<PAGE>
As filed with the Securities and Exchange Commission on May 9, 1994
Registration No. 33-15985
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 9
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
[X]
AMENDMENT NO. 10
(Check appropriate box or boxes)
-----------
PRUDENTIAL-BACHE GLOBAL GENESIS FUND, INC.
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 214-1250
S. JANE ROSE, ESQ.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(NAME AND ADDRESS OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)
[_] on (date) pursuant to paragraph (a), of Rule 485.
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HAS PREVIOUSLY REGISTERED AN INDEFINITE NUMBER OF SHARES OF COMMON STOCK PAR
VALUE $.01 PER SHARE. THE REGISTRANT WILL FILE A NOTICE UNDER SUCH RULE FOR
ITS FISCAL YEAR ENDING MAY 31, 1994 ON OR BEFORE JULY 29, 1994.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
------------- --------
<C> <S> <C>
PART A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Fund Expenses
Item 3. Condensed Financial Information...... Fund Expenses; Financial
Highlights
Item 4. General Description of Registrant.... Cover Page; How the Fund
Invests; General Information
Item 5. Management of Fund................... Financial Highlights; How the
Fund is Managed; General
Information
Item 6. Capital Stock and Other Securities... Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being Offered. Shareholder Guide; How the
Fund Values Its Shares
Item 8. Redemption or Repurchase............. Shareholder Guide
Item 9. Pending Legal Proceedings............ Not Applicable
PART B
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Table of Contents
Item 12. General Information and History...... General Information
Item 13. Investment Objectives and Policies... Investment Objective and
Policies; Investment
Restrictions
Item 14. Management of the Fund............... Directors and Officers;
Manager; Distributor
Item 15. Control Persons and Principal Holders Not Applicable
of Securities........................
Item 16. Investment Advisory and Other Manager; Distributor;
Services............................. Custodian, Transfer and
Dividend Disbursing Agent and
Independent Accountants
Item 17. Brokerage Allocation and Other Portfolio Transactions and
Practices............................ Brokerage
Item 18. Capital Stock and Other Securities... Not Applicable
Item 19. Purchase, Redemption and Pricing of Purchase and Redemption of
Securities Being Offered............. Fund Shares; Shareholder
Investment Account
Item 20. Tax Status........................... Taxes
Item 21. Underwriters......................... Distributor
Item 22. Calculation of Performance Data...... Performance Information
Item 23. Financial Statements................. Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment
to the Registration Statement.
</TABLE>
<PAGE>
Prudential Global Genesis Fund, Inc.
- --------------------------------------------------------------------------------
PROSPECTUS DATED , 1994
- --------------------------------------------------------------------------------
Prudential Global Genesis Fund, Inc., (the Fund) is an open-end, diversified
management investment company. Its investment objective is long-term growth of
capital. It seeks to achieve this objective by investing primarily in common
stocks, common stock equivalents and other equity securities of smaller foreign
and domestic companies. Smaller companies are those with market capitalizations
of less than $1 billion. See "How the Fund Invests--Investment Objective and
Policies--Smaller Companies." Under normal circumstances, the Fund intends to
invest at least 65% of its total assets in such securities. The Fund may also
invest in equity securities of other companies and in debt securities and
options on equity securities, stock indices, foreign currencies and futures
contracts on foreign currencies and may purchase and sell futures contracts on
foreign currencies and groups of currencies and on stock indices so as to hedge
its portfolio. See "How the Fund Invests--Investment Objective and Policies."
The Fund's address is One Seaport Plaza, New York, New York 10292, and its
telephone number is (800) 225-1852.
The Fund's purchase and sale of put and call options may be considered
speculative and may result in higher risks and costs to the Fund. The Fund may
also buy and sell options on stock indices pursuant to limits described herein.
See "How the Fund Invests--Investment Objective and Policies."
The Fund is not intended to constitute a complete investment program. Because
of its objective and policies, including its international orientation and its
emphasis on smaller companies, the Fund may be considered of a speculative
nature and subject to greater investment risks than are assumed by certain
other investment companies that invest solely in securities of U.S. issuers or
that do not emphasize investments in smaller companies. See "How the Fund
Invests--Investment Objective and Policies--Special Considerations and Risks of
Investing in Foreign Securities."
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated , 1994, which information is
incorporated herein by reference (is legally considered part of this
Prospectus) and is available without charge upon request to the Fund, at the
address or telephone number noted above.
- --------------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
FUND HIGHLIGHTS
The following summary is intended to highlight certain information contained
in the Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.
WHAT IS PRUDENTIAL GLOBAL GENESIS FUND, INC.?
Prudential Global Genesis Fund, Inc. is a mutual fund. A mutual fund pools the
resources of investors by selling its shares to the public and investing the
proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is an open-end, diversified
management investment company.
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in common stocks, common stock
equivalents and other equity securities of smaller foreign and domestic
companies (i.e., companies with market capitalizations of less than 1 billion).
See "How the Fund Invests--Investment Objective and Policies" at page 6.
WHAT ARE THE FUND'S SPECIAL CHARACTERISTICS AND RISKS?
The Fund has an international orientation and may invest primarily in the
securities of smaller foreign companies, whose market prices may be more
volatile than those of larger domestic or foreign companies. Foreign securities
involve certain risks, including political or economic instability in the
country of the issuer, the difficulty of predicting international trade
patterns, the possibility of imposition of exchange controls and the risk of
currency fluctuations. See "How the Fund Invests--Investment Objective and
Policies" at page 6. In addition, the Fund may engage in hedging and income
enhancement strategies, including the use of options, forward currency exchange
contracts and futures contracts and options thereon. These activities may be
considered speculative and may result in higher risks and costs to the Fund.
See "How the Fund Invests--Hedging and Income Enhancement Strategies" at page
8.
WHO MANAGES THE FUND?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the Manager of
the Fund and is compensated for its services at an annual rate of 1% of the
Fund's average daily net assets. As of March 31, 1994, PMF served as manager or
administrator to 66 investment companies, including 37 mutual funds, with
aggregate assets of approximately $[51] billion. The Prudential Investment
Corporation (PIC or the Subadviser) furnishes investment advisory services in
connection with the management of the Fund under a Subadvisory Agreement with
PMF. See "How the Fund is Managed--Manager" at page 12.
WHO DISTRIBUTES THE FUND'S SHARES?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the Distributor of
the Fund's Class A shares and is currently paid for its services at an annual
rate of .25 of 1% of the average daily net assets of the Class A shares.
Prudential Securities Incorporated (Prudential Securities or PSI), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's Class B and Class C shares and is paid for its
services at an annual rate of 1% of the average daily net assets of each of the
Class B and Class C shares.
See "How the Fund is Managed--Distributor" at page 12.
2
<PAGE>
WHAT IS THE MINIMUM INVESTMENT?
The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is $100
for all classes. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. See "Shareholder Guide--How
to Buy Shares of the Fund" at page 18 and "Shareholder Guide--Shareholder
Services" at page 26.
HOW DO I PURCHASE SHARES?
You may purchase shares of the Fund through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund, through its transfer
agent, Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent), at
the net asset value per share (NAV) next determined after receipt of your
purchase order by the Transfer Agent or Prudential Securities plus a sales
charge which may be imposed either (i) at the time of purchase (Class A shares)
or (ii) on a deferred basis (Class B or Class C shares). See "How the Fund
Values its Shares" at page 14 and "Shareholder Guide--How to Buy Shares of the
Fund" at page 18.
WHAT ARE MY PURCHASE ALTERNATIVES?
The Fund offers three classes:
. Class A Shares: Sold with an initial sales charge of up to 5% of the
offering price.
. Class B Shares: Sold without an initial sales charge but are subject to a
contingent deferred sales charge or CDSC (declining from
5% to zero of the lower of the amount invested or the
redemption proceeds) which will be imposed on certain
redemptions made within six years of purchase. Although
Class B shares are subject to higher ongoing distribution-
related expenses than Class A shares, Class B shares will
automatically convert to Class A shares (which are subject
to lower ongoing expenses) approximately seven years after
purchase.
. Class C Shares: Sold without an initial sales charge and, for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to higher
ongoing distribution-related expenses than Class A shares
but do not convert to another class.
See "Shareholder Guide--Alternative Purchase Plan" at page 19.
HOW DO I SELL MY SHARES?
You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order. However,
the proceeds of redemptions of Class B and Class C shares may be subject to a
CDSC. See "Shareholder Guide--How to Sell Your Shares" at page 21.
HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?
The Fund expects to pay dividends of net investment income and make
distributions of any net capital gains at least annually. Dividends and
distributions will be automatically reinvested in additional shares of the Fund
at NAV without a sales charge unless you request that they be paid to you in
cash. See "Taxes, Dividends and Distributions" at page 15.
3
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- ------------------- -------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES+
Maximum Sales Load Im-
posed on Purchases (as
a percentage of offer-
ing price)............ 5% None None
Maximum Sales Load or
Deferred Sales Load
Imposed on Reinvested
Dividends............. None None None
Deferred Sales Load None 5% during the first 1% on redemp-
(as a percentage of year, decreasing by tions made
original purchase 1% annually to 1% within one year
price or redemption in the fifth and of purchase
proceeds, whichever is the sixth years and
lower)................ 0% the seventh
year*
Redemption Fees....... None None None
Exchange Fee.......... None None None
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
<S> <C> <C> <C>
(as a percentage of av-
erage net assets) CLASS A SHARES CLASS B SHARES CLASS C SHARES**
-------------- ------------------- -------------------
Management Fees (Be-
fore Waiver)(a)....... 1.00% 1.00% 1.00%
12b-1 Fees+........... .25%++ 1.00% 1.00%
Other Expenses........ 1.29% 1.29% 1.29%
---- ---- ----
Total Fund Operating
Expenses (Before
Waiver)(a)............ 2.54% 3.29% 3.29%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual re-
turn and (2) redemption at the end of each
time period:
Class A..................................... $74 $125 $178 $323
Class B..................................... $83 $131 $182 $334
Class C**................................... $43 $101 $172 $359
You would pay the following expenses on the
same investment, assuming no
redemption:
Class A..................................... $74 $125 $178 $323
Class B..................................... $33 $101 $172 $334
Class C**................................... $33 $101 $172 $359
</TABLE>
The above example with respect to Class A and Class B shares is based on
restated data for the Fund's fiscal year ended May 31, 1993.The above example
with respect to Class C shares is based on expenses expected to have been
incurred if Class C shares had been in existence during the fiscal year ended
May 31, 1993. The examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
The purpose of this table is to assist investors in understanding the various
costs and expenses that an investor in the Fund will bear, whether directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "How the Fund is Managed." "Other Expenses" includes operating expenses of
the Fund, such as Directors' and professional fees, registration fees, reports
to shareholders, transfer agency and custodian (domestic and foreign) fees and
miscellaneous fees, but exclude foreign withholding taxes.
- ----------
(a) Based on expenses incurred during the fiscal year ended May 31, 1993
without taking into account the waiver of management fees. See "How the
Fund is Managed." After the waiver of management fees, Management Fees for
the fiscal year ended May 31, 1993 were 0% for both Class A and Class B
shares and Total Operating Expenses for Class A and Class B shares were
1.49% and 2.29%, respectively, of the Fund's average net assets.
* Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion Feature--
Class B Shares."
** Estimated based on expenses expected to have been incurred if Class C shares
had been in existence during the fiscal year ended May 31, 1993.
+ Pursuant to rules of the National Association of Securities Dealers, Inc.,
the aggregate initial sales charges, deferred sales charges and asset-based
sales charges on shares of the Fund may not exceed 6.25% of total gross
sales, subject to certain exclusions. This 6.25% limitation is imposed on
the Fund rather than on a per shareholder basis. Therefore, long-term Class
B and Class C shareholders of the Fund may pay more in total sales charges
than the economic equivalent of 6.25% of such shareholders' investment in
such shares. See "How the Fund is Managed--Distributor."
++ Although the Class A Distribution and Service Plan provides that the Fund
may pay a distribution fee of up to .30 of 1% per annum of the average daily
net assets of the Class A shares, the Distributor has agreed to limit its
distribution fees with respect to Class A shares of the Fund to no more than
.25 of 1% of the average daily net assets of the Class A shares for the
fiscal year ending May 31, 1994. See "How The Fund Is Managed--Distributor."
4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
The following financial highlights (with the exception of the six months ended
November 30, 1993) have been audited by Price Waterhouse, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and the notes thereto, which
appear in the Statement of Additional Information. The following financial
highlights contain selected data for a share of Class A and Class B common
stock outstanding, total return, ratios to average net assets and other
supplemental data for the periods indicated. The information is based on data
contained in the financial statements. No Class C shares were outstanding
during the periods indicated.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
SIX MONTHS JANUARY 22,
ENDED 1990*
NOVEMBER 30, YEARS ENDED MAY 31, THROUGH
1993++ ---------------------- MAY 31,
(UNAUDITED) 1993++ 1992++ 1991 1990
------------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period......... $ 15.34 $12.62 $11.95 $12.62 $12.41
------- ------ ------ ------ ------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income (loss)+. .03 .10 .02 (.03) (.04)
Net realized and
unrealized gain
(loss) on
investment and
foreign
currency
transactions... 2.61 2.62 .65 (.64) .25
------- ------ ------ ------ ------
Total from
investment
operations..... 2.64 2.72 .67 (.67) .21
------- ------ ------ ------ ------
LESS
DISTRIBUTIONS:
Dividends from
net investment
income......... (.15) -- -- -- --
Distributions
paid to
shareholders
from net
realized gain
on investment
and foreign
currency
transactions... (.09) -- -- -- --
------- ------ ------ ------ ------
Total
distributions (.24) -- -- -- --
Net asset value,
end of period.. $ 17.74 $15.34 $12.62 $11.95 $12.62
======= ====== ====== ====== ======
TOTAL
RETURN:****.... 17.43% 21.55% 5.61% (5.31)% 1.69%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000).......... $18,313 $3,435 $3,829 $4,059 $2,137
Average net
assets (000)... $ 8,248 $3,106 $3,771 $2,569 $1,204
Ratios to
average net
assets:
Expenses,
including
distribution
fees+.......... 1.00%** 1.49% 1.50% 2.72%# 3.90%**
Expenses,
excluding
distribution
fees+.......... .80%** 1.29% 1.30% 2.52%# 3.70%**
Net investment
income (loss)+. .25%** 0.79% 0.19% (0.61)% (1.71)%**
Portfolio
turnover rate.. 20% 67% 57% 95% 72%
<CAPTION>
CLASS B
-----------------------------------------------------------------------------
SIX MONTHS JANUARY 29,
ENDED 1988***
NOVEMBER 30, YEARS ENDED MAY 31, THROUGH
1993++ ------------------------------------------------- MAY 31,
(UNAUDITED) 1993++ 1992++ 1991 1990+++ 1989 1988
------------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period......... $ 14.93 $ 12.38 $ 11.82 $ 12.58 $ 12.28 $ 10.80 $ 10.00
------------- --------- --------- --------- --------- --------- -------------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income (loss)+. (.07) -- (.07) (.15) (.14) (.13) (.04)
Net realized and
unrealized gain
(loss) on
investment and
foreign
currency
transactions... 2.58 2.55 .63 (.61) 1.30 1.74 .84
------------- --------- --------- --------- --------- --------- -------------
Total from
investment
operations..... 2.51 2.55 .56 (.76) 1.16 1.61 .80
------------- --------- --------- --------- --------- --------- -------------
LESS
DISTRIBUTIONS:
Dividends from
net investment
income......... (.05) -- -- -- -- -- --
Distributions
paid to
shareholders
from net
realized gain
on investment
and foreign
currency
transactions... (.09) -- -- -- (.86) (.13) --
------------- --------- --------- --------- --------- --------- -------------
Total
distributions (.14) -- -- -- -- -- --
Net asset value,
end of period.. $ 17.30 $ 14.93 $ 12.38 $ 11.82 $ 12.58 $ 12.28 $ 10.80
============= ========= ========= ========= ========= ========= =============
TOTAL
RETURN:****.... 16.94% 20.60% 4.74% (6.04%) 9.72% 15.10% 8.00%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000).......... $95,917 $36,136 $35,644 $40,200 $39,868 $13,254 $12,137
Average net
assets (000)... $55,194 $31,561 $37,236 $37,689 $26,161 $11,495 $ 3,065
Ratios to
average net
assets:
Expenses,
including
distribution
fees+.......... 1.80%** 2.29% 2.30% 3.48%# 3.66%# 3.52%# 3.87%**
Expenses,
excluding
distribution
fees+.......... .80%** 1.29% 1.30% 2.48%# 2.70%# 2.52%# 2.95%**
Net investment
income (loss)+. (.50)%** (0.01)% (0.57)% (1.45)% (1.76)% (1.18)% (1.75)%**
Portfolio
turnover rate.. 20% 67% 57% 95% 72% 60% 3%
</TABLE>
- ----------
* Commencement of offering of Class A shares.
** Annualized.
*** Commencement of offering of Class B shares.
**** Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on
the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a full
year are not annualized.
+ Net of expense subsidies and/or fee waivers for all reported periods
except 1991.
++ Calculated based upon average shares outstanding during the fiscal period.
+++ On September 27, 1989, Prudential Mutual Fund Management, Inc. succeeded
The Prudential Insurance Company of America as Manager of the Fund. See
"Manager" in the Statement of Additional Information."
# Restated to reflect reclassification of foreign withholding taxes as a
reduction of related income.
5
<PAGE>
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. THE FUND
WILL SEEK TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING PRIMARILY IN COMMON
STOCKS, COMMON STOCK EQUIVALENTS (SUCH AS WARRANTS AND CONVERTIBLE DEBT
SECURITIES) AND OTHER EQUITY SECURITIES (INCLUDING PREFERRED STOCKS) OF
SMALLER FOREIGN AND DOMESTIC COMPANIES. UNDER NORMAL CIRCUMSTANCES, THE FUND
WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN SUCH SECURITIES. THERE CAN BE
NO ASSURANCE THAT THE FUND'S OBJECTIVE WILL BE ACHIEVED.
It is anticipated that the Fund will invest in securities of smaller
companies that are traded on established markets (including stock exchanges
and over-the-counter markets). The investment adviser believes that, in many
instances, these securities are overlooked by institutional investors and thus
are undervalued relative to the securities of many larger companies.
THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE INVESTMENT COMPANY ACT). FUND POLICIES THAT ARE NOT
FUNDAMENTAL MAY BE MODIFIED BY THE BOARD OF DIRECTORS.
SMALLER COMPANIES
THE SECURITIES OF SMALLER COMPANIES OFTEN OFFER A GREATER POTENTIAL FOR
LONG-TERM GROWTH. In analyzing companies for investment, the investment
adviser ordinarily looks for one or more of the following characteristics:
prospects for above-average earnings growth per share; high return on invested
capital; healthy balance sheets; sound financial and accounting policies and
overall financial strength; strong competitive advantages; effective research
and product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will
enable the companies to compete successfully in their marketplace--all in
relation to the prevailing prices of the securities of such companies. For
purposes of the Fund's investments, smaller companies are currently defined as
those with market capitalizations of less than $1 billion (or a corresponding
market capitalization in foreign markets). The Fund's Board of Directors will
periodically review and revise the capitalization requirements of smaller
companies as circumstances may require. Further, the Fund anticipates that it
will continue to hold the securities of smaller companies as those companies
grow or expand so long as those investments continue to offer prospects of
long-term growth.
