such security by any fund in the Complex and (ii) the issuer
is listed on The New York Stock Exchange or has a market capitalization
(outstanding shares multiplied by the current price per share) greater than
$1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 100 units
($100,000 principal amount) or less in the aggregate, if the Access Person
has no prior knowledge of transactions in such Securities by any fund in
the Complex.
(h) Any transaction in index options effected on a broad-based index
(See Exhibit B.)1
(i) Purchases or sales of Securities which receive the prior approval
of the Compliance Officer (such person having no personal interest in such
purchases or sales), based on a determination that no abuse is involved and
that such purchases and sales are not likely to have any economic impact on
any fund in the Complex or on its ability to purchase or sell Securities of
the same class or other Securities of the same issuer.
(j) Purchases or sales of Unit Investment Trusts.
6. Preclearance
------------
Access Persons (other than Disinterested Directors/Trustees) must preclear
all personal Securities investments with the exception of those identified in
subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer
for approval. All approved orders must be executed no later than 5:00 p.m. local
time on the business day following the date preclearance is
- ----------------
1 Exhibit B will be amended by the Compliance Officer as necessary.
8
<PAGE>
granted. If any order is not timely executed, a request for preclearance must be
resubmitted.
7. Reporting
---------
(a) Disinterested Directors/Trustees shall report to the Secretary of the
Fund or the Compliance Officer the information described in Section 7(b) hereof
with respect to transactions in any Security in which such Disinterested
Director/Trustee has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the Security only if such Disinterested
----
Director/Trustee, at the time of that transaction knew or, in the ordinary
course of fulfilling his or her official duties as a Director/Trustee of the
Fund, should have known that, during the 15-day period immediately preceding or
subsequent to the date of the transaction in a Security by such
Director/Trustee, such Security is or was purchased or sold by the Fund or was
being considered for purchase or sale by the Fund, the Manager or
Adviser/Subadviser; provided, however, that a Disinterested Director/Trustee is
not required to make a report with respect to transactions effected in any
account over which such Director/Trustee does not have any direct or indirect
influence or control or in any account of the Disinterested Director/Trustee
which is managed on a discretionary basis by a person other than such
Director/Trustee and with respect to which such Director/Trustee does not in
fact influence or control such transactions. The Secretary of the Fund or the
Compliance Officer shall maintain such reports and such other records to the
extent required by Rule 17j-1 under the Act.
(b) Every report required by Section 7(a) hereof shall be made not later
than ten days after the end of the calendar quarter in which the transaction to
which the report relates was effected, and shall contain the following
information:
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other type
----
of acquisition or disposition);
(iii) The price at which the transaction was effected;
9
<PAGE>
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the report
relates.
8. Records of Securities Transactions and Post-Trade Review
--------------------------------------------------------
Access Persons (other than Disinterested Directors/Trustees) are required
to direct their brokers to supply, on a timely basis, duplicate copies of
confirmations of all personal Securities transactions and copies of periodic
statements for all Securities accounts in which such Access Persons have a
Beneficial Ownership interest to the Compliance Officer. Such instructions must
be made upon becoming an Access Person and promptly as new accounts are
established, but no later than ten days after the end of a calendar quarter,
with respect to any account established by the Access Person in which any
securities were held during the quarter for the direct or indirect beneficial
interest of the Access Person. Notification must be made in writing and a copy
of the notification must be submitted to Compliance. This notification will
include the broker, dealer or bank with which the account was established and
the date the account was established.
Compliance with this Code requirement will be deemed to satisfy the
reporting requirements imposed on Access Persons under Rule 17j-1(d), provided,
however, that such confirmations and statements contain all the information
required by Section 7. b. hereof and are furnished within the time period
required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
10
<PAGE>
9. Disclosure of Personal Holdings
-------------------------------
Within ten days after an individual first becomes an Access Person and
thereafter on an annual basis, each Access Person (other than Disinterested
Directors/Trustees) must disclose all personal Securities holdings. Such
disclosure must be made in writing and be as of the date the individual first
became an Access Person with respect to the initial report and by January 30 of
each year, including holdings information as of December 31, with respect to the
annual report. All such reports shall include the following: title, number of
shares and principal amount of each security held, name of broker, dealer or
bank with whom these securities are held and the date of submission by the
Access Person.
10. Gifts
-----
Access Persons are prohibited from receiving any gift or other thing of
more than $100 in value from any person or entity that does business with or on
behalf of the Fund. Occasional business meals or entertainment (theatrical or
sporting events, etc.) are permitted so long as they are not excessive in number
or cost.
11. Service As a Director
---------------------
Investment Personnel are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization based upon a
determination that the board service would be consistent with the interests of
the Fund and its shareholders. In the limited instances that such board service
is authorized, Investment Personnel will be isolated from those making
investment decisions affecting transactions in Securities issued by any publicly
traded company on whose board such Investment Personnel serves as a director
through the use of "Chinese Wall" or other procedures designed to address the
potential conflicts of interest.
12. Certification of Compliance with the Code
-----------------------------------------
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
11
<PAGE>
(ii) that they recognize that they are subject to the Code;
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities
transactions required to be disclosed or reported pursuant to the
requirements of the Code.
13. Code Violations
---------------
All violations of the Code will be reported to the Board of
Directors/Trustees of the Fund on a quarterly basis. The Board of
Directors/Trustees may take such action as it deems appropriate.
14. Review by the Board of Directors/Trustees
-----------------------------------------
The Board of Directors/Trustees will be provided with an annual report
which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment
Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably
necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any
changes in the procedures made during the preceding year;
(iii) identifies material Code or procedural violations and sanctions
imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or
procedures based upon the Fund's experience under the Code, evolving industry
practices, or developments in applicable laws and regulations.
The Board will review such report and determine if any further action is
required.
12
<PAGE>
Explanatory Notes to Code
-------------------------
1. No comparable Code requirements have been imposed upon Prudential Mutual
Fund Services LLC, the Fund's transfer agent, or those of its directors or
officers who are not Directors/Trustees or Officers of the Fund since they are
deemed not to constitute Access Persons or Advisory Persons as defined in
paragraphs (e)(1) and (2) of Rule 17j-1.
Dated: February 29, 2000
13
<PAGE>
Exhibit A
---------
Definition of Beneficial Ownership
----------------------------------
The term "beneficial ownership" of securities would include not only
ownership of securities held by an access person for his or her own
benefit,whether in bearer form or registered in his or her own name or
otherwise, but also ownership of securities held for his or her benefit by other
(regardless of whether or how they are registered) such as custodians, brokers,
executors, administrators, or trustees (including trusts in which he or she has
only a remainder interest), and securities held for his or her account by
pledges, securities owned by a partnership in which he or she should regard as a
personal holding corporation. Correspondingly, this term would exclude
securities held by an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an access person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the final
determination of beneficial ownership is a question to be determined in the
light of the facts of the particular case, generally a person is regarded as the
beneficial owner of securities held in the name of his or her spouse and their
minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contact, understanding,
relationship, agreement or other arrangement, he obtains therefrom benefits
substantially equivalent to those of ownership. Moreover, the fact that the
holder is a relative or relative of a spouse and sharing the same home as an
access person may in itself indicate that the access person would obtain
benefits substantially equivalent to those of ownership from securities held in
the name of such relative. Thus, absent countervailing facts, it is expected
that securities held by relatives who share the same home as an access person
will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
<PAGE>
Exhibit B
---------
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION
- ------------------------------------------------------------------------------
NIK Nikkei 300 Index CI/Euro
- ------------------------------------------------------------------------------
OEX S&P 100 Close/Amer Index
- ------------------------------------------------------------------------------
OEW S&P 100 Close/Amer Index
- ------------------------------------------------------------------------------
OEY S&P 100 Close/Amer Index
- ------------------------------------------------------------------------------
SPB S&P 500 Index
- ------------------------------------------------------------------------------
SPZ S&P 500 Open/Euro Index
- ------------------------------------------------------------------------------
SPX S&P 500 Open/Euro Index
- ------------------------------------------------------------------------------