THERE ARE CERTAIN RISKS ASSOCIATED WITH INVESTING IN SECURITIES OF SMALLER
COMPANIES. THE MARKET PRICES OF THESE SECURITIES MAY BE MORE VOLATILE THAN
THOSE OF LARGER COMPANIES. BECAUSE SMALLER COMPANIES NORMALLY HAVE FEWER
SHARES OUTSTANDING THAN LARGER COMPANIES, IT MAY BE MORE DIFFICULT FOR THE
FUND TO BUY OR SELL SIGNIFICANT AMOUNTS OF SUCH SHARES WITHOUT AN UNFAVORABLE
IMPACT ON PREVAILING MARKET PRICES. THERE IS TYPICALLY LESS PUBLICLY AVAILABLE
INFORMATION CONCERNING SMALLER COMPANIES THAN FOR LARGER, MORE ESTABLISHED
ONES. THE LOWER CAPITALIZATIONS OF THE COMPANIES IN WHICH THE FUND INTENDS
PRIMARILY TO INVEST, AND THE FACT THAT SMALLER COMPANIES TYPICALLY HAVE
SMALLER PRODUCT LINES AND COMMAND A SMALLER MARKET SHARE THAN DO LARGER
COMPANIES, MAY MAKE THEM MORE VULNERABLE TO FLUCTUATIONS IN THE ECONOMIC
CYCLE.
GENERAL
THE FUND MAY INVEST IN SECURITIES NOT LISTED ON SECURITIES EXCHANGES. These
securities will generally have an established market (such as the over-the-
counter market), the depth and liquidity of which may vary from time to time
and from security to security. The Fund may also invest up to 10% of its net
assets in restricted securities or other securities that have a limited
market. See "Other Investments and Policies--Illiquid Securities."
There are no geographic limitations on the Fund's investments and, from time
to time depending upon market conditions, the Fund may invest primarily in
securities of foreign issuers. The Fund anticipates that many of the companies
6
<PAGE>
in which it invests will be located or have operations in the United States,
the United Kingdom, Canada, Australia, New Zealand, Hong Kong, Singapore,
Malaysia, Thailand, Indonesia, Mexico, Western Europe and Japan. Under normal
circumstances, the Fund intends to maintain investments in at least three
countries (including the United States). In addition to analyzing the
companies in which investments are made, the investment adviser also considers
factors relating to the various countries and geographic regions. The
investment adviser ordinarily considers such factors as prospects for economic
growth in foreign countries; expected levels of inflation and interest rates;
government policies influencing business conditions; the range of individual
investment opportunities available to international investors; and other
pertinent financial, tax, social, political and national factors--all in
relation to the prevailing prices of securities in each country or region.
THE FUND INTENDS TO INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN COMMON
STOCKS, COMMON STOCK EQUIVALENTS AND OTHER EQUITY SECURITIES OF SMALLER
DOMESTIC AND FOREIGN COMPANIES. UNDER NORMAL CIRCUMSTANCES, THE REMAINDER OF
THE FUND'S INVESTMENTS MAY BE IN OTHER SECURITIES OR INVESTMENT VEHICLES,
INCLUDING EQUITY SECURITIES OF OTHER COMPANIES, DEBT SECURITIES (INCLUDING
MONEY MARKET INSTRUMENTS) OF FOREIGN AND DOMESTIC COMPANIES, FUTURES CONTRACTS
ON STOCK INDICES AND FOREIGN CURRENCIES AND FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS. IN ADDITION, THE FUND MAY (I) PURCHASE AND WRITE (I.E., SELL) PUT
AND CALL OPTIONS ON EQUITY SECURITIES, STOCK INDICES, FOREIGN CURRENCIES AND
FUTURES CONTRACTS ON FOREIGN CURRENCIES, (II) PURCHASE SECURITIES ON A WHEN-
ISSUED OR DELAYED DELIVERY BASIS, (III) MAKE SHORT SALES AGAINST-THE-BOX AND
(IV) ENTER INTO REPURCHASE AGREEMENTS. THE FUND MAY FROM TIME TO TIME LEND ITS
PORTFOLIO SECURITIES TO BROKERS OR DEALERS, BANKS OR OTHER RECOGNIZED
INSTITUTIONAL BORROWERS OF SECURITIES AND MAY INVEST TO A LIMITED EXTENT IN
SECURITIES OF COMPANIES THAT HAVE BEEN IN EXISTENCE FOR LESS THAN THREE YEARS,
IN SECURITIES FOR WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE AND IN
SECURITIES OF OTHER REGISTERED INVESTMENT COMPANIES. SEE "INVESTMENT
RESTRICTIONS" IN THE STATEMENT OF ADDITIONAL INFORMATION.
When conditions dictate a temporary defensive strategy, the Fund may invest
in money market instruments (including repurchase agreements maturing in seven
days or less) without limit. The Fund will only invest in money market
instruments that are rated, or are issued by companies that have outstanding
debt securities rated at least BBB or Baa by Standard & Poor's Corporation
(S&P) or Moody's Investors Service (Moody's), respectively, or commercial
paper rated at least A-2 or P-2 by S&P or Moody's, respectively, or in unrated
securities of issuers that the Fund's investment adviser has determined to be
of comparable quality. Subsequent to its purchase by the Fund, a security may
be assigned a lower rating or cease to be rated. Such an event would not
require the elimination of the issue from the portfolio, but the investment
adviser will consider such an event in determining whether the Fund should
continue to hold the security in its portfolio. Securities rated Baa by
Moody's, although considered to be investment grade, lack outstanding
investment characteristics and, in fact, have speculative characteristics. See
"Description of Security Ratings" in the Statement of Additional Information.
SPECIAL CONSIDERATIONS AND RISKS OF INVESTING IN FOREIGN SECURITIES
FOREIGN SECURITIES INVOLVE CERTAIN RISKS WHICH SHOULD BE CONSIDERED
CAREFULLY BY AN INVESTOR IN THE FUND. THESE RISKS INCLUDE POLITICAL OR
ECONOMIC INSTABILITY IN THE COUNTRY OF THE ISSUER, THE DIFFICULTY OF
PREDICTING INTERNATIONAL TRADE PATTERNS, THE POSSIBILITY OF IMPOSITION OF
EXCHANGE CONTROLS AND THE RISK OF CURRENCY FLUCTUATIONS. Such securities may
be subject to greater fluctuations in price than securities issued by U.S.
corporations or issued or guaranteed by the U.S. Government, its
instrumentalities or agencies. In addition, there may be less publicly
available information about a foreign company than about a domestic company.
Foreign companies generally are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
companies. There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States and,
with respect to certain foreign countries, there is a possibility of
expropriation, confiscatory taxation or diplomatic developments which could
affect investment in those countries. Finally, in the event of a default of
any such foreign debt obligations, it may be more difficult for the Fund to
obtain or to enforce a judgment against the issuers of such securities.
ALTHOUGH THE FUND INTENDS TO INVEST PRIMARILY IN EQUITY SECURITIES, IT MAY
INVEST FROM TIME TO TIME IN DEBT SECURITIES OF FOREIGN ISSUERS. In many
instances, foreign debt securities may provide higher yields than securities
of
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domestic issuers which have similar maturities and are of similar quality.
Under certain market conditions these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. Government, its instrumentalities or
agencies.
IF A SECURITY IS DENOMINATED IN A FOREIGN CURRENCY, IT WILL BE AFFECTED BY
CHANGES IN CURRENCY EXCHANGE RATES AND IN EXCHANGE CONTROL REGULATIONS, AND
COSTS WILL BE INCURRED IN CONNECTION WITH CONVERSIONS BETWEEN CURRENCIES. A
change in the value of any such currency against the U.S. dollar will result
in a corresponding change in the U.S. dollar value of the Fund's securities
denominated in that currency. Such changes also will affect the Fund's income
and distributions to shareholders. In addition, although the Fund will receive
income in such currencies, the Fund will be required to compute and distribute
its income in U.S. dollars. Therefore, if the exchange rate for any such
currency declines after the Fund's income has been accrued and translated into
U.S. dollars, the Fund could be required to liquidate portfolio securities to
make such distributions, particularly in instances in which the amount of
income the Fund is required to distribute is not immediately reduced by the
decline in such currency. Similarly, if an exchange rate declines between the
time the Fund incurs expenses in U.S. dollars and the time such expenses are
paid, the amount of such currency required to be converted into U.S. dollars
in order to pay such expenses in U.S. dollars will be greater than the
equivalent amount in any such currency of such expenses at the time they were
incurred. The Fund may, but need not, enter into futures contracts on foreign
currencies, forward foreign currency exchange contracts and options on foreign
currencies for hedging purposes, including: locking-in the U.S. dollar price
of the purchase or sale of securities denominated in a foreign currency;
locking-in the U.S. dollar equivalent of interest or dividends to be paid on
such securities which are held by the Fund; and protecting the U.S. dollar
value of such securities which are held by the Fund.
HEDGING AND INCOME ENHANCEMENT STRATEGIES
THE FUND MAY ENGAGE IN VARIOUS PORTFOLIO STRATEGIES TO REDUCE CERTAIN RISKS
OF ITS INVESTMENTS AND TO ATTEMPT TO ENHANCE INCOME, BUT NOT FOR SPECULATION.
THESE STRATEGIES CURRENTLY INCLUDE THE USE OF OPTIONS, FORWARD CURRENCY
EXCHANGE CONTRACTS AND FUTURES CONTRACTS AND OPTIONS THEREON. The Fund's
ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations and there can be no assurance that
any of these strategies will succeed. See "Investment Objective and Policies"
and "Taxes" in the Statement of Additional Information. New financial products
and risk management techniques continue to be developed, and the Fund may use
these new investments and techniques to the extent consistent with its
investment objective and policies.
OPTIONS TRANSACTIONS
THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON
SECURITIES AND CURRENCIES THAT ARE TRADED ON U.S. OR FOREIGN SECURITIES
EXCHANGES OR IN THE OVER-THE-COUNTER MARKET TO ENHANCE INCOME OR TO HEDGE THE
FUND'S PORTFOLIO. These options will be on equity securities, financial
indices (e.g., S&P 500) and foreign currencies. The Fund may write covered put
and call options to generate additional income through the receipt of
premiums, purchase put options in an effort to protect the value of a security
that it owns against a decline in market value and purchase call options in an
effort to protect against an increase in the price of securities (or
currencies) it intends to purchase. The Fund may also purchase put and call
options to offset previously written put and call options of the same series.
See "Investment Objective and Policies--Options Transactions" in the Statement
of Additional Information.
A CALL OPTION GIVES THE PURCHASER, IN EXCHANGE FOR A PREMIUM PAID, THE
RIGHT, FOR A SPECIFIED PERIOD OF TIME, TO PURCHASE THE SECURITIES OR CURRENCY
SUBJECT TO THE OPTION AT A SPECIFIED PRICE (THE EXERCISE PRICE OR STRIKE
PRICE). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms
of the option contract, the underlying securities or currency or a specified
amount of cash to the purchaser upon receipt of the exercise price. When the
Fund writes a call option, the Fund gives up the potential for gain on the
underlying securities or currency in excess of the exercise price of the
option during the period that the option is open.
A PUT OPTION GIVES THE PURCHASER, IN RETURN FOR A PREMIUM, THE RIGHT, FOR A
SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES OR CURRENCY SUBJECT TO THE
OPTION TO THE WRITER OF THE PUT AT THE SPECIFIED EXERCISE PRICE. The writer of
the
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put option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the securities or currency underlying the option or deliver
cash at the exercise price. The Fund might, therefore, be obligated to purchase
the underlying securities or currency for more than their current market price.
THE FUND WILL WRITE ONLY "COVERED" OPTIONS. An option is covered if, so long
as the Fund is obligated under the option, it owns an offsetting position in
the underlying security or currency or maintains cash, U.S. Government
securities or other liquid high-grade debt obligations with a value sufficient
at all times to cover its obligations. See "Investment Objective and Policies--
Options Transactions" in the Statement of Additional Information.
THERE IS NO LIMITATION ON THE AMOUNT OF CALL OPTIONS THE FUND MAY WRITE. The
Fund has undertaken with certain state securities commissions that, so long as
shares of the Fund are registered in those states, it will not (a) write puts
having aggregate exercise prices greater than 25% of total net assets, or (b)
purchase (i) put options on stocks not held in the Fund's portfolio, (ii) put
options on stock indices, foreign currencies or future contracts on foreign
currencies or (iii) call options on stock, stock indices or foreign currencies
if, after any such purchase, the aggregate premiums paid for such options would
exceed 10% of the Fund's total assets; provided, however, that the Fund may
purchase put options on stocks held by the Fund if after such purchase the
aggregate premiums paid for such options do not exceed 20% of the Fund's total
assets. The aggregate value of the obligations underlying put options will not
exceed 50% of the Fund's assets.
FORWARD CURRENCY EXCHANGE CONTRACTS
THE FUND MAY ENTER INTO FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO
PROTECT THE VALUE OF ITS PORTFOLIO AGAINST FUTURE CHANGES IN THE LEVEL OF
CURRENCY EXCHANGE RATES. The Fund may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market
or on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days agreed upon by the parties from the date of the contract at a price set on
the date of the contract.
THE FUND'S DEALINGS IN FORWARD CONTRACTS WILL BE LIMITED TO HEDGING INVOLVING
EITHER SPECIFIC TRANSACTIONS OR PORTFOLIO POSITIONS. Transaction hedging is the
purchase or sale of a forward contract with respect to specific receivables or
payables of the Fund generally arising in connection with the purchase or sale
of its portfolio securities and accruals of interest or dividends receivable
and Fund expenses. Position hedging is the sale of a foreign currency with
respect to portfolio security positions denominated or quoted in that currency
or in a currency bearing a substantial correlation to the value of that
currency (cross hedge). Although there are no limits on the number of forward
contracts which the Fund may enter into, the Fund may not position hedge with
respect to a particular currency for an amount greater than the aggregate
market value (determined at the time of making any sale of foreign currency) of
the securities held in its portfolio denominated or quoted in, or currently
convertible into, such currency. See "Investment Objective and Policies--Risks
Related to Forward Currency Exchange Contracts" in the Statement of Additional
Information.
FUTURES CONTRACTS AND OPTIONS THEREON
THE FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS AND OPTIONS
THEREON WHICH ARE TRADED ON A COMMODITIES EXCHANGE OR BOARD OF TRADE FOR
CERTAIN HEDGING, INCOME ENHANCEMENT AND RISK MANAGEMENT PURPOSES IN ACCORDANCE
WITH REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION. These futures
contracts and options thereon will be on financial indices and foreign
currencies or groups of foreign currencies such as the European Currency Unit.
(A European Currency Unit is a basket of specified amounts of the currencies of
certain member states of the European Economic Community, a Western European
economic cooperative organization including such countries as France, Germany,
The Netherlands and the United Kingdom.) A financial futures contract is an
agreement to purchase or sell an agreed amount of securities or currencies at a
set price for delivery in the future.
THE FUND MAY NOT PURCHASE OR SELL FUTURES CONTRACTS AND OPTIONS THEREON FOR
INCOME ENHANCEMENT OR RISK MANAGEMENT PURPOSES IF, IMMEDIATELY THEREAFTER, THE
SUM OF THE AMOUNT OF INITIAL MARGIN DEPOSITS ON THE FUND'S FUTURES POSITIONS
AND PREMIUMS PAID FOR OPTIONS THEREON WOULD EXCEED 5% OF THE LIQUIDATION VALUE
OF THE
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FUND'S TOTAL ASSETS. ALTHOUGH THERE ARE NO OTHER LIMITS APPLICABLE TO FUTURES
CONTRACTS, THE VALUE OF ALL FUTURES CONTRACTS SOLD WILL NOT EXCEED THE TOTAL
MARKET VALUE OF THE FUND'S PORTFOLIO.
THE FUND'S SUCCESSFUL USE OF FUTURES CONTRACTS AND OPTIONS THEREON DEPENDS
UPON THE INVESTMENT ADVISER'S ABILITY TO PREDICT THE DIRECTION OF THE MARKET
AND OF INTEREST RATES AND REQUIRES SKILLS AND TECHNIQUES DIFFERENT FROM THOSE
USED IN SELECTING PORTFOLIO SECURITIES. The correlation between movements in
the price of a futures contract and the movements in the index or price of the
currencies being hedged is imperfect, and there is a risk that the value of the
index or currencies being hedged may increase or decrease at a greater rate
than the related futures contracts, resulting in losses to the Fund. Certain
futures exchanges or boards of trade have established daily limits on the
amount that the price of futures contracts or options thereon may vary, either
up or down, from the previous day's settlement price. These daily limits may
restrict the Fund's ability to purchase or sell certain futures contracts or
options thereon on any particular day.
THE FUND'S ABILITY TO ENTER INTO FUTURES CONTRACTS AND OPTIONS THEREON IS
LIMITED BY THE REQUIREMENTS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE INTERNAL REVENUE CODE), FOR QUALIFICATION AS A REGULATED INVESTMENT
COMPANY. SEE "TAXES" IN THE STATEMENT OF ADDITIONAL INFORMATION.
SPECIAL RISKS OF HEDGING AND INCOME ENHANCEMENT STRATEGIES
PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS AND IN CURRENCY EXCHANGE
TRANSACTIONS INVOLVES INVESTMENT RISKS AND TRANSACTION COSTS TO WHICH THE FUND
WOULD NOT BE SUBJECT ABSENT THE USE OF THESE STRATEGIES. If the investment
adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such strategies were
not used. Risks inherent in the use of options, foreign currency and futures
contracts and options on futures contracts include (1) dependence on the
investment adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; (5) the
possible need to defer closing out certain hedged positions to avoid adverse
tax consequences; and (6) the possible inability of the Fund to purchase or
sell a portfolio security at a time that otherwise would be favorable for it to
do so, or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions. See "Investment
Objective and Policies" and "Taxes" in the Statement of Additional Information.
OTHER INVESTMENTS AND POLICIES
REPURCHASE AGREEMENTS
The Fund may on occasion enter into repurchase agreements whereby the seller
of a security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The repurchase date is usually within a day or two
of the original purchase although it may be for a number of months. The resale
price is in excess of the purchase price, reflecting an agreed-upon rate of
return effective for the period of time the Fund's money is invested in the
security. The Fund's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the purchase price, including
accrued interest earned on the underlying securities. The instruments held as
collateral are valued daily, and as the value of the instruments declines, the
Fund will require additional collateral. If the seller defaults and the value
of the collateral securing the repurchase agreement declines, the Fund may
incur a loss. The Fund participates in a joint repurchase account with other
investment companies managed by Prudential Mutual Fund Management, Inc.
pursuant to an order of the Securities and Exchange Commission (SEC).
SECURITIES LENDING
The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that
outstanding loans do not exceed in the aggregate 10% of the Fund's total assets
and that the borrower at all times maintains cash or equivalent collateral or
secures a letter of credit in favor of the Fund in an amount
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<PAGE>
equal to at least 100% of the market value of the securities loaned. During
the time portfolio securities are on loan, the borrower will pay the Fund an
amount equivalent to any dividend or interest paid on such securities and the
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed upon amount of interest income from the borrower. See
"Investment Objective and Policies--Lending of Securities" in the Statement of
Additional Information.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net 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. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933, as amended (the Securities Act), that have a readily available market
are not considered illiquid for purposes of this limitation. The investment
adviser will monitor the liquidity of such restricted securities under the
supervision of the Board of Directors. Repurchase agreements subject to demand
are deemed to have a maturity equal to the applicable notice period.
The staff of the SEC has taken the position that purchased over-the-counter
options and the assets used as "cover" for written over-the-counter options
are illiquid securities unless the Fund and the counterparty have provided for
the Fund, at the Fund's election, to unwind the over-the-counter 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."
BORROWING
The Fund may borrow an amount equal to no more than 20% of the value of its
total assets (computed at the time the loan is made) for temporary,
extraordinary or emergency purposes or for the clearance of transactions. The
Fund may pledge up to 20% of its total assets to secure these borrowings.
PORTFOLIO TURNOVER
As a result of the Fund's investment policies, its portfolio turnover rate
may exceed 100%, although the rate is not expected to exceed 200%. The
portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the average monthly value of the Fund's
portfolio securities, excluding securities having a maturity at the date of
purchase of one year or less. High portfolio turnover may involve
correspondingly greater brokerage commissions and other transaction costs,
which will be borne directly by the Fund. See "Portfolio Transactions and
Brokerage" in the Statement of Additional Information. In addition, high
portfolio turnover may result in increased short-term capital gains, which,
when distributed to shareholders, are treated as ordinary income. See "Taxes,
Dividends and Distributions."
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company
Act. See "Investment Restrictions" in the Statement of Additional Information.
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HOW THE FUND IS MANAGED
THE FUND HAS A BOARD OF DIRECTORS WHICH, IN ADDITION TO OVERSEEING THE
ACTIONS OF THE FUND'S MANAGER, SUBADVISER AND DISTRIBUTOR, AS SET FORTH BELOW,
DECIDES UPON MATTERS OF GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND
SUPERVISES THE DAILY BUSINESS OPERATIONS OF THE FUND. THE FUND'S SUBADVISER
FURNISHES DAILY INVESTMENT ADVISORY SERVICES.
For the year ended May 31, 1993, the total expenses as a percentage of
average net assets for the Fund's Class A and Class B shares were 1.49% and
2.29%, respectively. See "Financial Highlights." No Class C shares were
outstanding during the fiscal year ended May 31, 1993.
MANAGER
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (PMF OR THE MANAGER), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS THE MANAGER OF THE FUND AND IS COMPENSATED
FOR ITS SERVICES AT AN ANNUAL RATE OF 1% OF THE FUND'S AVERAGE DAILY NET
ASSETS. It was incorporated in May 1987 under the laws of the State of
Delaware. For the fiscal year ended May 31, 1993, PMF waived its management
fee of 1.00% of the Fund's average net assets. See "Manager" in the Statement
of Additional Information.
PMF may from time to time waive its management fee (or a portion thereof)
and subsidize operating expenses of the Fund. See "Fund Expenses." The Fund is
not required to reimburse PMF for such fee waiver or expense subsidy. Fee
waivers and expense subsidies will increase the Fund's total return. See "How
the Fund Calculates Performance."
As of March 31, 1994, PMF served as the manager to 37 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 29 closed-end investment companies with aggregate assets of
approximately $[51] billion.
UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PMF MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. See
"Manager" in the Statement of Additional Information.
UNDER A SUBADVISORY AGREEMENT BETWEEN PMF AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC OR THE SUBADVISER), PIC FURNISHES INVESTMENT ADVISORY
SERVICES IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY
PMF FOR ITS REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES.
PMF continues to have responsibility for all investment advisory services
pursuant to the Management Agreement and supervises PIC's performance of such
services.
The current portfolio manager of the Fund is Daniel J. Duane, a Managing
Director and Chief Investment Officer for Global Equity Investments of
Prudential Investment Advisors, a unit of PIC. Mr. Duane has responsibility
for the day-to-day management of the Fund's portfolio. Mr. Duane has been
employed by PIC as a manager since 1990. Mr. Duane was formerly with First
Investors Asset Management from 1986 to 1990 as senior portfolio manager and
head of global equity investments. Mr. Duane is a Chartered Financial Analyst.
Mr. Duane also serves as the portfolio manager of the Prudential Series Fund
Global Equity Portfolio and the Prudential Pacific Growth Fund.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance and
financial services company.
DISTRIBUTOR
PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC. (PMFD), ONE SEAPORT PLAZA, NEW
YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE
OF DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS A SHARES OF THE FUND.
IT IS A WHOLLY-OWNED SUBSIDIARY OF PMF.
PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR PSI), ONE
SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE
LAWS OF THE STATE OF DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS B AND
CLASS C SHARES OF THE FUND. IT IS AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF
PRUDENTIAL.
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<PAGE>
UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND SEPARATE DISTRIBUTION
AGREEMENTS (THE DISTRIBUTION AGREEMENTS), PMFD AND PRUDENTIAL SECURITIES
(COLLECTIVELY THE DISTRIBUTOR) INCUR THE EXPENSES OF DISTRIBUTING THE FUND'S
CLASS A, CLASS B AND CLASS C SHARES. These expenses include commissions and
account servicing fees paid to, or on account of, financial advisers of
Prudential Securities and Pruco Securities Corporation (Prusec), an affiliated
broker-dealer, commissions and account servicing fees paid to, or on account
of, other broker-dealers or financial institutions (other than national banks)
which have entered into agreements with the Distributor, advertising expenses,
the cost of printing and mailing prospectuses to potential investors and
indirect and overhead costs of Prudential Securities and Prusec associated with
the sale of Fund shares, including lease, utility, communications and sales
promotion expenses. The State of Texas requires that shares of the Fund may be
sold in that state only by dealers or other financial institutions which are
registered there as broker-dealers.
Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
UNDER THE CLASS A PLAN, THE FUND MAY PAY PMFD FOR ITS DISTRIBUTION-RELATED
EXPENSES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL RATE OF UP TO .30 OF 1% OF
THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES. The Class A Plan provides
that (i) up to .25 of 1% of the average daily net assets of the Class A shares
may be used to pay for personal service and/or the maintenance of shareholder
accounts (service fee) and (ii) total distribution fees (including the service
fee of .25 of 1%) may not exceed .30 of 1% of the average daily net assets of
the Class A Shares. PMFD has agreed to limit its distribution-related expenses
payable under the Class A Plan to .25 of 1% of the average daily net assets of
the Class A shares for the fiscal year ending May 31, 1994.
For the fiscal year ended May 31, 1993, PMFD received payments of $6,212
under the Class A Plan as reimbursement of expenses related to the distribution
of Class A shares. This amount was primarily expended for payment of account
servicing fees to financial advisers and other persons who sell Class A shares.
For the fiscal year ended May 31, 1993, PMFD also received approximately
$19,800 in initial sales charges.
UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS PRUDENTIAL SECURITIES FOR
ITS DISTRIBUTION-RELATED EXPENSES WITH RESPECT TO CLASS B AND CLASS C SHARES AT
AN ANNUAL RATE OF 1% OF THE AVERAGE DAILY NET ASSETS OF EACH OF THE CLASS B AND
CLASS C SHARES. The Class B and Class C Plans provide for the payment to
Prudential Securities of (i) an asset-based sales charge of .75 of 1% of the
average daily net assets of each of the Class B and Class C shares and (ii) a
service fee of .25 of 1% of the average daily net assets of each of the Class B
and Class C shares. The service fee is used to pay for personal service and/or
the maintenance of shareholder accounts. Prudential Securities also receives
contingent deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales
Charges."
For the fiscal year ended May 31, 1993, Prudential Securities incurred
distribution expenses of approximately $322,000 under the Class B Plan and
received $315,614 from the Fund under the Class B Plan. In addition, Prudential
Securities received approximately $145,500 in contingent deferred sales charges
from redemptions of Class B shares during this period. No Class C shares were
outstanding during the fiscal year ending May 31, 1993.
For the fiscal year ended May 31, 1993, the Fund paid distribution expenses
of .20% and 1.00% of the average daily net assets of the Class A and Class B
shares, respectively. The Fund records all payments made under the Plans as
expenses in the calculation of net investment income. No Class C shares were
outstanding during the fiscal year ended May 31, 1993.
Distribution expenses attributable to the sale of shares of the Fund will be
allocated to each class based upon the ratio of sales of each class to the
sales of all shares of the Fund other than expenses allocable to a particular
class. The
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<PAGE>
distribution fee and sales charge of Class A shares will not be used to
subsidize the sale of Class B shares. Similarly, the distribution fee and
contingent deferred sales charge of one class will not be used to subsidize the
sale of another class.
Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan (the Rule 12b-1 Directors), vote annually to continue the Plan. Each Plan
may be terminated at any time by vote of a majority of the Rule 12b-1 Directors
or of a majority of the outstanding shares of the applicable class of the Fund.
The Fund will not be obligated to pay expenses incurred under any plan if it is
terminated or not continued.
In addition to distribution and service fees paid by the Fund under the Class
A, Class B and Class C Plans, the Manager (or one of its affiliates) may make
payments to dealers and other persons who distribute shares of the Fund. Such
payments may be calculated by reference to the net asset value of shares sold
by such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc., governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Prudential Securities may also act as a broker or futures commission merchant
for the Fund, provided that the commissions, fees or other remuneration it
receives are fair and reasonable. See "Portfolio Transactions and Brokerage" in
the Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts, 02171, serves as Custodian for the Fund's portfolio securities
and cash and, in that capacity, maintains certain financial and accounting
books and records pursuant to an agreement with the Fund. Its mailing address
is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and, in
those capacities, maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.
HOW THE FUND VALUES ITS SHARES
THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. THE BOARD OF DIRECTORS HAS FIXED THE
SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NET ASSET VALUE TO BE AS
OF 4:15 P.M., NEW YORK TIME.
Portfolio securities are valued based on market quotations or, if not readily
available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information.
14
<PAGE>
The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase,
sell or redeem shares have been received by the Fund or days on which changes
in the value of the Fund's portfolio securities do not materially affect the
NAV. The New York Stock Exchange is closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger distribution-
related fee to which Class B and Class C shares are subject. It is expected,
however, that the NAV of the three classes will tend to converge immediately
after the recording of dividends, if any, which will differ by approximately
the amount of the distribution-related expense accrual differential among the
classes.
HOW THE FUND CALCULATES PERFORMANCE
FROM TIME TO TIME THE FUND MAY ADVERTISE ITS TOTAL RETURN (INCLUDING
"AVERAGE ANNUAL" TOTAL RETURN AND "AGGREGATE" TOTAL RETURN) AND YIELD IN
ADVERTISEMENTS OR SALES LITERATURE. TOTAL RETURN AND YIELD ARE CALCULATED
SEPARATELY FOR CLASS A, CLASS B AND CLASS C SHARES. These figures are based on
historical earnings and are not intended to indicate future performance. The
"total return" shows how much an investment in the Fund would have increased
(decreased) over a specified period of time (i.e., one, five or ten years or
since inception of the Fund) assuming that all distributions and dividends by
the Fund were reinvested on the reinvestment dates during the period and less
all recurring fees. The "aggregate" total return reflects actual performance
over a stated period of time. "Average annual" total return is a hypothetical
rate of return that, if achieved annually, would have produced the same
aggregate total return if performance had been constant over the entire
period. "Average annual" total return smooths out variations in performance
and takes into account any applicable initial or contingent deferred sales
charges. Neither "average annual" total return nor "aggregate" total return
takes into account any federal or state income taxes which may be payable upon
redemption. The "yield" refers to the income generated by an investment in the
Fund over a one-month or 30-day period. This income is then "annualized;" that
is, the amount of income generated by the investment during that 30-day period
is assumed to be generated each 30-day period for twelve periods and is shown
as a percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The Fund also
may include comparative performance information in advertising or marketing
the Fund's shares. Such performance information may include data from Lipper
Analytical Services, Inc., other industry publications, business periodicals
and market indices. See "Performance Information" in the Statement of
Additional Information. The Fund will include performance data for each class
of shares of the Fund in any advertisement or information including
performance data of the Fund. Further performance information is contained in
the Fund's annual and semi-annual reports to shareholders, which may be
obtained without charge. See "Shareholder Guide--Shareholder Services--Reports
to Shareholders."
TAXES, DIVIDENDS AND DISTRIBUTIONS
TAXATION OF THE FUND
THE FUND HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A
REGULATED INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY, THE
FUND WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME
AND CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. See
"Taxes" in the Statement of Additional Information.
Under the Internal Revenue Code, special rules apply to the treatment of
certain options and futures contracts (Section 1256 contracts). At the end of
each year, such investments held by the Fund will be required to be "marked to
market" for
15
<PAGE>
federal income tax purposes; that is, treated as having been sold at market
value. Sixty percent of any gain or loss recognized on these "deemed sales"
and on actual dispositions will be treated as long-term capital gain or loss,
and the remainder will be treated as short-term capital gain or loss. See
"Taxes" in the Statement of Additional Information.
The Fund may incur foreign income taxes in connection with some of its
foreign investments. Certain of these taxes may be credited to shareholders.
See "Taxes" in the Statement of Additional Information. The Fund may, from
time to time, invest in Passive Foreign Investment Companies (PFICs). PFICs
are foreign corporations which derive a majority of their income from passive
sources. For tax purposes, the Fund's investments in PFICs may subject the
Fund to federal income tax on certain income and gains realized by the Fund.
Certain gains or losses from fluctuations in foreign currency exchange rates
("Section 988" gains or losses) will affect the amount of ordinary income the
Fund will be able to pay as dividends. See "Taxes" in the Statement of
Additional Information.
TAXATION OF SHAREHOLDERS
All dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholder whether or not reinvested. Any net capital gains (i.e., the excess
of net long-term capital gains over net short-term capital losses) distributed
to shareholders will be taxable as long-term capital gains to the
shareholders, whether or not reinvested and regardless of the length of time a
shareholder has owned his or her shares. The maximum long-term capital gains
rate for individuals is 28%. The maximum long-term capital gains rate for
corporate shareholders is the same as the maximum tax rate for ordinary
income.
Dividends received by corporate shareholders are eligible for a dividends-
received deduction of 70% to the extent the Fund's income is derived from
qualified dividends received by the Fund from domestic corporations. Dividends
attributable to interest income, capital and currency gain, gain or loss from
Section 1256 contracts, dividend income from foreign corporations and income
from other sources will not be eligible for the dividends received deduction.
Corporate shareholders should consult their tax advisers regarding other
requirements applicable to the dividends received deduction.
Any gain or loss realized upon a sale or redemption of shares of the Fund by
a shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any such loss, however, although
otherwise treated as a short-term capital loss, will be treated as long-term
capital loss to the extent of any capital gain distributions received by the
shareholder on shares that are held for six months or less.
The Fund has obtained an opinion of counsel to the effect that the
conversion of Class B shares into Class A shares does not constitute a taxable
event for U.S. income tax purposes. However, such opinion is not binding on
the Internal Revenue Service.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
WITHHOLDING TAXES
Under the Internal Revenue Code, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders). Dividends of net investment income and short-term
capital gains paid to a foreign shareholder will generally be subject to a
U.S. withholding rate of 30% (or lower treaty rate).
DIVIDENDS AND DISTRIBUTIONS
THE FUND EXPECTS TO PAY DIVIDENDS OF NET INVESTMENT INCOME, IF ANY, AND MAKE
DISTRIBUTIONS OF ANY CAPITAL GAINS IN EXCESS OF NET LONG-TERM CAPITAL LOSSES
AT LEAST ANNUALLY. Dividends paid by the Fund with respect to each class of
16
<PAGE>
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount
except that each class will bear its own distribution charges, generally
resulting in lower dividends for Class B and Class C shares. Distributions of
net capital gains, if any, will be paid in the same amount for each class of
shares. See "How the Fund Values its Shares."
DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL FUND SHARES, BASED ON
THE NAV OF EACH CLASS ON THE RECORD DATE OR SUCH OTHER DATE AS THE BOARD OF
DIRECTORS MAY DETERMINE, UNLESS THE SHAREHOLDER ELECTS IN WRITING NOT LESS
THAN FIVE BUSINESS DAYS PRIOR TO THE RECORD DATE TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS IN CASH. Such election should be submitted to Prudential Mutual
Fund Services, Inc., Attention: Account Maintenance, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. The Fund will notify each shareholder after
the close of the Fund's taxable year both of the dollar amount and the taxable
status of that year's dividends and distributions on a per share basis. If you
hold shares through Prudential Securities, you should contact your financial
adviser to elect to receive dividends and distributions in cash.
WHEN THE FUND GOES "EX-DIVIDEND," THE NAV OF EACH CLASS IS REDUCED BY THE
AMOUNT OF THE DIVIDEND OR DISTRIBUTION ALLOCABLE TO EACH CLASS. IF YOU BUY
SHARES JUST PRIOR TO THE EX-DIVIDEND DATE (WHICH GENERALLY OCCURS FOUR
BUSINESS DAYS PRIOR TO THE RECORD DATE), THE PRICE YOU PAY WILL INCLUDE THE
DIVIDEND OR DISTRIBUTION AND A PORTION OF YOUR INVESTMENT WILL BE RETURNED TO
YOU AS A TAXABLE DIVIDEND OR DISTRIBUTION. YOU SHOULD, THEREFORE, CONSIDER THE
TIMING OF DIVIDENDS AND DISTRIBUTIONS WHEN MAKING YOUR PURCHASES.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
THE FUND WAS INCORPORATED IN MARYLAND ON JUNE 15, 1987. THE FUND IS
AUTHORIZED TO ISSUE 500 MILLION SHARES OF COMMON STOCK, $.01 PAR VALUE PER
SHARE, DIVIDED INTO THREE CLASSES, DESIGNATED CLASS A, CLASS B AND CLASS C
COMMON STOCK, EACH OF WHICH CONSISTS OF 166 2/3 MILLION AUTHORIZED SHARES.
Each class of common stock represents an interest in the same assets of the
Fund and is identical in all respects except that (i) each class bears
different distribution expenses, (ii) each class has exclusive voting rights
with respect to its distribution and service plan (except that the Fund has
agreed with the SEC in connection with the offering of a conversion feature on
Class B shares to submit any amendment of the Class A distribution and service
plan to both Class A and Class B shareholders), (iii) each class has a
different exchange privilege and (iv) only Class B shares have a conversion
feature. See "How the Fund is Managed--Distributor." The Fund has received an
order from the SEC permitting the issuance and sale of multiple classes of
common stock. Currently, the Fund is only offering three classes designated
Class A, Class B and Class C Shares. In accordance with the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine.