SXZ S&P 500 (Wrap)
- ------------------------------------------------------------------------------
SXB S&P 500 Open/Euro Index
- ------------------------------------------------------------------------------
RUZ Russell 2000 Open/Euro Index
- ------------------------------------------------------------------------------
RUT Russell 2000 Open/Euro Index
- ------------------------------------------------------------------------------
MID S&P Midcap 400 Open/Euro Index
- ------------------------------------------------------------------------------
NDX NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NDU NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NDZ NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NDV NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NCZ NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
SML S&P Small Cap 600
- ------------------------------------------------------------------------------
TPX U.S. Top 100 Sector
- ------------------------------------------------------------------------------
SPL S&P 500 Long-Term Close
- ------------------------------------------------------------------------------
ZRU Russell 2000 L-T Open./Euro
- ------------------------------------------------------------------------------
VRU Russell 2000 Long-Term Index
- ------------------------------------------------------------------------------
<PAGE>
Prudential Investment Corporation
Prudential Investments Fund Management LLC
Prudential Investment Management Services LLC
Code of Ethics Adopted Pursuant to Rule 17j-1
Under the Investment Company Act of 1940
(the Code)
1. Purposes
--------
The Code has been adopted by the Board of Directors/Trustees or the Duly
Appointed Officer-In-Charge of the Prudential Mutual Fund (hereinafter, referred
to as the "Fund"), the Manager, the Adviser/Subadviser, and the Principal
Underwriter in accordance with Rule 17j-1(c) under the Investment Company Act of
1940 (the Act) and in accordance with the following general principles:
(1) The duty at all times to place the interests of shareholders
first.
Investment company personnel should scrupulously avoid serving
their own personal interests ahead of shareholders' interests in any
decision relating to their personal investments.
(2) The requirement that all personal securities transactions be
conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility.
Investment company personnel must not only seek to achieve
technical compliance with the Code but should strive to abide by its
spirit and the principles articulated herein.
(3) The fundamental standard that investment company personnel should
not take inappropriate advantage of their positions.
Investment company personnel must avoid any situation that might
compromise, or call into question, their exercise of fully independent
judgment in the interest of shareholders, including, but not limited
to the receipt of unusual investment opportunities, perquisites, or
gifts of more than a de minimis value from persons doing or seeking
business with the Fund.
<PAGE>
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to a purchase or sale of a security held or to be
acquired (as such term is defined in Section 2.) by an investment company, if
effected by an associated person of such company.
The purpose of the Code is to establish procedures consistent with the Act
and Rule 17j-1 to give effect to the following general prohibitions as set forth
in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or Principal
Underwriter for a registered investment company, or any affiliated person
of an investment adviser of or principal underwriter for a registered
investment company in connection with the purchase or sale, directly or
indirectly, by such person of a security held or to be acquired, by such
registered investment company:
(1) To employ any device, scheme or artifice to defraud such
registered investment company;
(2) To make to such registered investment company any untrue
statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such
registered investment company; or
(4) To engage in any manipulative practice with respect to such
registered investment company.
2. Definitions
-----------
(a) "Access Person" means any director/trustee, officer, general
partner or Advisory Person (including any Investment Personnel, as that
term is defined herein) of the Fund, the Manager, the Adviser/Subadviser,
or the Principal Underwriter.
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund
or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or
Adviser/Subadviser (or of any company in a control relationship to the
Fund, Manager or Adviser/Subadviser) who, in connection with his or her
regular functions or duties, makes,
2
<PAGE>
participates in, or obtains information regarding the purchase or sale of a
security by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and (ii) any
natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to the
purchase or sale of a security.
(d) "Beneficial Ownership" will be interpreted in the same manner as
it would be under Securities Exchange Act Rule 16a-1(a)(2) in determining
which security holdings of a person are subject to the reporting and short-
swing profit provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the
determination of direct or indirect beneficial ownership will apply to all
securities which an Access Person has or acquires (Exhibit A).