The Board of Directors may increase or decrease the number of authorized
shares. Shares of the Fund, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances as described
under "Shareholder Guide--How to Sell Your Shares." Each share of each class
of common stock is equal as to earnings, assets and voting privileges, except
as noted above, and each class bears the expenses related to the distribution
of its shares. Except for the conversion feature applicable to the Class B
shares, there are no conversion, preemptive or other subscription rights. In
the event of liquidation, each share of common stock of the Fund is entitled
to its portion of all of the Fund's assets after all debt and expenses of the
Fund have been paid. Since Class B and Class C shares generally bear higher
distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders. The Fund's shares do not have cumulative voting rights for the
election of Directors.
17
<PAGE>
THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF DIRECTORS IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OR
MORE OF THE FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL
OF ONE OR MORE DIRECTORS OR TO TRANSACT ANY OTHER BUSINESS.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information
set forth in the Registration Statement filed by the Fund with the SEC under
the Securities Act of 1933. Copies of the Registration Statement may be
obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
YOU MAY PURCHASE SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, PRUSEC OR
DIRECTLY FROM THE FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND
SERVICES, INC. (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES,
P.O. BOX 15020, NEW BRUNSWICK, NEW JERSEY 08906-5020. The minimum initial
investment for Class A and Class B shares is $1,000 per class and $5,000 for
Class C shares. The minimum subsequent investment is $100 for all classes. All
minimum investment requirements are waived for certain retirement and employee
savings plans or custodial accounts for the benefit of minors. For purchases
made through the Automatic Savings Accumulation Plan, the minimum initial and
subsequent investment is $50. See "Shareholder Services" below.
THE PURCHASE PRICE IS THE NAV NEXT DETERMINED FOLLOWING RECEIPT OF AN ORDER
BY THE TRANSFER AGENT OR PRUDENTIAL SECURITIES PLUS A SALES CHARGE WHICH, AT
YOUR OPTION, MAY BE IMPOSED EITHER (I) AT THE TIME OF PURCHASE (CLASS A
SHARES) OR (II) ON A DEFERRED BASIS (CLASS B OR CLASS C SHARES). SEE
"ALTERNATIVE PURCHASE PLAN" BELOW. SEE ALSO "HOW THE FUND VALUES ITS SHARES."
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing for
each transaction. Certificates are issued only for full shares. Shareholders
who hold their shares through Prudential Securities will not receive stock
certificates.
The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares. See
"How to Sell Your Shares" below.
Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the fifth business day following the investment.
Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.
PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. The following information will be requested: your name, address, tax
identification number, class election, dividend distribution election, amount
being wired and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust Company (State
Street), Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Global Genesis Fund, Inc., specifying on the wire the
account number assigned by PMFS and your name and identifying the sales charge
alternative (Class A, Class B, or Class C shares).
If you arrange for receipt by State Street of Federal Funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Fund as
of that day.
In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Global Genesis
Fund, Inc., Class A, Class B or Class C shares and your name and individual
account
18
<PAGE>
number. It is not necessary to call PMFS to make subsequent purchase orders
utilizing Federal Funds. The minimum amount which may be invested by wire is
$1,000.
ALTERNATIVE PURCHASE PLAN
THE FUND OFFERS THREE CLASSES OF SHARES (CLASS A, CLASS B AND CLASS C
SHARES) WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES CHARGE STRUCTURE
FOR YOUR INDIVIDUAL CIRCUMSTANCES GIVEN THE AMOUNT OF THE PURCHASE, THE LENGTH
OF TIME YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT CIRCUMSTANCES
(ALTERNATIVE PURCHASE PLAN).
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
---------------------------------------- -------------------------- --------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 5.00% of .30 of 1% (Currently being Initial sales charge waived or reduced
the public offering price charged at a rate of for certain purchases
.25 of 1%)
CLASS B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser of approximately seven years after
the amount invested or the redemption purchase
proceeds; declines to zero after six
years
CLASS C Maximum CDSC of 1% of the lesser 1% Shares do not convert to another class
of the amount invested or the
redemption proceeds on redemptions
made within one year of purchase
</TABLE>
The three classes of shares represent an interest in the same portfolio of
investments of the Fund and have the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan (except
as noted under the heading "General Information--Description of Common
Stock"), and (iii) only Class B shares have a conversion feature. The three
classes also have separate exchange privileges. See "How to Exchange Your
Shares" below. The income attributable to each class and the dividends payable
on the shares of each class will be reduced by the amount of the distribution
fee of each class. Class B and Class C shares bear the expenses of a higher
distribution fee which will generally cause them to have higher expense ratios
and to pay lower dividends than the Class A shares.
Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B and Class C shares
and will generally receive more compensation initially for selling Class A and
Class B shares than for selling Class C shares.
IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER
THINGS, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted above, (3) whether you
qualify for any reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among the different classes of shares (see "How to
Exchange Your Shares" below) and (5) the fact that Class B shares
automatically convert to Class A shares approximately seven years after
purchase (see "Conversion Feature--Class B Shares" below).
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:
If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to an initial sales share of 5% and Class B shares are
subject to a CDSC of 5% which declines to zero over a 6 year period, you
should consider purchasing Class C shares over either Class A or Class B
shares.
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<PAGE>
If you intend to hold your investment for 7 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
Class A shares approximately [7] years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or Class C shares.
If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money
invested initially because the sales charge on Class A shares is deducted at
the time of purchase.
If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed
the initial sales charge plus cumulative annual distribution-related fees on
Class A shares. This does not take into account the time value of money, which
further reduces the impact of the higher Class B or Class C distribution-
related fee on the investment, fluctuations in net asset value, the effect of
the return on the investment over this period of time or redemptions during
which the CDSC is applicable.
ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT
OR UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A
SHARES. See "Reduction and Waiver of Initial Sales Charges" below.
CLASS A SHARES
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount invested)
as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------ --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50 4.71 4.25
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.25 3.36 3.00
$250,000 to $499,999 2.50 2.56 2.40
$500,000 to $999,999 2.00 2.04 1.90
$1,000,000 and above None None None
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is defined in
the Securities Act.
REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be
aggregated to determine the applicable reduction. See "Purchase and Redemption
of Fund Shares--Reduction and Waiver of Initial Sale Charges--Class A Shares"
in the Statement of Additional Information.
Class A shares may be purchased at NAV, without payment of an initial sales
charge, by pension, profit-sharing or other employee benefit plans qualified
under Section 401 of the Internal Revenue Code and deferred compensation and
annuity plans under Section 457 and 403(b)(7) of the Internal Revenue Code
(Benefit Plans), provided that the plan has existing assets of at least $1
million invested in shares of Prudential Mutual Funds (excluding money market
funds other than those acquired pursuant to the exchange privilege) or 1,000
eligible employees or members. In the case of Benefit Plans whose
20
<PAGE>
accounts are held directly with the Transfer Agent and for which the Transfer
Agent does individual account record keeping (Direct Account Benefit Plans)
and Benefit Plans sponsored by PSI or its subsidiaries (PSI or Subsidiary
Prototype Benefit Plans), Class A shares may be purchased at NAV by
participants who are repaying loans made from such plans to the participant.
Additional information concerning the reduction and waiver of initial sales
charges is set forth in the Statement of Additional Information.
In addition, Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) Directors and
officers of the Fund and other Prudential Mutual Funds, (b) employees of
Prudential Securities and PMF and their subsidiaries and members of the
families of such persons who maintain an "employee related" account at
Prudential Securities or the Transfer Agent, (c) employees and special agents
of Prudential and its subsidiaries and all persons who have retired directly
from active service with Prudential or one of its subsidiaries, (d) registered
representatives and employees of dealers who have entered into a selected
dealer agreement with Prudential Securities provided that purchases at NAV are
permitted by such person's employer and (e) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 90 days
of the commencement of the financial adviser's employment at Prudential
Securities, (ii) the purchase is made with proceeds of a redemption of shares
of any open-end, non-money market fund sponsored by the financial adviser's
previous employer (other than a fund which imposes a distribution or service
fee of .25 of 1% or less) on which no deferred sales load, fee or other charge
was imposed on redemption and (iii) the financial adviser served as the
client's broker on the previous purchases.
You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec that you are entitled to the reduction or waiver of the
sales charge. The reduction or waiver will be granted subject to confirmation
of your entitlement. No initial sales charges are imposed upon Class A shares
purchased upon the reinvestment of dividends and distributions. See "Purchase
and Redemption of Fund Shares--Reduction and Waiver of Initial Sales Charges--
Class A Shares" in the Statement of Additional Information.
CLASS B AND CLASS C SHARES
The offering price of Class B and Class C shares for investors choosing one
of the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent or Prudential Securities. Although
there is no sales charge imposed at the time of purchase, redemptions of Class
B and Class C shares may be subject to a CDSC. See "How to Sell Your Shares--
Contingent Deferred Sales Charges."
HOW TO SELL YOUR SHARES
YOU CAN REDEEM YOUR SHARES OF THE FUND AT ANY TIME FOR CASH AT THE NAV PER
SHARE NEXT DETERMINED AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM
BY THE TRANSFER AGENT OR PRUDENTIAL SECURITIES. SEE "HOW THE FUND VALUES ITS
SHARES." In certain cases, however, redemption proceeds will be reduced by the
amount of an applicable contingent deferred sales charge, as described below.
See "Contingent Deferred Sales Charges" below.
IF YOU HOLD SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, YOU MUST
REDEEM YOUR SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.
IF YOU HOLD SHARES IN NON-CERTIFICATE FORM, A WRITTEN REQUEST FOR REDEMPTION
SIGNED BY YOU EXACTLY AS THE ACCOUNT IS REGISTERED IS REQUIRED. IF YOU HOLD
CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE FACE OF THE
CERTIFICATES, MUST BE RECEIVED BY THE TRANSFER AGENT IN ORDER FOR THE
REDEMPTION REQUEST TO BE PROCESSED. IF REDEMPTION IS REQUESTED BY A
CORPORATION, PARTNERSHIP, TRUST OR FIDUCIARY, WRITTEN EVIDENCE OF AUTHORITY
ACCEPTABLE TO THE TRANSFER AGENT MUST BE SUBMITTED BEFORE SUCH REQUEST WILL BE
ACCEPTED. All correspondence and documents concerning redemptions should be
sent to the Fund in care of its Transfer Agent, Prudential Mutual Fund
Services, Inc., Attention: Redemption Services, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.
21
<PAGE>
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution". An "eligible guarantor
institution" includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Prusec, a signature guarantee may be obtained from the agency or office
manager of most Prudential Insurance and Financial Services or Preferred
Services offices.
PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR
WRITTEN REQUEST EXCEPT AS INDICATED BELOW. Such payment may be postponed or
the right of redemption suspended at times (a) when the New York Stock
Exchange is closed for other than customary weekends and holidays, (b) when
trading on such Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (d) during any other period when
the SEC, by order, so permits; provided that applicable rules and regulations
of the SEC shall govern as to whether the conditions prescribed in (b), (c) or
(d) exist.
PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL
THE FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS
BEEN HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE
CHECK BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY
WIRE OR BY CERTIFIED OR OFFICIAL BANK CHECK.
REDEMPTION IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price
in whole or in part by a distribution in kind of securities from the
investment portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the SEC. Securities will be readily marketable and will be
valued in the same manner as a regular redemption. See "How the Fund Values
its Shares." If your shares are redeemed in kind, you will incur transaction
costs in converting the assets into cash. The Fund, however, has elected to be
governed by Rule 18f-1 under the Investment Company Act, under which the Fund
is obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of the net asset value of the Fund during any 90-day period for any one
shareholder.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board
of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose
account has a net asset value of less than $500 due to a redemption. The Fund
will give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption. No contingent deferred
sales charge will be imposed on any involuntary redemption.
30-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 30 days after the
date of the redemption. No sales charge will apply to such repurchases. You
will receive pro rata credit for any contingent deferred sales charge paid in
connection with the redemption of your shares. You must notify the Fund's
Transfer Agent, either directly or through Prudential Securities or Prusec, at
the time the repurchase privilege is exercised that you are entitled to credit
for the contingent deferred sales charge previously paid. Exercise of the
repurchase privilege will generally not affect federal income tax treatment of
any gain realized upon redemption. If the redemption results in a loss, some
or all of the loss, depending on the amount reinvested, will not be allowed
for federal income tax purposes.
22
<PAGE>
CONTINGENT DEFERRED SALES CHARGES
Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within one year of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid
to you. The CDSC will be imposed on any redemption by you which reduces the
current value of your Class B or Class C shares of the Fund to an amount which
is lower than the dollar amount of all payments by you for shares during the
preceding six years, in the case of Class B shares, and one year, in the case
of Class C shares. A CDSC will be applied on the lesser of the original
purchase price or the current value of the shares being redeemed. Increases in
the value of your shares or shares purchased through reinvestment of dividends
or distributions are not subject to a CDSC. The amount of any contingent
deferred sales charge will be paid to and retained by the Distributor. See
"How the Fund is Managed--Distributor" and "Waiver of the Contingent Deferred
Sales Charges--Class B Shares" below.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month.
The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
<TABLE>
<CAPTION>
YEAR SINCE CONTINGENT DEFERRED SALES CHARGE
PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
------------ -----------------------------------
<S> <C>
First................ 5.0%
Second............... 4.0%
Third................ 3.0%
Fourth............... 2.0%
Fifth................ 1.0%
Sixth................ 1.0%
Seventh.............. None
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value above the total amount of
payments for the purchase of Fund shares made during the preceding six years
(five years for Class B shares purchased prior to January 22, 1990); then of
amounts representing the cost of shares held beyond the applicable CDSC
period; and finally, of amounts representing the cost of shares held for the
longest period of time within the applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided
to redeem $500 of your investment. Assuming at the time of the redemption the
NAV had appreciated to $12 per share, the value of your Class B shares would
be $1,260 (105 shares at $12 per share). The CDSC would not be applied to the
value of the reinvested dividend shares and the amount which represents
appreciation ($260). Therefore, $240 of the $500 redemption proceeds ($500
minus $260) would be charged at a rate of 4% (the applicable rate in the
second year after purchase) for a total CDSC of $9.60.
For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC
will be waived in the case of a redemption following the death or disability
of a shareholder or, in the case of a trust account, following the death or
disability
23
<PAGE>
of the grantor. The waiver is available for total or partial redemptions of
shares owned by a person, either individually or in joint tenancy (with rights
of survivorship), or a trust, at the time of death or initial determination of
disability, provided that the shares were purchased prior to death or
disability.
The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or a Section 403(b)
custodial account. These distributions include a lump-sum or other
distribution after retirement, or for an IRA or Section 403(b) custodial
account, after attaining age 59 1/2, a tax-free return of an excess
contribution or plan distributions following the death or disability of the
shareholder (provided that the shares were purchased prior to death or
disability. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from service. In the
case of Direct Account and PSI or Subsidiary Prototype Benefit Plans, the CDSC
will be waived on redemptions which represent borrowings from such plans.
Shares purchased with amounts used to repay a loan from such plans on which a
CDSC was not previously deducted will thereafter be subject to a CDSC without
regard to the time such amounts were previously invested. In the case of a
401(k) plan, the CDSC will also be waived upon the redemption of shares
purchased with amounts used to repay loans made from the account to the
participant and from which a CDSC was previously deducted.
In addition, the CDSC will be waived on redemptions of shares held by a
Director of the Fund.
You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec, at the time of redemption, that you are entitled to
waiver of the CDSC. The waiver will be granted subject to confirmation of your
entitlement.
A quantity discount may apply to redemptions of Class B shares purchased
prior to , 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to , 1994" in the Statement of
Additional Information.
CONVERSION FEATURE--CLASS B SHARES
Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will occur during
the month following each calendar quarter and will be effected at relative net
asset value without the imposition of any additional sales charge. It is
currently anticipated that conversions will occur on the first Friday of the
month following each calendar quarter, or, if not a business day, then on the
next Friday of the month.
Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will
be determined on each conversion date in accordance with the following
formula: (i) the ratio of (a) the amounts paid for Class B shares purchased at
least [seven] years prior to the conversion date to (b) the total amount paid
for all Class B shares purchased and then held in your account (ii) multiplied
by the total number of Class B shares then in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or
amounts representing Class B shares then in your account that were acquired
through the automatic reinvestment of dividends and other distributions will
convert to Class A shares.
For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible
Shares calculated as described above will generally be either more or less
than the number of shares actually purchased approximately [seven] years
before such conversion date. For example, if 100 shares were initially
purchased at $10 per share (for a total of $1,000) and a second purchase of
100 shares was subsequently made at $11 per share (for a total of $1,100),
95.24 shares would convert approximately [seven] years from the initial
purchase (i.e., $1,000 divided by $2,100 (47.62%), multiplied by 200 shares
equals 95.24 shares). The Manager reserves the right to modify the formula for
determining the number of Eligible Shares in the future as it deems
appropriate on notice to shareholders.
24
<PAGE>
Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of conversion. Thus,
although the aggregate dollar value will be the same, you may receive fewer
Class A shares than Class B shares converted. See "How the Fund Values its
Shares."
For purposes of calculating the applicable holding period for conversions,
all payments for Class B shares during a month will be deemed to have been
made on the last day of the month, or for Class B shares acquired through
exchange, or a series of exchanges, on the last day of the month in which the
original payment for purchases of such Class B shares was made. For Class B
shares previously exchanged for shares of a money market fund, the time period
during which such shares were held in the money market fund will be excluded.
For example, Class B shares held in a money market fund for one year will not
convert to Class A shares until approximately eight years from purchase. For
purposes of measuring the time period during which shares are held in a money
market fund, exchanges will be deemed to have been made on the last day of the
month. Class B shares acquired through exchange will convert to Class A shares
approximately one year after expiration of the CDSC applicable to the original
purchase of such shares. It is currently anticipated that the first conversion
of Class B shares will occur in or about January, 1995. At that time all
amounts representing Class B shares then outstanding for at least one year
beyond the expiration of the applicable CDSC period will automatically convert
to Class A shares, together with all shares or amounts representing Class B
shares acquired through the automatic reinvestment of dividends and
distributions then held in your account.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, and Class C shares
will not constitute "preferential dividends" under the Internal Revenue Code
and (ii) that the conversion of shares does not constitute a taxable event.
The conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended,
Class B shares of the Fund will continue to be subject, possibly indefinitely,
to their higher annual distribution and service fee.
HOW TO EXCHANGE YOUR SHARES
AS A SHAREHOLDER OF THE FUND, YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN
OTHER PRUDENTIAL MUTUAL FUNDS (THE EXCHANGE PRIVILEGE), INCLUDING ONE OR MORE
SPECIFIED MONEY MARKET FUNDS, SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS
OF SUCH FUNDS. CLASS A, CLASS B AND CLASS C SHARES MAY BE EXCHANGED FOR CLASS
A, CLASS B AND CLASS C SHARES, RESPECTIVELY, OF ANOTHER FUND ON THE BASIS OF
THE RELATIVE NAV. Any applicable CDSC payable upon the redemption of shares
exchanged will be calculated from the first day of the month after the initial
purchase excluding the time shares were held in a money market fund. Class B
and Class C shares may not be exchanged into money market funds other than
Prudential Special Money Market Fund. For purposes of calculating the holding
period applicable to the Class B conversion feature, the time period during
which Class B shares were held in a money market fund will be excluded. See
"Conversion Feature--Class B Shares" above. If your investment in shares of
Prudential Mutual Funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) reaches $1 million and you then
hold Class B and/or Class C shares of the Fund which are free of CDSC, you
will be so notified and offered the opportunity to exchange those shares for
Class A shares of the Fund without the imposition of any sales charge. In the
case of tax-exempt shareholders, if no response is received within 60 days of
the mailing of such notice, eligible Class B and/or Class C shares will be
automatically exchanged for Class A shares. All other shareholders must
affirmatively elect to have their eligible Class B and/or Class C shares
exchanged for Class A shares. An exchange will be treated as a redemption and
purchase for tax purposes. See "Shareholder Investment Account--Exchange
Privilege" in the Statement of Additional Information.
IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE THE TELEPHONE
EXCHANGE PRIVILEGE ON YOUR INITIAL APPLICATION FORM AND HOLD SHARES IN NON-
CERTIFICATE FORM. Thereafter, you may call the Fund at (800) 225-1852 to
execute a telephone exchange of shares, weekdays, except holidays, between the
hours of 8:00 A.M. and 6:00 P.M., New York time.
25
<PAGE>
For your protection and to prevent fraudulent exchanges, your telephone call
will be recorded and you will be asked to provide your personal identification
number. A written confirmation of the exchange transaction will be sent to
you. NEITHER THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS, LIABILITY OR
COST WHICH RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY BELIEVED TO BE
GENUINE UNDER THE FOREGOING PROCEDURES. All exchanges will be made on the
basis of the relative NAV of the two funds next determined after the request
is received in good order. The Exchange Privilege is available only in states
where the exchange may legally be made.
IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.
IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.
You may also exchange shares by mail by writing to Prudential Mutual Fund
Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.
IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS THE TELEPHONE EXCHANGE OF
SHARES MAY BE DIFFICULT TO IMPLEMENT AND SHAREHOLDERS SHOULD MAKE EXCHANGES BY
MAIL BY WRITING TO PRUDENTIAL MUTUAL FUND SERVICES, INC. AT THE ADDRESS NOTED
ABOVE.
The Exchange Privilege may be modified or terminated at any time on 60 days'
notice to shareholders.
SHAREHOLDER SERVICES
In addition to the Exchange Privilege, as a shareholder of the Fund, you can
take advantage of the following services and privileges:
. AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at NAV
without a sales charge. You may direct the Transfer Agent in writing not less
than 5 full business days prior to the record date to have subsequent
dividends and/or distributions sent in cash rather than reinvested. If you
hold shares through Prudential Securities, you should contact your financial
adviser.
. AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP, you may make
regular purchases of the Fund's shares in amounts as little as $50 via an
automatic debit to a bank account or Prudential Securities account (including
a Command Account). For additional information about this service, you may
contact your Prudential Securities financial adviser, Prusec registered
representative or the Transfer Agent directly.
. TAX DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both self-
employed individuals and corporate employers. These plans permit either self-
direction of accounts by participants or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or
the Transfer Agent. If you are considering adopting such a plan, you should
consult with your own legal or tax adviser with respect to the establishment
and maintenance of such a plan.
. SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks in any amount.
Withdrawals of Class B and Class C shares may be subject to a CDSC. See "How
to Sell Your Shares--Contingent Deferred Sales Charges."
26
<PAGE>
. REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder report
and annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, New York 10292. In addition, monthly unaudited financial data
is available upon request from the Fund.
. SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at One
Seaport Plaza, New York, New York 10292, or by telephone, at (800) 225-1852
(toll-free) or, from outside the U.S.A., at (908) 417-7555 (collect).
For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.
27
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your
Prudential Securities financial adviser or Prusec registered representative or
telephone the Fund at (800) 225-1852 for a free prospectus. Read the prospectus
carefully before you invest or send money.
TAXABLE BOND
FUNDS
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Income Portfolio Fund
The BlackRock Government Income Trust
TAX-EXEMPT
BOND FUNDS
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
GLOBAL FUNDS
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
EQUITY FUNDS
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Growth Opportunity Fund, Inc.
Prudential Incomevertible (R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
MONEY MARKET
FUNDS
. Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
. Tax Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
. Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
. Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
A-1
<PAGE>
P
R
O
S
P
E
C
T
U
S
, 1994
- --------------------------------------------------------------------------------
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given
or made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell, or a solicita-
tion of any offer to buy any of the securities offered hereby in any jurisdic-
tion to any person to whom it is unlawful to make such offer in such jurisdic-
tion.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND HIGHLIGHTS............................................................ 2
FUND EXPENSES.............................................................. 4
FINANCIAL HIGHLIGHTS....................................................... 5
HOW THE FUND INVESTS....................................................... 6
Investment Objective and Policies......................................... 6
Hedging and Income Enhancement Strategies................................. 8
Other Investments and Policies............................................ 10
Investment Restrictions................................................... 11
HOW THE FUND IS MANAGED.................................................... 12
Manager................................................................... 12
Distributor............................................................... 12
Portfolio Transactions.................................................... 14
Custodian and Transfer and Dividend Disbursing Agent...................... 14
HOW THE FUND VALUES ITS SHARES............................................. 14
HOW THE FUND CALCULATES PERFORMANCE........................................ 15
TAXES, DIVIDENDS AND DISTRIBUTIONS......................................... 15
GENERAL INFORMATION........................................................ 17
Description of Common Stock............................................... 17
Additional Information.................................................... 18
SHAREHOLDER GUIDE.......................................................... 18
How to Buy Shares of the Fund............................................. 18
Alternative Purchase Plan................................................. 19
How to Sell Your Shares................................................... 21
Conversion Feature--Class B Shares........................................ 24
How to Exchange Your Shares............................................... 25
Shareholder Services...................................................... 26
THE PRUDENTIAL MUTUAL FUND FAMILY.......................................... A-1
</TABLE>
- --------------------------------------------------------------------------------
MF 136A 4441545
<TABLE>
<S> <C>
Class A: 744333105
CUSIP Nos.: Class B: 744333204
Class C:
</TABLE>
Prudential Global
Genesis Fund, Inc.
PRUDENTIAL MUTUAL FUNDS
Building Your Future LOGO
On Our Strength (SM)
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND, INC.
Statement of Additional Information
dated , 1994
Prudential Global Genesis Fund, Inc. (the Fund), is an open-end, diversified
management investment company. Its investment objective is long-term growth of
capital. It seeks to achieve this objective by investing primarily in common
stocks, common stock equivalents and other equity securities of smaller
foreign and domestic companies. Smaller companies are those with market
capitalizations of less than $750 million. Under normal circumstances, the
Fund intends to invest at least 65% of its total assets in such securities.
The Fund may also invest in equity securities of other companies and in debt
securities and options on stocks, stock indices, foreign currencies and
futures contracts on foreign currencies and may purchase and sell futures
contracts on foreign currencies and groups of currencies and on stock indices
so as to hedge its portfolio. See "Investment Objective and Policies."
The Fund's address is One Seaport Plaza, New York, New York 10292, and its
telephone number is (800)225-1852.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus dated , 1994, a copy of
which may be obtained from the Fund upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
---- ---------------
<S> <C> <C>
General Information....................................... B-2 17
Investment Objective and Policies......................... B-2 6
Investment Restrictions................................... B-10 11
Directors and Officers.................................... B-12 12
Manager................................................... B-14 12
Distributor............................................... B-15 12
Portfolio Transactions and Brokerage...................... B-17 14
Purchase and Redemption of Fund Shares.................... B-18 18
Shareholder Investment Account............................ B-21 25
Net Asset Value........................................... B-24 14
Taxes..................................................... B-24 15
Performance Information................................... B-26 15
Custodian, Transfer and Dividend Disbursing Agent and In-
dependent Accountants.................................... B-28 14
Financial Statements...................................... B-29 --
Report of Independent Accountants......................... B-37 --
Description of Security Ratings........................... A-1 --
</TABLE>
- -------------------------------------------------------------------------------
MF1368 444-1553
<PAGE>
GENERAL INFORMATION
At a special meeting held on , 1994, shareholders of the Fund approved
an amendment to the Fund's Articles of Incorporation to change the Fund's name
from Prudential-Bache Global Genesis Fund, Inc. to Prudential Global Genesis
Fund, Inc.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in common stocks, common stock
equivalents and other equity securities of smaller foreign and domestic
companies. See "How the Fund Invests--Investment Objective and Policies" in
the Prospectus.
PORTFOLIO STRATEGY
In selecting portfolio securities, The Prudential Investment Corporation
(PIC or the Subadviser) focuses on individual companies with the potential for
long-term capital growth, including established companies with the potential
for high earnings growth and smaller and medium-sized companies that are well
positioned to adapt to market and industry changes. The Subadviser identifies
such companies on the basis of fundamental analysis, which involves assessing
a company and its business environment, management, balance sheet, income
statement, anticipated earnings and dividends and other related measures of
value. Although the primary portfolio management approach is company analysis,
the Subadviser also analyzes foreign currency movements against the U.S.
dollar in order to manage the foreign currency exposure of the Fund and
performs an analysis of individual countries. The Subadviser uses a variety of
sources and techniques in analyzing these companies and countries and
maintains strong local contacts in securities markets around the world. The
Subadviser monitors and evaluates the economic and political climate and
principal securities markets of the country in which each company is located.
The Subadviser has broad access to international research and financial
reports, data retrieval services and industry analysts. In addition, the
Subadviser maintains relationships with the management of corporate issuers
and from time to time visits companies overseas in whose securities the Fund
may invest.
OPTIONS TRANSACTIONS
OPTIONS ON EQUITY SECURITIES. The Fund intends to purchase and write (i.e.,
sell) put and call options that are traded on U.S. or foreign securities
exchanges or that are listed on NASDAQ or that are traded over-the-counter. A
call option is a short-term contract (having a duration of nine months or
less) pursuant to which the purchaser, in return for a premium paid, has the
right to buy the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. A put
option is a similar contract which gives the purchaser, in return for a
premium, the right to sell the underlying security at a specified price during
the term of the option. The writer of the put, who receives the premium, has
the obligation to buy the underlying security upon exercise at the exercise
price. The Fund will write put options only when the investment adviser
desires to invest in the underlying security.
A call option written by the Fund is "covered" if the Fund owns the security
underlying the option or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon conversion
or exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds on a share-for-share basis a call on the same
security as the call written where the exercise price of the call held is
equal to or less than the exercise price of the call written or greater than
the exercise price of the call written if the difference is maintained by the
Fund in cash, U.S. government securities or other liquid, high grade debt
obligations in a segregated account with its Custodian. A put option written
by the Fund is "covered" if the Fund maintains cash, U.S. government
securities or other liquid, high grade debt obligations with a value equal to
the exercise price in a segregated account with its Custodian, or else holds
on a share-for-share basis a put of the same security as the put written where
the exercise price of the put held is equal to or greater than the exercise
price of the put written. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates.
If the writer of an option wishes to terminate the obligation, he or she may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously
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purchased. There is no guarantee that either a closing purchase or a closing
sale transaction can be effected. To secure the obligation to deliver the
underlying security in the case of a call option, the writer of the option is
generally required to pledge for the benefit of the broker the underlying
security or other assets in accordance with the rules of the relevant exchange
or clearinghouse, such as The Options Clearing Corporation (OCC), an
institution created to interpose itself between buyers and sellers of options
in the United States. Technically, the clearinghouse assumes the other side of
every purchase and sale transaction on an exchange and, by doing so,
guarantees the transaction.
The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid
to purchase the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying security owned
by the Fund.
The Fund may also purchase a "protective put," i.e., a put option acquired
for the purpose of protecting a portfolio security from a decline in market
value. In exchange for the premium paid for the put option, the Fund acquires
the right to sell the underlying security at the exercise price of the put
regardless of the extent to which the underlying security declines in value.
The loss to the Fund is limited to the premium paid for, and transaction costs
in connection with, the put plus the initial excess, if any, of the market
price of the underlying security over the exercise price. However, if the
market price of the security underlying the put rises, the profit the Fund
realizes on the sale of the security will be reduced by the premium paid for
the put option less any amount (net of transaction costs) for which the put
may be sold. Similar principles apply to the purchase of puts on stock
indices, as described below.
OPTIONS ON STOCK INDICES. In addition to options on equity securities, the
Fund may also purchase and sell put and call options on stock indices traded
on securities exchanges or listed on NASDAQ or that are traded over-the-
counter. Options on stock indices are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price,
an option on a stock index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the case of a call,
or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option, expressed in dollars times a
specified multiple (the multiplier). The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike stock
options, all settlements are in cash, and gain or loss depends on price
movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements in individual stocks.
The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an
option and the current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on different
indices may have different multipliers. Because exercises of index options are
settled in cash, a call writer cannot determine the amount of its settlement
obligations in advance and, unlike call writing on specific stocks, cannot
provide in advance for, or cover, its potential settlement obligations by
acquiring and holding the underlying securities. In addition, unless the Fund
has other liquid assets which are sufficient to satisfy the exercise of a
call, the Fund would be required to liquidate portfolio securities or borrow
in order to satisfy the exercise.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index
depends upon movements in the level of stock prices in the stock market
generally or in an industry or market segment rather than movements in the
price of a particular stock. Accordingly, successful use by the Fund of
options on indices would be subject to the investment adviser's ability to
predict correctly movements in the direction of the stock market generally or
of a particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks. The investment adviser
currently uses such techniques in conjunction with the management of other
mutual funds.
RISKS OF TRANSACTIONS IN OPTIONS
An option position may be closed out only on an exchange, board of trade or
other trading facility which provides a secondary market for an option of the
same series. Although the Fund will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no
secondary market on an exchange or otherwise may exist. In such event it might
not be possible to effect closing transactions in particular options, with the
result that the Fund would have to exercise its options in order to realize
any profit and would incur brokerage commissions upon the exercise of call
options and upon the subsequent disposition of underlying securities acquired
through the exercise of call options or upon the purchase of underlying
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securities for the exercise of put options. If the Fund as a covered call
option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in the
class or series of options) would cease to exist, although outstanding options
on that exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of any of the clearing corporations inadequate, and thereby result
in the institution by an exchange of special procedures which may interfere
with the timely execution of customers' orders. The Fund intends to purchase
and sell only those options which are cleared by clearinghouses whose
facilities are considered to be adequate to handle the volume of options
transactions.
RISKS OF OPTIONS ON INDICES
The Fund's purchase and sale of options on indices will be subject to risks
described above under "Risks of Transactions in Options." In addition, the
distinctive characteristics of options on indices create certain risks that
are not present with stock options.
Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this occurred, the Fund would not be able
to close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which
could result in substantial losses to the Fund. It is the Fund's policy to
purchase or write options only on indices which include a number of stocks
sufficient to minimize the likelihood of a trading halt in the index.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until, in
the investment adviser's opinion, the market for such options has developed
sufficiently that the risk in connection with such transactions is no greater
than the risk in connection with options on stocks.
SPECIAL RISKS OF WRITING CALLS ON INDICES. Because exercises of index
options are settled in cash, a call writer such as the Fund cannot determine
the amount of its settlement obligations in advance and, unlike call writing
on specific stocks, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities.
However, the Fund will write call options on indices only under the
circumstances described below under "Limitations on Purchase and Sale of Stock
Options and Options on Stock Indices, Foreign Currencies and Futures Contracts
on Foreign Currencies."
Price movements in the Fund's portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, the Fund
bears the risk that the price of the securities held by the Fund may not
increase as much as the index. In such event, the Fund would bear a loss on
the call which is not completely offset by movements in the price of the
Fund's portfolio. It is also possible that the index may rise when the Fund's
portfolio of stocks does not rise. If this occurred, the Fund would experience
a loss on the call which is not offset by an increase in the value of its
portfolio and might also experience a loss in its portfolio. However, because
the value of a diversified portfolio will, over time, tend to move in the same
direction as the market, movements in the value of the Fund in the opposite
direction as the market would be likely to occur for only a short period or to
a small degree.
Unless the Fund has other liquid assets which are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be
settled within hours after receiving the notice of exercise, if the Fund fails
to anticipate an exercise, it may have to borrow from a bank (in amounts not
exceeding 20% of the Fund's total assets) pending settlement of the sale of
securities in its portfolio and would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a price
which is fixed as of the closing level of the index on the date of exercise,
and the time the Fund is able to sell stocks in its portfolio. As with stock
options, the Fund will not learn that an index option has been exercised until
the day following
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the exercise date but, unlike a call on stock where the Fund would be able to
deliver the underlying securities in settlement, the Fund may have to sell
part of its investment portfolio in order to make settlement in cash, and the
price of such investments might decline before they can be sold. This timing
risk makes certain strategies involving more than one option substantially
more risky with index options than with stock options. For example, even if an
index call which the Fund has written is "covered" by an index call held by
the Fund with the same strike price, the Fund will bear the risk that the
level of the index may decline between the close of trading on the date the
exercise notice is filed with the clearing corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call which, in either case, would occur no earlier than the day
following the day the exercise notice was filed.
SPECIAL RISKS OF PURCHASING PUTS AND CALLS. If the Fund holds an index
option and exercises it before final determination of the closing index value
for that day, it runs the risk that the level of the underlying index may
change before closing. If such a change causes the exercised option to fall
out-of-the-money, the Fund will be required to pay the difference between the
closing index value and the exercise price of the option (times the applicable
multiplier) to the assigned writer. Although the Fund may be able to minimize
this risk by withholding exercise instructions until just before the daily
cutoff time or by selling rather than exercising an option when the index
level is close to the exercise price, it may not be possible to eliminate this
risk entirely because the cutoff times for index options may be earlier than
those fixed for other types of options and may occur before definitive closing
index values are announced.
RISKS OF OPTIONS ON FOREIGN CURRENCIES
Because there are two currencies involved, developments in either or both
countries can affect the values of options on foreign currencies. Risks
include those described in the Prospectus under "How the Fund Invests--
Investment Objective and Policies--Special Considerations and Risks of
Investing in Foreign Securities," including government actions affecting
currency valuation and the movements of currencies from one country to
another. The quantities of currency underlying option contracts represent odd
lots in a market dominated by transactions between banks; this can mean extra
transaction costs upon exercise. Option markets may be closed while round-the-
clock interbank currency markets are open, and this can create price and rate
discrepancies.
RISKS RELATED TO FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
several circumstances. When the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Fund may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for a fixed amount of dollars, for the purchase or sale of the amount
of foreign currency involved in the underlying transactions, the Fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is purchased
or sold, or on which the dividend or interest payment is declared, and the
date on which such payments are made or received.
Additionally, when the investment adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of
some or all of the Fund's portfolio securities denominated in such foreign
currency. The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible since the future
value of securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the date on which
the forward contract is entered into and the date it matures. The projection
of short-term currency market movement is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain. The
Fund does not intend to enter into such forward contracts to protect the value
of its portfolio securities on a regular or continuous basis. The Fund will
also not enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency. Under
normal circumstances, consideration of the prospect for currency parities will
be incorporated into the long-term investment decisions made with regard to
overall diversification strategies. However, the Fund believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Fund will thereby be served. The
Fund's Custodian will place cash or liquid equity or debt securities into a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward foreign currency
exchange contracts. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the account
on a daily basis so that the value of the account will equal the amount of the
Fund's commitments with respect to such contracts.