---------
(e) "Complex" means the group of registered investment companies for
which Prudential Investments Fund Management LLC serves as Manager;
provided, however, that with respect to Access Persons of the Subadviser
(including any unit or subdivision thereof), "Complex" means the group of
registered investment companies in the Complex advised by the Subadviser or
unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager,
the Adviser/Subadviser, or Principal Underwriter (including his or her
designee) as having responsibility for compliance with the requirements of
the Code.
(g) "Control" will have the same meaning as that set forth in Section
2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
An interested Director/Trustee who would not otherwise be deemed to be
an Access Person, shall be treated as a Disinterested Director/Trustee for
purposes of compliance with the provisions of the Code.
(i) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the reporting
requirements of sections 13 or 15(d) of the Securities Exchange Act of
1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other
Advisory Persons who provide investment information and/or advice to the
Portfolio Manager(s) and/or help execute the Portfolio Manager's(s')
investment decisions, including securities analysts and traders ; and (b)
any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to the
purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
3
<PAGE>
(l) "Portfolio Manager" means any Advisory Person who has the direct
responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from
registration under the Securities Act of 1933 pursuant to section 4(2) or
section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such
Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of
the Act, except that it will not include shares of registered open-end
investment companies, direct obligations of the Government of the United
States, , short-term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Act, bankers' acceptances,
bank certificates of deposit, commercial paper and such other money market
instruments as are designated by the Compliance Officer. For purposes of
the Code, an "equivalent Security" is one that has a substantial economic
relationship to another Security. This would include, among other things,
(1) a Security that is exchangeable for or convertible into another
Security, (2) with respect to an equity Security, a Security having the
same issuer (including a private issue by the same issuer) and any
derivative, option or warrant relating to that Security and (3) with
respect to a fixed-income Security, a Security having the same issuer,
maturity, coupon and rating.
(o) "Security held or to be acquired" means any Security or any
equivalent Security which, within the most recent 15 days: (1) is or has
been held by the Fund; or (2) is being considered by the Fund or its
investment adviser for purchase by the Fund.
3. Applicability
-------------
The Code applies to all Access Persons and the Compliance Officer shall
provide each Access Person with a copy of the Code. The prohibitions described
below will only apply to a transaction in a Security in which the designated
Access Person has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership. The Compliance Officer will maintain a list of
all Access Persons who are currently, and within the past five years, subject to
the Code.
4. Prohibited Purchases and Sales
------------------------------
A. Initial Public Offerings
No Investment Personnel may acquire any Securities in an initial public
offering. For purposes of this restriction, "Initial Public Offerings" shall not
include offerings of government and municipal securities.
4
<PAGE>
B. Private Placements
No Investment Personnel may acquire any Securities in a private placement
without prior approval.
(i) Prior approval must be obtained in accordance with the
preclearance procedure described in Section 6 below. Such approval will
take into account, among other factors, whether the investment opportunity
should be reserved for the Fund and its shareholders and whether the
opportunity is being offered to the Investment Personnel by virtue of his
or her position with the Fund. The Adviser/Subadviser shall maintain a
record of such prior approval and reason for same, for at least 5 years
after the end of the fiscal year in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire
Securities in a private placement must disclose that investment to the
chief investment officer (including his or her designee) of the
Adviser/Subadviser (or of any unit or subdivision thereof) or the
Compliance Officer when they play a part in any subsequent consideration of
an investment by the Fund in the issuer. In such circumstances, the Fund's
decision to purchase Securities of the issuer will be subject to an
independent review by appropriate personnel with no personal interest in
the issuer.
C. Blackout Periods
(i) Except as provided in Section 5 below, Access Persons are
prohibited from executing a Securities transaction on a day during which
any investment company in the Complex has a pending "buy" or "sell" order
in the same or an equivalent Security and until such time as that order is
executed
5
<PAGE>
or withdrawn; provided, however, that this prohibition shall not apply to
Disinterested Directors/Trustees except if they have actual knowledge of
trading by any fund in the Complex and, in any event, only with respect to
those funds on whose boards they sit.