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The Fund generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency,
or it may retain the security and terminate its contractual obligation to
deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for the Fund to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Should forward contract prices
decline during the period between the Fund's entering into a forward contract
for the sale of a foreign currency and the date it enters into an offsetting
contract for the purchase of the foreign currency, the Fund will realize a
gain to the extent that the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
contract prices increase, the Fund will suffer a loss to the extent that the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The Fund's dealings in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, the Fund is not
required to enter into such transactions with regard to its foreign currency-
denominated securities. It also should be realized that this method of
protecting the value of the Fund's portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying
prices of the securities which are unrelated to exchange rates. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time they tend to limit any
potential gain which might result should the value of such currency increase.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend physically to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures contracts as a
hedging device. Due to the imperfect correlation between the price of futures
contracts and movements in the currency or group of currencies, the price of a
futures contract may move more or less than the price of the currencies being
hedged. In the case of futures contracts on stock indices, the correlation
between the price of the futures contract and the movements in the index may
not be perfect. Therefore, a correct forecast of currency rates, market trends
or international political trends by the investment adviser may still not
result in a successful hedging transaction.
Although the Fund will purchase or sell futures contracts only on exchanges
where there appears to be an adequate secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
contract or at any particular time. Accordingly, there can be no assurance
that it will be possible, at any particular time, to close a futures position.
In the event the Fund could not close a futures position and the value of such
position declined, the Fund would be required to continue to make daily cash
payments of variation margin. There is no guarantee that the price movements
of the portfolio securities denominated in foreign currencies will, in fact,
correlate with the price movements in the futures contract and thus provide an
offset to losses on a futures contract. Currently, futures contracts are
available on the Australian Dollar, British Pound, Canadian Dollar, Japanese
Yen, Swiss Franc, German Mark and Eurodollar, among others. Futures contracts
are also available on the S&P 500 Stock Index, the NYSE Composite Index and
the Major Market Index, and other global exchanges.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the
Investment Company Act), are exempt from the definition of "commodity pool
operator," subject to compliance with certain conditions. The exemption is
conditioned upon a requirement that the Fund's futures or options transactions
constitute bona fide hedging transactions within the meaning of the
regulations of the Commodity Futures Trading Commission (CFTC). The Fund may
also enter into futures contracts or options thereon for income enhancement
and risk management purposes if the aggregate initial margin for such
contracts and premiums paid for such options does not exceed 5% of the
liquidation value of the Fund's total assets. The Fund will use currency
futures and options on futures or commodity options contracts in a manner
consistent with these requirements.
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Successful use of futures contracts by the Fund is also subject to the
ability of the Fund's investment adviser to predict correctly movements in the
direction of markets and other factors affecting currencies or the stock
market generally. For example, if the Fund has hedged against the possibility
of an increase in currency rates which would adversely affect the price of
securities in its portfolio and the price of such securities increases
instead, the Fund will lose part or all of the benefit of the increased value
of its securities because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash
to meet daily variation margin requirements, it may need to sell securities to
meet such requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it is disadvantageous to do so.
The hours of trading of futures contracts may not conform to the hours
during which the Fund may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be
reflected in the futures markets.
OPTIONS ON FUTURES CONTRACTS
An option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of
the option is required upon exercise to assume an offsetting futures position
(a short position if the option is a call and a long position if the option is
a put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures margin
account which represents the amount by which the market price of the futures
contract, at exercise, exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract.
Currently options can be purchased or written with respect to futures
contracts on the Australian Dollar, British Pound, Canadian Dollar, Japanese
Yen, Swiss Franc, German Mark and Eurodollar, among others. With respect to
stock indices, options are traded on futures contracts for the S&P 500 Stock
Index and the NYSE Composite Index and other global indices.
The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such
closing transactions can be effected.
LIMITATIONS ON PURCHASE AND SALE OF STOCK OPTIONS AND OPTIONS ON STOCK
INDICES, FOREIGN CURRENCIES AND FUTURES CONTRACTS ON FOREIGN CURRENCIES
The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund will write put options on stock indices and foreign
currencies and futures contracts on foreign currencies only if they are
covered by segregating with the Fund's Custodian an amount of cash or short-
term investments equal to the aggregate exercise price of the puts. The Fund
has undertaken with certain state securities commissions that, so long as
shares of the Fund are registered in those states, it will not (a) write puts
having aggregate exercise prices greater than 25% of total net assets; or (b)
purchase (i) put options on stocks not held in the Fund's portfolio, (ii) put
options on stock indices, foreign currencies or futures contracts on foreign
currencies or (iii) call options on stocks, stock indices or foreign
currencies if, after any such purchase, the aggregate premiums paid for such
options would exceed 10% of the Fund's total net assets; provided, however,
that the Fund may purchase put options on stocks held by the Fund if after
such purchase the aggregate premiums paid for such options do not exceed 20%
of the Fund's total assets. During the coming year, the Fund does not intend
to purchase or sell options on equity securities or stock indices if the
aggregate premiums paid for such outstanding options would exceed 5% of the
Fund's total assets.
Except as described below, the Fund will write call options on indices only
if on such date it holds a portfolio of stocks at least equal to the value of
the index times the multiplier times the number of contracts. When the Fund
writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, cash, U.S. Government securities, liquid, high
grade debt securities or at least one "qualified security" with a market value
at the time the option is written of not less than 100% of the current index
value times the multiplier times the number of contracts.
If the Fund has written an option on an industry or market segment index, it
will segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, at least ten "qualified securities," all of which
are stocks of issuers in such industry or market segment, with a market value
at the time the option is written of not less than 100% of the current index
value times the multiplier times the number of contracts. Such stocks will
include stocks which represent at least 50% of the weighting of the industry
or market segment index and will represent at least 50% of the Fund's holdings
in that industry or market segment. No individual security will represent more
than 15% of the amount so segregated, pledged or escrowed in the case of
broadly-based stock market
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index options or 25% of such amount in the case of industry or market segment
index options. If at the close of business on any day the market value of such
qualified securities so segregated, escrowed or pledged falls below 100% of
the current index value times the multiplier times the number of contracts,
the Fund will so segregate, escrow or pledge an amount in cash, Treasury bills
or other high grade short-term debt obligations equal in value to the
difference. In addition, when the Fund writes a call on an index which is in-
the-money at the time the call is written, the Fund will segregate with its
Custodian or pledge to the broker as collateral cash, U.S. Government
securities or other high grade short-term debt obligations equal in value to
the amount by which the call is in-the-money times the multiplier times the
number of contracts. Any amount segregated pursuant to the foregoing sentence
may be applied to the Fund's obligation to segregate additional amounts in the
event that the market value of the qualified securities falls below 100% of
the current index value times the multiplier times the number of contracts. A
"qualified security" is an equity security which is listed on a national
securities exchange or listed on NASDAQ against which the Fund has not written
a stock call option and which has not been hedged by the Fund by the sale of
stock index futures. However, if the Fund holds a call on the same index as
the call written where the exercise price of the call held is equal to or less
than the exercise price of the call written or greater than the exercise price
of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other high grade short-term obligations in a segregated
account with its Custodian, it will not be subject to the requirements
described in this paragraph.
The Fund intends to engage in futures contracts and options on futures
transactions as a hedge against changes, resulting from market or political
conditions, in the value of the currencies to which the Fund is subject or to
which the Fund expects to be subject in connection with future purchases. The
Fund also intends to engage in such transactions when they are economically
appropriate for the reduction of risks inherent in the ongoing management of
the Fund. The Fund may write options on futures contracts to realize through
the receipt of premium income a greater return than would be realized in the
Fund's portfolio securities alone.
POSITION LIMITS. Transactions by the Fund in futures contracts and options
will be subject to limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ) governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges, boards of trade or
other trading facilities or are held or written in one or more accounts or
through one or more brokers. Thus, the number of futures contracts and options
which the Fund may write or purchase may be affected by the futures contracts
and options written or purchased by other investment advisory clients of the
investment adviser. An exchange, board of trade or other trading facility may
order the liquidation of positions found to be in excess of these limits, and
it may impose certain other sanctions.
DEFENSIVE STRATEGY AND SHORT-TERM INVESTMENTS
When conditions dictate a temporary defensive strategy, the Fund may invest
in money market instruments, including commercial paper of domestic
corporations, certificates of deposit, bankers' acceptances and other
obligations of domestic and foreign banks, obligations issued or guaranteed by
the U.S. Government, its agencies or its instrumentalities and repurchase
agreements (described more fully below). Such investments may be subject to
certain risks, including future political and economic developments, the
possible imposition of withholding taxes on interest income, the seizure or
nationalization of foreign deposits and foreign exchange controls or other
restrictions.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis, that is, delivery and
payment can take place a month or more after the date of the transaction. The
Fund will limit such purchases to those in which the date for delivery and
payment falls within 120 days of the date of the commitment. The Fund will
make commitments for such when-issued or delayed delivery transactions only
with the intention of actually acquiring the securities. The Fund's Custodian
will maintain, in a separate account of the Fund, cash, U.S. Government
securities or other high grade debt obligations having a value equal to or
greater than such commitments. If the Fund chooses to dispose of the right to
acquire a when-issued or delayed delivery security prior to its acquisition,
it could, as with the disposition of any other portfolio security, incur a
gain or loss due to market fluctuations. The Fund does not intend to have more
than 5% of its net assets (determined at the time of entering into the
transaction) involved in transactions on a when-issued or delayed delivery
basis during the coming year.
SHORT SALES AGAINST-THE-BOX
The Fund may make short sales of securities or maintain a short position,
provided that at all times when a short position is open the Fund owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for an equal
amount of the securities of the same issuer as the securities sold short (a
short sale against-the-box), and that not more than 25% of the Fund's net
assets (determined at the time of the short sale) may be subject to such
sales. Short
B-8
<PAGE>
sales will be made primarily to defer realization of gain or loss for federal
tax purposes. The Fund does not intend to have more than 5% of its net assets
(determined at the time of the short sale) subject to short sales against-the-
box during the coming year.
REPURCHASE AGREEMENTS
The Fund's repurchase agreements will be collateralized by U.S. Government
obligations. The Fund will enter into repurchase transactions only with
parties meeting creditworthiness standards approved by the Fund's Board of
Directors. The Fund's investment adviser will monitor the creditworthiness of
such parties, under the general supervision of the Board of Directors. In the
event of a default or bankruptcy by a seller, the Fund will promptly seek to
liquidate the collateral. To the extent that the proceeds from any sale of
such collateral upon a default in the obligation to repurchase are less than
the repurchase price, the Fund will suffer a loss.
The Fund participates in a joint repurchase agreement account with other
investment companies managed by Prudential Mutual Fund Management, Inc. (PMF)
pursuant to an order of the Securities and Exchange Commission (SEC). On a
daily basis, any uninvested cash balances of the Fund may be aggregated with
those of such investment companies and invested in one or more repurchase
agreements. Each fund participates in the income earned or accrued in the
joint account based on the percentage of its investment.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 10% of the value of the
Fund's total assets and provided that such loans are callable at any time by
the Fund and are at all times secured by cash or equivalent collateral that is
equal to at least the market value, determined daily, of the loaned
securities. The advantage of such loans is that the Fund continues to receive
payments in lieu of the interest and dividends of the loaned securities, while
at the same time earning interest either directly from the borrower or on the
collateral which will be invested in short-term obligations.
A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount
of collateral, the loan automatically terminates, and the Fund can use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to
be creditworthy pursuant to procedures approved by the Board of Directors of
the Fund. On termination of the loan, the borrower is required to return the
securities to the Fund, and any gain or loss in the market price during the
loan would inure to the Fund.
Since voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in the
securities which are the subject of the loan. The Fund will pay reasonable
finders', administrative and custodial fees in connection with a loan of its
securities or may share the interest earned on collateral with the borrower.
SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest up to 5% of its total assets in securities of other
registered investment companies. Generally, the Fund does not intend to invest
in such securities. If the Fund does invest in securities of other registered
investment companies, shareholders of the Fund may be subject to duplicate
management and advisory fees.
PORTFOLIO TURNOVER
As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions, but the Fund's portfolio
turnover rate is not expected to exceed 200%. The portfolio turnover rate is
generally the percentage computed by dividing the lesser of portfolio
purchases or sales (excluding all securities, including options, whose
maturities or expiration dates at acquisition were one year or less) by the
monthly average value of the portfolio. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs,
which are borne directly by the Fund. In addition, high portfolio turnover may
also mean that a proportionately greater amount of distributions to
shareholders will be taxed as ordinary income rather than long-term capital
gains compared to investment companies with lower portfolio turnover. See
"Portfolio Transactions and Brokerage" and "Taxes."
B-9
<PAGE>
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the
Fund's outstanding voting securities," when used in this Statement of
Additional Information, means the lesser of (i) 67% of the voting shares
represented at a meeting at which more than 50% of the outstanding voting
shares are present in person or represented by proxy or (ii) more than 50% of
the outstanding voting shares.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment by the Fund of initial or maintenance margin in
connection with futures or options is not considered the purchase of a
security on margin.
2. Make short sales of securities or maintain a short position, except short
sales against-the-box.
3. Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow up to 20% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or
for the clearance of transactions. The Fund may pledge up to 20% of the value
of its total assets to secure such borrowings. For purposes of this
restriction, the purchase or sale of securities on a when-issued or delayed
delivery basis, forward foreign currency exchange contracts and collateral and
collateral arrangements relating thereto, and collateral arrangements with
respect to futures contracts and options thereon and with respect to the
writing of options and obligations of the Fund to Directors pursuant to
deferred compensation arrangements are not deemed to be a pledge of assets or
the issuance of a senior security.
4. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities) if as a result: (i) with respect to 75% of the
Fund's total assets, more than 5% of the Fund's total assets (determined at
the time of investment) would then be invested in securities of a single
issuer, or (ii) 25% or more of the Fund's total assets (determined at the time
of investment) would be invested in a single industry.
5. Purchase any security if as a result the Fund would then hold more than
10% of the outstanding voting securities of an issuer.
6. Purchase any security if as a result the Fund would then have more than
5% of its total assets (determined at the time of investment) invested in
securities of companies (including predecessors) less than three years old,
except that the Fund may invest in the securities of any U.S. Government
agency or instrumentality, and in any security guaranteed by such an agency or
instrumentality.
7. Buy or sell real estate or interests in real estate, except that the Fund
may purchase and sell securities which are secured by real estate, securities
of companies which invest or deal in real estate and publicly traded
securities of real estate investment trusts. The Fund may not purchase
interests in real estate limited partnerships which are not readily
marketable.
8. Buy or sell commodities or commodity contracts. (For purposes of this
restriction, futures contracts on currencies and on stock indices and forward
foreign currency exchange contracts are not deemed to be commodities or
commodity contracts.)
9. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
10. Make investments for the purpose of exercising control or management.
11. Invest in securities of other registered investment companies, except by
purchases in the open market involving only customary brokerage commissions
and as a result of which not more than 5% of its total assets (determined at
the time of investment) would be invested in such securities, or except as
part of a merger, consolidation or other acquisition.
12. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the securities of
companies which invest in or sponsor such programs.
13. Make loans, except through (i) repurchase agreements and (ii) loans of
portfolio securities (limited to 10% of the Fund's total assets).
In order to comply with certain state "blue sky" restrictions, the Fund will
not as a matter of operating policy:
B-10
<PAGE>
(1) make investments which are not readily marketable if at the time of
investment more than 15% of its total assets would be committed to such
investments, including illiquid securities and foreign securities which are
not listed on an exchange;
(2) invest in oil, gas and mineral leases;
(3) purchase warrants if as a result the Fund would then have more than 5%
of its net assets (determined at the time of investment) invested in warrants.
Warrants will be valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock Exchange, American Stock
Exchange or any major foreign stock exchange will be limited to 2% of the
Fund's net assets (determined at the time of investment). For purposes of this
limitation, warrants acquired in units or attached to securities are deemed to
be without value;
(4) purchase unlisted foreign securities, if as a result the Fund would then
have more than 15% of its total assets (taken at current value) invested in
such securities; and
(5) issue shares for consideration other than cash in compliance with state
securities commission limitations.
(6) purchase the securities of any issuer if, to the knowledge of the Fund,
any officer or Director of the Fund or the Fund's Manager or Subadviser owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers and Directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the
percentage limitation is met at the time the investment is made, a later
change in percentage resulting from changing total or net asset values will
not be considered a violation of such policy. However, in the event that the
Fund's asset coverage for borrowings falls below 300%, the Fund will take
prompt action to reduce its borrowings, as required by applicable law.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH FUND DURING PAST FIVE YEARS
- ---------------- --------- ----------------------
<S> <C> <C>
Edward D. Director President and Director of BMC Fund, Inc.; prior thereto
Beach Vice Chairman of Broyhill Furniture Industries, Inc.;
c/o Certified Public Accountant; Secretary and Treasurer of
Prudential Broyhill Family Foundation, Inc.; President, Treasurer
Mutual Fund and Director of First Financial Fund, Inc. and The High
Management, Yield Plus Fund, Inc.; Director of The Global
Inc. Government Plus Fund, Inc. and The Global Yield Fund,
One Seaport Inc.
Plaza
New York,
New York
Donald D. Director Chairman (since February 1990) and Director (since April
Lennox 1989) of International Imaging Materials, Inc.; Retired
c/o Chairman, Chief Executive Officer and Director of
Prudential Schlegel Corporation (March 1987-February 1989);
Mutual Fund Director, Gleason Corporation, Navistar International
Management, Corporation, Personal Sound Technologies, Inc., The
Inc. Global Government Plus Fund, Inc. and The High Yield
One Seaport Income Fund, Inc.
Plaza
New York,
New York
Douglas H. Director Vice Chairman, Gannett Co. Inc. (publishing and media)
McCorkindale (since March 1984); Director of Continental Airlines,
c/o Inc., Gannett Co., Inc., Rochester Telephone
Prudential Corporation and The Global Government Plus Fund, Inc.
Mutual Fund
Management,
Inc.
One Seaport
Plaza
New York,
New York
*Lawrence C. President and Vice Chairman of Prudential Mutual Fund Management, Inc.
McQuade Director (PMF) (since 1988); Managing Director, Investment
One Seaport Banking, Prudential Securities (1988-1991); Director of
Plaza Quixote Corporation (since February 1992) and BUNZL,
New York, NY P.L.C. (since June 1991); formerly Director of Kaiser
Tech. Ltd. and Kaiser Aluminum and Chemical Corp.
(March 1987-November 1988) and Crazy Eddie Inc. (1987-
1990); formerly Executive Vice President and Director
of W.R. Grace Co.; President and Director of The Global
Government Plus Fund Inc., The Global Yield Fund, Inc.
and the High Yield Income Fund, Inc.