This prohibition shall also not apply to Access Persons of the
Subadviser who do not, in the ordinary course of fulfilling his or her
official duties, have access to information regarding the purchase and sale
of Securities for the Fund and are not engaged in the day-to-day operations
of the Fund; provided that Securities investments effected by such Access
Persons during the proscribed period are not effected with knowledge of the
purchase or sale of the same or equivalent Securities by any fund in the
Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase
or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a
Security within seven calendar days before or after the Fund trades in the
same or an equivalent Security. Nevertheless, a personal trade by any
Investment Personnel shall not prevent a Fund in the same Complex from
trading in the same or an equivalent security. However, such a transaction
shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
(ii) above, except as provided in (iv) below with respect to (i) above, any
profits realized on such trades will be promptly required to be disgorged
to the Fund.
(iv) A transaction by Access Persons (other than Investment Personnel)
inadvertently effected during the period proscribed in (i) above will not
be considered a violation of the Code and disgorgement will not be required
so long as the transaction was effected in accordance with the preclearance
6
<PAGE>
procedures described in Section 6 below and without prior knowledge of
trading by any fund in the Complex in the same or an equivalent Security.
D. Short-Term Trading Profits
Except as provided in Section 5 below, Investment Personnel are prohibited
from profiting from a purchase and sale, or sale and purchase, of the same or an
equivalent Security within any 60 calendar day period. If trades are effected
during the proscribed period, any profits realized on such trades will be
immediately required to be disgorged to the Fund.
E. Short Sales
No Access Person may sell any security short which is owned by any Fund in
the Complex. Access Persons may, however make short sales when he/she owns an
equivalent amount of the same security.
F. Options
No Access Person may write a naked call option or buy a naked put option on
a security owned by any Fund in the Complex. Access Persons may purchase options
on securities not held by any Fund in the Complex, or purchase call options or
write put options on securities owned by any Fund in the Complex, subject to
preclearance and the same restrictions applicable to other Securities. Access
Persons may write covered call options or buy covered put options on a Security
owned by any Fund in the Complex at the discretion of the Compliance Officer.
G. Investment Clubs
No Access Person may participate in an investment club.
5. Exempted Transactions
---------------------
Subject to preclearance in accordance with Section 6 below with respect to
subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C)
and 4(D) will not apply to the following:
7
<PAGE>
(a) Purchases or sales of Securities effected in any account over
which the Access Person has no direct or indirect influence or control or
in any account of the Access Person which is managed on a discretionary
basis by a person other than such Access Person and with respect to which
such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are
not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the
part of either the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend
reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the extent such
--- ----
rights were acquired from such issuer, and sales of such rights so
acquired.
(f) Any equity Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 500 shares
or less in the aggregate, if (i) the Access Person has no prior knowledge
of activity in such security by any fund in the Complex and (ii) the issuer
is listed on The New York Stock Exchange or has a market capitalization
(outstanding shares multiplied by the current price per share) greater than
$1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 100 units
($100,000 principal amount) or less in the aggregate, if the Access Person
has no prior knowledge of transactions in such Securities by any fund in
the Complex.
(h) Any transaction in index options effected on a broad-based index
(See Exhibit B.)1
(i) Purchases or sales of Securities which receive the prior approval
of the Compliance Officer (such person having no personal interest in such
purchases or sales), based on a determination that no abuse is involved and
that such purchases and sales are not likely to have any economic impact on
any fund in the Complex or on its ability to purchase or sell Securities of
the same class or other Securities of the same issuer.
(j) Purchases or sales of Unit Investment Trusts.
- ----------------
1 Exhibit B will be amended by the Compliance Officer as necessary.
8
<PAGE>
6. Preclearance
------------
Access Persons (other than Disinterested Directors/Trustees) must preclear
all personal Securities investments with the exception of those identified in
subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer
for approval. All approved orders must be executed no later than 5:00 p.m. local
time on the business day following the date preclearance is granted. If any
order is not timely executed, a request for preclearance must be resubmitted.
7. Reporting
---------
(a) Disinterested Directors/Trustees shall report to the Secretary of the
Fund or the Compliance Officer the information described in Section 7(b) hereof
with respect to transactions in any Security in which such Disinterested
Director/Trustee has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the Security only if such Disinterested
----
Director/Trustee, at the time of that transaction knew or, in the ordinary
course of fulfilling his or her official duties as a Director/Trustee of the
Fund, should have known that, during the 15-day period immediately preceding or
subsequent to the date of the transaction in a Security by such
Director/Trustee, such Security is or was purchased or sold by the Fund or was
being considered for purchase or sale by the Fund, the Manager or
Adviser/Subadviser; provided, however, that a Disinterested Director/Trustee is
not required to make a report with respect to transactions effected in any
account over which such Director/Trustee does not have any direct or indirect
influence or control or in any account of the Disinterested Director/Trustee
which is managed on a discretionary basis by a person other than such
Director/Trustee and with respect to which such Director/Trustee does not in
fact influence or control such transactions. The Secretary of the Fund or the
Compliance Officer shall maintain such reports and such other records to the
extent required by Rule 17j-1 under the Act.
9
<PAGE>
(b) Every report required by Section 7(a) hereof shall be made not later
than ten days after the end of the calendar quarter in which the transaction to
which the report relates was effected, and shall contain the following
information:
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other type
----
of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the report
relates.
8. Records of Securities Transactions and Post-Trade Review
--------------------------------------------------------
Access Persons (other than Disinterested Directors/Trustees) are required
to direct their brokers to supply, on a timely basis, duplicate copies of
confirmations of all personal Securities transactions and copies of periodic
statements for all Securities accounts in which such Access Persons have a
Beneficial Ownership interest to the Compliance Officer. Such instructions must
be made upon becoming an Access Person and promptly as new accounts are
established, but no later than ten days after the end of a calendar quarter,
with respect to any account established by the Access Person in which any
securities were held during the quarter for the direct or indirect beneficial
interest of the Access Person. Notification must be made in writing and a copy
of the notification must be submitted to Compliance. This notification will
include the broker, dealer or bank with which the account was established and
the date the account was established.
Compliance with this Code requirement will be deemed to satisfy the
reporting requirements imposed on
10
<PAGE>
Access Persons under Rule 17j-1(d), provided, however, that such confirmations
and statements contain all the information required by Section 7. b. hereof and
are furnished within the time period required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
9. Disclosure of Personal Holdings
-------------------------------
Within ten days after an individual first becomes an Access Person and
thereafter on an annual basis, each Access Person (other than Disinterested
Directors/Trustees) must disclose all personal Securities holdings. Such
disclosure must be made in writing and be as of the date the individual first
became an Access Person with respect to the initial report and by January 30 of
each year, including holdings information as of December 31, with respect to the
annual report. All such reports shall include the following: title, number of
shares and principal amount of each security held, name of broker, dealer or
bank with whom these securities are held and the date of submission by the
Access Person.
10. Gifts
-----
Access Persons are prohibited from receiving any gift or other thing of
more than $100 in value from any person or entity that does business with or on
behalf of the Fund. Occasional business meals or entertainment (theatrical or
sporting events, etc.) are permitted so long as they are not excessive in number
or cost.
11. Service As a Director
---------------------
Investment Personnel are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization based upon a
determination that the board service would be consistent with the interests of
the Fund and its shareholders. In the limited instances that such board service
is authorized, Investment Personnel will be isolated from those making
investment decisions affecting transactions in Securities
11
<PAGE>
issued by any publicly traded company on whose board such Investment Personnel
serves as a director through the use of "Chinese Wall" or other procedures
designed to address the potential conflicts of interest.