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH FUND DURING PAST FIVE YEARS
- ---------------- --------- ----------------------
<S> <C> <C>
Thomas T. Director President of the Greater Rochester Metro Chamber of
Mooney Commerce; formerly Rochester City Manager; Trustee of
c/o Center for Governmental Research, Inc.; Director of
Prudential Blue Cross of Rochester, Monroe County Water Authority,
Mutual Fund Rochester Jobs, Inc., Executive Service Corps of
Management, Rochester, Monroe County Industrial Development
Inc. Corporation, Northeast Midwest Institute, First
One Seaport Financial Fund, Inc., The Global Government Plus Fund,
Plaza Inc., The Global Yield Fund, Inc. and The High Yield
New York, Plus Fund, Inc.
New York
*Richard A. Director President, Chief Executive Officer and Director (since
Redeker October 1993), PMF; Executive Vice President, Director
One Seaport and Member of the Operating Committee (since October
Plaza 1993), Prudential Securities Incorporated (Prudential
New York, Securities); Director (since October 1993) of
NY Prudential Securities Group, Inc.; formerly Senior
Executive Vice President and Director of Kemper
Financial Services, Inc. (September 1978-September
1993); Director of The Global Government Plus Fund,
Inc. and The High Yield Income Fund, Inc.
Louis A. Director Publisher and Chief Executive Officer, Phoenix
Weil, III Newspapers Inc. (since August 1991); Director of
c/o Central Newspapers Inc. (since September 1991); prior
Prudential thereto, Publisher of Time Magazine (May 1989-March
Mutual Fund 1991); formerly President, Publisher and CEO of The
Management, Detroit News (February 1986-August 1989); formerly
Inc. member of the Advisory Board, Chase Manhattan Bank-
One Seaport Westchester; Director of The Global Government Plus
Plaza Fund, Inc.
New York,
New York
Robert F. Vice President Chief Administrative Officer (since July 1990), Director
Gunia (since January 1989) and Executive Vice President,
One Seaport Treasurer and Chief Financial Officer (since June 1987)
Plaza of PMF; Senior Vice President (since March 1987) of
New York, Prudential Securities; Vice President and Director
NY (since May 1989) of The Asia Pacific Fund, Inc.
S. Jane Secretary Senior Vice President (since January 1991), Senior
Rose Counsel (since June 1987) and First Vice President
One Seaport (June 1987-December 1990) of PMF; Senior Vice President
Plaza and Senior Counsel of Prudential Securities (since July
New York, 1992); formerly Vice President and Associate General
NY Counsel of Prudential Securities.
Susan C. Treasurer and Senior Vice President (since January 1989) of PMF;
Cote Principal Senior Vice President (since January 1992) and Vice
One Seaport Financial and President (January 1986-December 1991) of Prudential
Plaza Accounting Securities.
New York, Officer
NY
Marguerite Assistant Vice President and Associate General Counsel (since June
E.H. Secretary 1991) of PMF; Vice President and Associate General
Morrison Counsel of Prudential Securities.
One Seaport
Plaza
New York,
NY
</TABLE>
- ---------
* "Interested" Director, as defined in the Investment Company Act.
Directors and officers of the Fund are also Trustees, Directors and officers
of some or all of the other investment companies distributed by Prudential
Securities or Prudential Mutual Fund Distributors, Inc.
The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the
Manager.
The Fund pays each of its Directors who is not an affiliated person of PMF
or The Prudential Investment Corporation (PIC) annual compensation of $5,000,
in addition to certain out-of-pocket expenses. [The Chairman of the Audit
Committee receives an additional $200 per year.]
B-12
<PAGE>
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Directors' fees in installments which accrue interest at a
rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or at the daily rate of return
of the Fund. Payment of the interest so accrued is also deferred and accruals
become payable at the option of the Director. The Fund's obligation to make
payments of deferred Directors' fees, together with interest thereon, is a
general obligation of the Fund.
As of March 31, 1994, the Directors and officers of the Fund, as a group,
owned beneficially less than 1% of the common stock of the Fund.
As of March 31, 1994, Prudential Securities was record holder of 1,192,393
Class A shares (or 78% of the outstanding Class A shares) and 7,386,595 Class
B shares (or 82% of the outstanding Class B shares). As of March 31, 1994,
there were no Class C shares outstanding. In the event of any meetings of
shareholders, Prudential Securities will forward, or cause the forwarding of,
proxy material to the beneficial owners for which it is the record holder.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF or
the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as
manager to all of the other investment companies that, together with the Fund,
comprise the "Prudential Mutual Funds." See "How the Fund is Managed--Manager"
in the Prospectus. As of March 31, 1994, PMF managed and/or administered open-
end and closed-end management investment companies with assets of
approximately $[51] billion and, according to the Investment Company
Institute, as of December 31, 1993, the Prudential Mutual Funds were the 12th
largest family of mutual funds in the United States.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors
and in conformity with the stated policies of the Fund, manages both the
investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention, disposition and loan of securities. In
connection therewith, PMF is obligated to keep certain books and records of
the Fund. PMF also administers the Fund's corporate affairs and, in connection
therewith, furnishes the Fund with office facilities, together with those
ordinary clerical and bookkeeping services which are not being furnished by
State Street Bank and Trust Company, the Fund's custodian, and Prudential
Mutual Fund Services, Inc. (PMFS or the Transfer Agent), the Fund's transfer
and dividend disbursing agent. The management services of PMF for the Fund are
not exclusive under the terms of the Management Agreement and PMF is free to,
and does, render management services to others.
For its services, PMF receives, pursuant to the Management Agreement, a fee
at an annual rate of 1% of the Fund's average net assets. The fee is computed
daily and payable monthly. The Management Agreement also provides that, in the
event the expenses of the Fund (including the fees of PMF, but excluding
interest, taxes, brokerage commissions, distribution fees and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) for any fiscal year exceed the lowest
applicable annual expense limitation established and enforced pursuant to the
statutes or regulations of any jurisdiction in which the Fund's shares are
qualified for offer and sale, the compensation due to PMF will be reduced by
the amount of such excess. Reductions in excess of the total compensation
payable to PMF will be paid by PMF to the Fund. No such reductions were
required during the fiscal year ended May 31, 1993. Currently, the Fund
believes that the most restrictive expense limitation of state securities
commissions is 2 1/2% of the Fund's average daily net assets up to $30
million, 2% of the next $70 million of such assets and 1 1/2% of such assets
in excess of $100 million. Because the expenses incurred by the Fund are
anticipated to be higher than those of funds that invest only in U.S.
securities, the Fund has received waivers from applicable state expense
limitations to exclude certain foreign transactional expenses from expenses
subject to the limitation.
In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel except
the fees and expenses of Directors who are not affiliated persons of PMF or
the Fund's investment adviser;
(b) all expenses incurred, by PMF or by the Fund in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund as described below; and
(c) the costs and expenses payable to PIC pursuant to the subadvisory
agreement between PMF and PIC (the Subadvisory Agreement).
B-13
<PAGE>
Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses: (a) the fees payable to the Manager, (b)
the fees and expenses of Directors who are not affiliated persons of the
Manager or the Fund's investment adviser, (c) the fees and certain expenses of
the Custodian and Transfer and Dividend Disbursing Agent, including the cost
of providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of legal counsel and independent accountants for the
Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Fund to governmental agencies, (g) the fees of
any trade associations of which the Fund may be a member, (h) the cost of
stock certificates representing shares of the Fund, (i) the cost of fidelity
and liability insurance, (j) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the SEC,
registering the Fund and qualifying its shares under state securities laws,
including the preparation and printing of the Fund's registration statements
and prospectuses for such purposes, (k) allocable communications expenses with
respect to investor services and all expenses of shareholders' and Directors'
meetings and of preparing, printing and mailing reports, proxy statements and
prospectuses to shareholders in the amount necessary for distribution to the
shareholders, (l) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business and (m) distribution fees.
The Management Agreement provides that PMF will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the
matters to which the Management Agreement relates, except a loss resulting
from willful misfeasance, bad faith, gross negligence or reckless disregard of
duty. The Management Agreement provides that it will terminate automatically
if assigned, and that it may be terminated without penalty by either party
upon not more than 60 days' nor less than 30 days' written notice. The
Management Agreement will continue in effect for a period of more than two
years from the date of execution only so long as such continuance is
specifically approved at least annually in conformity with the Investment
Company Act. The Management Agreement was last approved by the Board of
Directors of the Fund, including all of the Directors who are not parties to
the contract or interested persons of any such party, as defined in the
Investment Company Act, on May 3, 1994 and by shareholders of the Fund on
September 8, 1988.
For the fiscal years ended May 31, 1993 and 1992, PMF waived its management
fee of $346,674 and $410,076, respectively. For the fiscal year ended May 31,
1991, PMF received a management fee of $402,582.
PMF has entered into the Subadvisory Agreement with PIC (the Subadviser), a
wholly-owned subsidiary of Prudential. The Subadvisory Agreement provides that
PIC furnish investment advisory services in connection with the management of
the Fund. In connection therewith, PIC is obligated to keep certain books and
records of the Fund. PMF continues to have responsibility for all investment
advisory services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable
costs and expenses incurred by PIC in furnishing those services.
The Subadvisory Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not parties to the contract or
interested persons of any such party, as defined in the Investment Company
Act, on May 3, 1994, and by shareholders of the Fund on September 8, 1988.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PMF or PIC upon not more than 60 days', nor less than
30 days', written notice. The Subadvisory Agreement provides that it will
continue in effect for a period of more than two years from its execution only
so long as such continuance is specifically approved at least annually in
accordance with the requirements of the Investment Company Act.
The Manager and Subadviser (The Prudential Investment Corporation) are
subsidiaries of The Prudential Insurance Company of America (Prudential)
which, as of December 31, 1993, is one of the largest financial institutions
in the world and the largest insurance company in North America. Prudential
has been engaged in the insurance business since 1875. [In July 1993,
Institutional Investor ranked Prudential the third largest institutional money
manager of the 300 largest money management organizations in the United States
as of December 31, 1992.]
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Class A shares of the
Fund. Prudential Securities, One Seaport Plaza, New York, New York 10292 acts
as the distributor of the Class B and Class C shares of the Fund.
B-14
<PAGE>
Pursuant to separate distribution and service plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. See "How the Fund is Managed--
Distributor" in the Prospectus.
Prior to January 22, 1990, the Fund offered only one class of shares (the
existing Class B shares). On October 11, 1989, the Board of Directors,
including a majority of the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation of
the Class A or Class B Plan or in any agreement related to either Plan (the
Rule 12b-1 Directors), at a meeting called for the purpose of voting on each
Plan, adopted a new plan of distribution for the Class A shares of the Fund
(the Class A Plan) and approved an amended and restated plan of distribution
with respect to the Class B shares of the Fund (the Class B Plan). On May 4,
1993, the Board of Directors, including a majority of the Rule 12b-1
Directors, at a meeting called for the purpose of voting on each Plan,
approved the continuance of the Plans and Distribution Agreements and approved
modifications of the Fund's Class A and Class B Plans and Distribution
Agreements to conform them with recent amendments to the National Association
of Securities Dealers, Inc. (NASD) maximum sales charge rule described below.
As so modified, the Class A Plan provides that (i) up to .25 of 1% of the
average daily net assets of the Class A shares may be used to pay for personal
service and/or the maintenance of shareholder accounts (service fee) and (ii)
total distribution fees (including the service fee of .25 of 1%) may not
exceed .30 of 1%. As so modified, the Class B Plan provides that (i) up to .25
of 1% of the average daily net assets of the Class B shares may be paid as a
service fee and (ii) up to .75 of 1% (not including the service fee) may be
used as reimbursement for distribution-related expenses with respect to the
Class B shares (asset-based sales charge). On May 4, 1993, the Board of
Directors, including a majority of the Rule 12b-1 Directors, at a meeting
called for the purpose of voting on each Plan, adopted a plan of distribution
for the Class C shares of the Fund and approved further amendments to the
plans of distribution for the Fund's Class A and Class B shares changing them
from reimbursement type plans to compensation type plans. The Plans were last
approved by the Board of Directors, including a majority of the Rule 12b-1
Directors, on May 3, 1994. The Class A Plan, as amended, was approved by Class
A and Class B shareholders, and the Class B Plan, as amended, was approved by
Class B shareholders on , 1994. The Class C Plan was approved by the sole
shareholder of Class C shares on , 1994.
CLASS A PLAN. For the fiscal year ended May 31, 1993, PMFD received payments
of $6,212 under the Class A Plan as reimbursement of expenses related to the
distribution of Class A shares. This amount was primarily expended for
payments of account servicing fees to financial advisers and other persons who
sell Class A shares. For the fiscal year ended May 31, 1993, PMFD also
received approximately $19,800 in initial sales charges.
CLASS B PLAN. For the fiscal year ended May 31, 1993, the Distributor
received $315,614 from the Fund under the Class B Plan. It is estimated that
Prudential Securities spent approximately $322,000 on behalf of the Fund
during such period. It is estimated that of the latter amount, approximately
0.9% ($3,000) was spent on printing and mailing of prospectuses to other than
current shareholders; 9.6% ($31,000) was spent on compensation to Prusec for
commissions to its financial advisers and other expenses, including an
allocation on account of overhead and other branch office distribution-related
expenses, incurred by it for distribution of Class B shares; 13.4% ($43,000)
on interest and/or carrying charges; and 76.1% ($245,000) was spent on the
aggregate of (i) payments of commissions and account servicing fees to
financial advisers (18.6% or $60,000) and (ii) an allocation on account of
overhead and other branch office distribution-related expenses (57.5% or
$185,000). The term "overhead and other branch office distribution-related
expenses" represents (a) the expenses of operating branch offices of
Prudential Securities and Prusec in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies, (b) the costs of client sales seminars, (c) expenses
of mutual fund sales coordinators to promote the sale of Fund shares and (d)
other incidental expenses relating to branch promotion of Fund sales.
Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by investors upon certain redemptions of Class B shares.
See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales
Charges" in the Prospectus. For the fiscal year ended May 31, 1993, the
Distributor received approximately $145,500 in contingent deferred sales
charges.
CLASS C PLAN. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class C
shares. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the Prospectus. Prior to the date of this Statement of
Additional Information, no distribution expenses were incurred under the Class
C Plan.
B-15
<PAGE>
The Class A, Class B and Class C Plans continue in effect from year to year,
provided that each such continuance is approved at least annually by a vote of
the Board of Directors, including a majority vote of the Rule 12b-1 Directors,
cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the
holders of a majority of the outstanding shares of the applicable class on not
more than 30 days' written notice to any other party to the Plans. The Plans
may not be amended to increase materially the amounts to be spent for the
services described therein without approval by the shareholders of the
applicable class (by both Class A and Class B shareholders, voting separately,
in the case of material amendments to the Class A Plan), and all material
amendments are required to be approved by the Board of Directors in the manner
described above. Each Plan will automatically terminate in the event of its
assignment. The Fund will not be contractually obligated to pay expenses
incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least quarterly
a written report of the distribution expenses incurred on behalf of each class
of shares of the Fund by the Distributor. The report includes an itemization
of the distribution expenses and the purposes of such expenditures. In
addition, as long as the Plans remain in effect, the selection and nomination
of Rule 12b-1 Directors shall be committed to the Rule 12b-1 Directors.
Pursuant to each Distribution Agreement, the Fund has agreed to indemnify
PMFD and Prudential Securities to the extent permitted by applicable law
against certain liabilities under the Securities Act of 1933, as amended. Each
Distribution Agreement was last approved by the Board of Directors, including
a majority of the Rule 12b-1 Directors, on May 3, 1994.
NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred
sales charges and asset-based sales charges to 6.25% of total gross sales of
each class of shares. In the case of Class B shares, interest charges on
unreimbursed distribution expenses equal to the prime rate plus one percent
per annum may be added to the 6.25% limitation. Sales from the reinvestment of
dividends and distributions are not required to be included in the calculation
of the 6.25% limitation. The annual asset-based sales charge on shares of the
Fund may not exceed .75 of 1% per class. The 6.25% limitation applies to each
class of the Fund rather than on a per shareholder basis. If aggregate sales
charges were to exceed 6.25% of total gross sales of any class, all sales
charges on shares of that class would be suspended.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities, futures
and options on securities and futures for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. The term "Manager" as used in
this section includes the Subadviser. Broker-dealers may receive negotiated
brokerage commissions on Fund portfolio transactions, including options and
the purchase and sale of underlying securities upon the exercise of options.
On foreign securities exchanges, commissions may be fixed. Orders may be
directed to any broker or futures commission merchant including, to the extent
and in the manner permitted by applicable law, Prudential Securities and its
affiliates. Brokerage commissions on United States securities, options and
futures exchanges or boards of trade are subject to negotiation between the
Adviser and the broker or futures commission merchant.
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 may be purchased directly from the issuer, in
which case no commissions or discounts are paid. The Fund will not deal with
Prudential Securities in any transaction in which Prudential Securities acts
as principal. Thus, it will not deal with Prudential Securities acting as
market maker, and it will not execute a negotiated trade with Prudential
Securities if execution involves Prudential Securities' acting as principal
with respect to any part of the Fund's order.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price
and efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio
transactions of the Fund, the Manager or the Manager's other clients. Such
research and investment services are those which brokerage houses customarily
provide to institutional investors and include statistical and economic data
and research reports on particular companies and industries. Such services are
used by the Manager in connection with all of its investment activities, and
some of such services obtained in connection with the execution of
transactions for the Fund may be used in managing other investment accounts.
Conversely, brokers, dealers or futures commission merchants furnishing such
services may be selected for the execution of
B-16
<PAGE>
transactions of such other accounts, whose aggregate assets are far larger
than the Fund's, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing
investment management for the Fund. Commission rates are established pursuant
to negotiations with the broker, dealer or futures commission merchant based
on the quality and quantity of execution services provided by the broker,
dealer or futures commission merchant in the light of generally prevailing
rates. The Manager's policy is to pay higher commissions to brokers, other
than Prudential Securities, for particular transactions than might be charged
if a different broker had been selected, on occasions when, in the Manager's
opinion, this policy furthers the objective of obtaining best price and
execution. In addition, the Manager is authorized to pay higher commissions on
brokerage transactions for the Fund to brokers other than Prudential
Securities in order to secure research and investment services described
above, subject to review by the Fund's Board of Directors from time to time as
to the extent and continuation of this practice. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Fund's Board of Directors.
Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities or any affiliate, during the
existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the Securities and
Exchange Commission. This limitation, in the opinion of the Fund, will not
significantly affect the Fund's ability to pursue its present investment
objective. However, in the future in other circumstances, the Fund may be at a
disadvantage because of this limitation in comparison to other funds with
similar objectives but not subject to such limitations.