12. Certification of Compliance with the Code
-----------------------------------------
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
(ii) that they recognize that they are subject to the Code;
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities
transactions required to be disclosed or reported pursuant to the
requirements of the Code.
13. Code Violations
---------------
All violations of the Code will be reported to the Board of
Directors/Trustees of the Fund on a quarterly basis. The Board of
Directors/Trustees may take such action as it deems appropriate.
14. Review by the Board of Directors/Trustees
-----------------------------------------
The Board of Directors/Trustees will be provided with an annual report
which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment
Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably
necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any
changes in the procedures made during the preceding year;
(iii) identifies material Code or procedural violations and sanctions
imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or
procedures based upon the Fund's experience under the Code, evolving industry
practices, or developments in applicable laws and regulations.
12
<PAGE>
The Board will review such report and determine if any further action is
required.
13
<PAGE>
Explanatory Notes to Code
-------------------------
1. No comparable Code requirements have been imposed upon Prudential Mutual
Fund Services LLC, the Fund's transfer agent, or those of its directors or
officers who are not Directors/Trustees or Officers of the Fund since they are
deemed not to constitute Access Persons or Advisory Persons as defined in
paragraphs (e)(1) and (2) of Rule 17j-1.
Dated: February 29, 2000
14
<PAGE>
Exhibit A
---------
Definition of Beneficial Ownership
----------------------------------
The term "beneficial ownership" of securities would include not only
ownership of securities held by an access person for his or her own benefit,
whether in bearer form or registered in his or her own name or otherwise, but
also ownership of securities held for his or her benefit by other (regardless of
whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he or she has only a
remainder interest), and securities held for his or her account by pledges,
securities owned by a partnership in which he or she should regard as a personal
holding corporation. Correspondingly, this term would exclude securities held by
an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an access person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the final
determination of beneficial ownership is a question to be determined in the
light of the facts of the particular case, generally a person is regarded as the
beneficial owner of securities held in the name of his or her spouse and their
minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contact, understanding,
relationship, agreement or other arrangement, he obtains therefrom benefits
substantially equivalent to those of ownership. Moreover, the fact that the
holder is a relative or relative of a spouse and sharing the same home as an
access person may in itself indicate that the access person would obtain
benefits substantially equivalent to those of ownership from securities held in
the name of such relative. Thus, absent countervailing facts, it is expected
that securities held by relatives who share the same home as an access person
will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
<PAGE>
Exhibit B
---------
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION
- ------------------------------------------------------------------------------
NIK Nikkei 300 Index CI/Euro
- ------------------------------------------------------------------------------
OEX S&P 100 Close/Amer Index
- ------------------------------------------------------------------------------
OEW S&P 100 Close/Amer Index
- ------------------------------------------------------------------------------
OEY S&P 100 Close/Amer Index
- ------------------------------------------------------------------------------
SPB S&P 500 Index
- ------------------------------------------------------------------------------
SPZ S&P 500 Open/Euro Index
- ------------------------------------------------------------------------------
SPX S&P 500 Open/Euro Index
- ------------------------------------------------------------------------------
SXZ S&P 500 (Wrap)
- ------------------------------------------------------------------------------
SXB S&P 500 Open/Euro Index
- ------------------------------------------------------------------------------
RUZ Russell 2000 Open/Euro Index
- ------------------------------------------------------------------------------
RUT Russell 2000 Open/Euro Index
- ------------------------------------------------------------------------------
MID S&P Midcap 400 Open/Euro Index
- ------------------------------------------------------------------------------
NDX NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NDU NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NDZ NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NDV NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
NCZ NASDAQ- 100 Open/Euro Index
- ------------------------------------------------------------------------------
SML S&P Small Cap 600
- ------------------------------------------------------------------------------
TPX U.S. Top 100 Sector
- ------------------------------------------------------------------------------
SPL S&P 500 Long-Term Close
- ------------------------------------------------------------------------------
ZRU Russell 2000 L-T Open./Euro
- ------------------------------------------------------------------------------
VRU Russell 2000 Long-Term Index
- ------------------------------------------------------------------------------