Subject to the above considerations, Prudential Securities may act as a
securities broker or futures commission merchant for the Fund. In order for
Prudential Securities (or any affiliate) to effect any portfolio transactions
for the Fund, the commissions, fees or other remuneration received by
Prudential Securities (or any affiliate) must be reasonable and fair compared
to the commissions, fees or other remuneration paid to other brokers or
futures commission merchants in connection with comparable transactions
involving similar securities or futures being purchased or sold on an exchange
during a comparable period of time. This standard would allow Prudential
Securities (or any affiliate) to receive no more than the remuneration which
would be expected to be received by an unaffiliated broker or futures
commission merchant in a commensurate arm's-length transaction. Furthermore,
the Board of Directors of the Fund, including a majority of the Rule 12b-1
Directors has adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to Prudential Securities (or
any affiliate) are consistent with the foregoing standard. In accordance with
Section 11(a) of the Securities Exchange Act of 1934, Prudential Securities
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. Prudential Securities must furnish to the Fund
at least annually a statement setting forth the total amount of all
compensation retained by Prudential Securities from transactions effected for
the Fund during the applicable period. Brokerage and futures transactions with
Prudential Securities (or any affiliate) are also subject to such fiduciary
standards as may be imposed upon Prudential Securities (or such affiliate) by
applicable law.
Transactions in options by the Fund will be subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options are written or held on the same
or different exchanges or are written or held in one or more accounts or
through one or more brokers. Thus, the number of options which the Fund may
write or hold may be affected by options written or held by the Manager and
other investment advisory clients of the Manager. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
The table below sets forth information concerning the payment of commissions
by the Fund, including the commissions paid to Prudential Securities, for the
three years ended May 31, 1993:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1993 MAY 31, 1992 MAY 31, 1991
------------ ------------ ------------
<S> <C> <C> <C>
Total brokerage commissions paid by the
Fund................................... $ 194,850 $196,142 $216,589
Total brokerage commissions paid to
Prudential Securities and its foreign
affiliates............................. $ 1,710 $ 4,185 $ 7,900
Percentage of total brokerage
commissions paid to Prudential
Securities and its foreign affiliates.. 0.9% 2.1% 3.6%
</TABLE>
The Fund effected approximately 1.8% of the total dollar amount of its
transactions involving the payment of commissions through Prudential
Securities during the year ended May 31, 1993. Of the total brokerage
commissions paid during that period, $193,680 (or 99.4%) were paid to firms
which provide research, statistical or other services to PIC.
B-17
<PAGE>
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares)
or (ii) on a deferred basis (Class B or Class C shares). See "Shareholder
Guide--How to Buy Shares of the Fund" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) each class
bears the separate expenses of its distribution and service plan, (ii) each
class has exclusive voting rights with respect to its plan (except that the
Fund has agreed with the SEC in connection with the offering of a conversion
feature on Class B shares to submit any amendment of the Class A distribution
and service plan to both Class A and Class B shareholders) and (iii) only
Class B shares have a conversion feature. See "Distributor." Each class also
has separate exchange privileges. See "Shareholder Investment Account--
Exchange Privilege."
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5.00% and
Class B* and Class C* shares are sold at net asset value. Using the Fund's net
asset value at May 31, 1993, the maximum offering price of the Fund's shares
is as follows:
<TABLE>
<S> <C>
CLASS A...........................................................
Net asset value and redemption price per Class A share............ $15.34
Maximum sales charge (5.00% of offering price).................... .81
------
Maximum offering price to public.................................. $16.15
======
CLASS B...........................................................
Net asset value, offering price and redemption price per Class B
share*........................................................... $14.93
CLASS C...........................................................
Net asset value, offering price and redemption price per Class C
share*........................................................... $14.93
======
</TABLE>
---------
*Class B and Class C shares are subject to a contingent
deferred sales charge on certain redemptions. See "Shareholder
Guide--How to Sell Your Shares--Contingent Deferred Sales
Charges" in the Prospectus.
REDUCTION AND WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES
COMBINED PURCHASES AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the
purchases may be combined to take advantage of the reduced sales charges
applicable to larger purchases. See the table of breakpoints under
"Shareholder Guide--How to Buy Shares of the Fund" in the Prospectus.
An eligible group of related Fund investors includes any combination of the
following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's and spouse's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group that
holds 25% or more of the outstanding voting securities of a company will be
deemed to control the company, and a partnership will be deemed to be
controlled by each of its general partners);
(e) a trust created by the individual, the beneficiaries of which are the
individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse; and
(g) one or more employee benefits plans of a company controlled by an
individual.
[In addition, an eligible group of related Fund investors may include an
employer (or group of related employers) and one or more qualified retirement
plans of such employer or employers (an employer controlling, controlled by or
under common control with another employer is deemed related to that
employer).]
The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charges will be
granted subject to confirmation of the investor's holdings. The Combined
Purchase and Cumulative Purchase Privilege does not apply to individual
participants described above under "Retirement and Group Plans."
B-18
<PAGE>
RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of
related investors, as described above under "Combined Purchase and Cumulative
Purchase Privilege," may aggregate the value of their existing holdings of
shares of the Fund and shares of other Prudential Mutual Funds (excluding
money market funds other than those acquired pursuant to the exchange
privilege) to determine the reduced sales charge. However, the value of shares
held directly with the Transfer Agent and through Prudential Securities will
not be aggregated to determine the reduced sales charge. All shares must be
held either directly with the Transfer Agent or through Prudential Securities.
The value of existing holdings for purposes of determining the reduced sales
charge is calculated using the maximum offering price (net asset value plus
maximum sales charge) as of the previous business day. See "How the Fund
Values Its Shares" in the Prospectus. The Distributor must be notified at the
time of purchase that the shareholder is entitled to a reduced sales charge.
The reduced sales charges will be granted subject to confirmation of the
investors' holdings. Rights of Accumulation are not available to individual
participants in any retirement or group plans.
LETTER OF INTENT. Reduced sales charges are available to investors (or an
eligible group of related investors) who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of shares of the
Fund and shares of other Prudential Mutual Funds. All shares of the Fund and
shares of other Prudential Mutual Funds (excluding money market funds other
than those acquired pursuant to the exchange privilege) which were previously
purchased and are still owned are also included in determining the applicable
reduction. However, the value of shares held directly with the Transfer Agent
and through Prudential Securities will not be aggregated to determine the
reduced sales charge. All shares must be held either directly with the
Transfer Agent or through Prudential Securities. Letters of Intent are not
available to individual participants in any retirement or group plans .
A Letter of Intent permits a purchaser to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Escrowed Class A shares totaling 5% of the dollar amount of the
Letter of Intent will be held by the Transfer Agent in the name of the
purchaser. The effective date of a Letter of Intent may be back-dated up to 90
days, in order that any investments made during this 90-day period, valued at
the purchaser's cost, can be applied to the fulfillment of the Letter of
Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the purchaser is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the
Distributor will liquidate sufficient escrowed shares to obtain such
difference. If the goal is exceeded in an amount which qualifies for a lower
sales charge, a price adjustment is made by refunding to the purchaser the
amount of excess sales charge, if any, paid during the thirteen-month period.
Investors electing to purchase Class A shares of the Fund pursuant to a Letter
of Intent should carefully read such Letter of Intent.
QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO , 1994
The CDSC is reduced on the redemptions of Class B shares of the Fund
purchased prior to , 1994 if immediately after a purchase of such shares,
the aggregate cost of all Class B shares of the Fund owned by you in a single
account exceeded $500,000. For example, if you purchased $100,000 of Class B
shares of the Fund and the following year purchase an additional $450,000 of
Class B shares with the result that the aggregate cost of your Class B shares
of the Fund following the second purchase was $550,000, the quantity discount
would be available for the second purchase of $450,000 but not for the first
purchase of $100,000. The quantity discount will be imposed at the following
rates depending on whether the aggregate value exceeded $500,000 or $1
million:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
YEAR SINCE OR REDEMPTION PROCEEDS
PURCHASE --------------------------------------
PAYMENT MADE $500,001 TO $1 MILLION OVER $1 MILLION
------------ ---------------------- ---------------
<S> <C> <C>
First........... 3.0% 2.0%
Second.......... 2.0% 1.0%
Third........... 1.0% 0%
Fourth and
thereafter..... 0% 0%
</TABLE>
You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to the reduced CDSC. The reduced CDSC will be granted subject to
confirmation of your holdings.
B-19
<PAGE>
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account
is established for each investor under which a record of the shares held is
maintained by the Transfer Agent. If a stock certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the Account at any time. There is no
charge to the investor for issuance of a certificate. The Fund makes available
to its shareholders the following privileges and plans.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund. An
investor may direct the Transfer Agent in writing not less than five full
business days prior to the record date to have subsequent dividends or
distributions sent in cash rather than reinvested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be made directly to the dealer. Any
shareholder who receives a cash payment representing a dividend or
distribution may reinvest such dividend or distribution at net asset value by
returning the check or the proceeds to the Transfer Agent within 30 days after
the payment date. Such investment will be made at the net asset value per
share next determined after receipt of the check or proceeds by the Transfer
Agent. Such shareholder will receive credit for any contingent deferred sales
charge paid in connection with the amount of proceeds being reinvested.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders the privilege of exchanging
their shares of the Fund for shares of certain other Prudential Mutual Funds,
including one or more specified money market funds, subject in each case to
the minimum investment requirements of such funds. Shares of such other
Prudential Mutual Funds may also be exchanged for shares of the Fund. All
exchanges are made on the basis of relative net asset value next determined
after receipt of an order in proper form. An exchange will be treated as a
redemption and purchase for tax purposes. Shares may be exchanged for shares
of another fund only if shares of such fund may legally be sold under
applicable state laws. For retirement and group plans having a limited menu of
Prudential Mutual Funds, the Exchange Privilege is available for those funds
eligible for investment in the particular program.
It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
CLASS A. Shareholders of the Fund may exchange their Class A shares for
Class A shares of certain other Prudential Mutual Funds, shares of Prudential
Government Securities Trust (Intermediate Term Series) and shares of the money
market funds specified below. No fee or sales load will be imposed upon the
exchange. Shareholders of money market funds who acquired such shares upon
exchange of Class A shares may use the Exchange Privilege only to acquire
Class A shares of the Prudential Mutual Funds participating in the Exchange
Privilege.
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund
CLASS B AND CLASS C. Shareholders of the Fund may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds and shares of Prudential Special Money Market Fund. No
CDSC will be payable upon such exchange, but a CDSC may be payable upon the
redemption of Class B and Class C shares acquired as a result of the exchange.
The applicable sales charge will be that imposed by the fund in which shares
were initially purchased and the purchase date will be deemed to be the first
day of the month after the initial purchase, rather than the date of the
exchange.
Class B and Class C shares of the Fund may also be exchanged for shares of
an eligible money market fund without imposition of any CDSC at the time of
exchange. Upon subsequent redemption from such money market fund or after re-
exchange into the
B-20
<PAGE>
Fund, such shares will be subject to the CDSC calculated by excluding the time
such shares were held in the money market fund. In order to minimize the
period of time in which shares are subject to a CDSC, shares exchanged out of
the money market fund will be exchanged on the basis of their remaining
holding periods, with the longest remaining holding periods being transferred
first. [In measuring the time period shares are held in a money market fund
and "tolled" for purposes of calculating the CDSC holding period, exchanges
are deemed to have been made on the last day of the month.] Thus, if shares
are exchanged into the Fund from a money market fund during the month (and are
held in the Fund at the end of month), the entire month will be included in
the CDSC holding period. Conversely, if shares are exchanged into a money
market fund prior to the last day of the month (and are held in the money
market fund on the last day of the month), the entire month will be excluded
from the CDSC holding period. For purposes of calculating the seven year
holding period applicable to the Class B conversion feature, the time period
during which Class B shares were held in a money market fund will be excluded.
At any time after acquiring shares of other funds participating in the Class
B or Class C exchange privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B or Class C shares
of the Fund, respectively, without subjecting such shares to any CDSC. Shares
of any fund participating in the Class B or Class C exchange privilege that
were acquired through reinvestment of dividends or distributions may be
exchanged for Class B or Class C shares of other funds, respectively, without
being subject to any CDSC.
Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days' notice, and any fund, including the
Fund, or the Distributor, has the right to reject any exchange application
relating to such fund's shares.
DOLLAR COST AVERAGING
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more
shares when the price is low and fewer shares when the price is high. The
average cost per share is lower than it would be if a constant number of
shares were bought at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $4,800 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2007, the cost of four years at a private
college could reach $163,000 and over $97,000 at a public university./1/
The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals./2/
<TABLE>
<CAPTION>
PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 years.............................. $ 110 $ 165 $ 220 $ 275
20 years.............................. 176 264 352 440
15 years.............................. 296 444 592 740
10 years.............................. 555 833 1,110 1,388
5 years.............................. 1,371 2,057 2,742 3,428
</TABLE>
See "Automatic Savings Accumulation Plan."
- ---------
/1/Source information concerning the costs of education at public universities
is available from The College Board Annual Survey of Colleges, 1992.
Information about the costs of private colleges is from the Digest of
Education Statistics, 1992; The National Center for Education Statistics; and
the U.S. Department of Education. Average costs for private institutions
include tuition, fees, room and board.
/2/The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of the Fund.
The investment return and principal value of an investment will fluctuate so
that an investor's shares when redeemed may be worth more or less than their
original cost.
AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP)
Under ASAP, an investor may arrange to have a fixed amount automatically
invested in shares of the Fund monthly by authorizing his or her bank account
or Prudential Securities account (including a Command Account) to be debited
to invest specified dollar amounts in shares of the Fund. The investor's bank
must be a member of the Automatic Clearing House System. Stock certificates
are not issued to ASAP participants.
B-21
<PAGE>
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan is available to shareholders through Prudential
Securities or the Transfer Agent. Such withdrawal plan provides for monthly or
quarterly checks in any amount, except as provided below, up to the value of
the shares in the shareholder's account. Withdrawals of Class B or Class C
shares may be subject to a CDSC. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and
(iii) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See '"Shareholder Investment Account-
Automatic Reinvestment of Dividends and/or Distributions."
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may
be terminated at any time, and the Distributor reserves the right to initiate
a fee of up to $5 per withdrawal, upon 30 days' written notice to the
shareholder.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be generally recognized for federal income tax
purposes. In addition, withdrawals made concurrently with purchases of
additional Class A shares are inadvisable because of the sales charges
applicable to (i) the purchase of Class A shares and (ii) the withdrawal of
Class B and Class C shares. Each shareholder should consult his or her own tax
adviser with regard to the tax consequences of the plan, particularly if used
in connection with a retirement plan.
TAX-DEFERRED RETIREMENT PLANS
Various qualified retirement plans, including a 401(k) plan, self-directed
individual retirement accounts and "tax-deferred accounts" under Section
403(b)(7) of the Internal Revenue Code are available through the Distributor.
These plans are for use by both self-employed individuals and corporate
employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, and the administration, custodial fees and other
details are available from Prudential Securities or the Transfer Agent.
Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.
TAX-DEFERRED RETIREMENT ACCOUNTS
INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account
until the earnings are withdrawn. The following chart represents a comparison
of the earnings in a personal savings account with those in an IRA, assuming a
$2,000 annual contribution, an 8% rate of return and a 39.6% federal income
tax bracket and shows how much more retirement income can accumulate within an
IRA as opposed to a taxable individual savings account.
TAX-DEFERRED COMPOUNDING/1/
<TABLE>
<CAPTION>
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
------------- -------- --------
<S> <C> <C>
10 years $ 26,165 $ 31,291
15 years 44,675 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
</TABLE>
- ---------
/1/The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings
in the IRA account will be subject to tax when withdrawn from the account.
B-22
<PAGE>
NET ASSET VALUE
The net asset value per share is the net worth of the Fund (assets,
including securities at value, minus liabilities) divided by the number of
shares outstanding. Net asset value is calculated separately for each class.
Under the Investment Company Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Board of Directors, the value of
investments listed on a securities exchange is the last sales price on that
exchange prior to the time assets are valued or, if there was no sale on such
day, the average of readily available closing bid and asked prices on such
day. Should an extraordinary event, which is likely to affect the value of the
security, occur after the close of an exchange on which a portfolio security
is traded, such security will be valued at fair value considering factors
determined in good faith by the investment adviser under procedures
established by and under the general supervision of the Fund's Board of
Directors.
Unlisted securities are valued at the average of the quoted bid and asked
prices in the over-the-counter market. Securities or other assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith in accordance with procedures adopted by the Board of
Directors. Short-term debt securities are valued at amortized cost, if their
original term to maturity from date of purchase was 60 days or less, or by
amortizing their value on the 61st day prior to maturity if their original
maturity when acquired by the Fund was more than 60 days, unless this is
determined by the Board of Directors not to represent fair value. The Fund
will compute its net asset value at 4:15 P.M., New York time on each day the
New York Stock Exchange is open for trading except on days on which no orders
to purchase, sell or redeem Fund shares have been received or days on which
changes in the value of the Fund's portfolio securities do not affect net
asset value.
Because the New York Stock Exchange or the national securities exchanges on
which stock options are traded have adopted different trading hours on either
a permanent or temporary basis, the Board of Directors of the Fund may
reconsider the time at which net asset value is computed. In addition, the
Fund may compute its net asset value as of any time permitted pursuant to any
exemption, order or statement of the SEC or its staff.
The net asset value of Class B and Class C shares will generally be lower
than the net asset value of Class A shares (1) as a result of the larger
distribution fee with respect to Class B and Class C shares. It is expected,
however, that the net asset value per share of each class will intend to
converge immediately after the recording of dividends which will differ by
approximately the amount of the distribution expense accrual differential
among the classes. Net asset value is calculated separately for each class.
TAXES
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
This relieves the Fund (but not its shareholders) from paying federal income
tax on income which is distributed to shareholders, provided that it
distributes at least 90% of its net investment income and short-term capital
gains and permits net capital gains of the Fund (i.e., the excess of net long-
term capital gains over net short-term capital losses) to be treated as long-
term capital gains of the shareholders, regardless of how long shares in the
Fund are held.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of the Fund's annual gross income (without
reduction for losses from the sale or other disposition of securities) be
derived from interest, dividends, payments with respect to securities loans,
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of
investing in such securities or currencies; (b) the Fund derive less than 30%
of its gross income from gains (without reduction for losses) from the sale or
other disposition of securities, options thereon, futures contracts, options
thereon, forward contracts and foreign currencies held for less than three
months (except for foreign currencies directly related to the Fund's business
of investing in foreign securities); and (c) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of
the market value of the Fund's assets is represented by cash, U.S. Government
securities and other securities limited in respect of any one issuer to an
amount not greater than 5% of the market value of the Fund's assets and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities).
The Fund is required under the Internal Revenue Code to distribute 98% of
its ordinary income in the same calendar year in which it is earned. The Fund
is also required to distribute during the calendar year 98% of the capital
gain net income it earned during the twelve months ending on October 31 of
such calendar year. In addition, the Fund must distribute during the calendar
year any undistributed ordinary income and undistributed capital gain net
income from the prior year of the twelve-month period ending on October 31 of
such prior calendar year, respectively. To the extent it does not meet these
distribution requirements, the Fund will be subject to a non-deductible 4%
excise tax on the undistributed amount. For purposes of this excise tax,
income on which the Fund pays income tax is treated as distributed.
B-23
<PAGE>
Gains or losses on sales of securities by the Fund will be treated as long-
term capital gains or losses if the securities have been held by it for more
than one year except in certain cases where the Fund acquires a put or writes
a call thereon or makes a short sale against-the-box. Other gains or losses on
the sale of securities will be short-term capital gains or losses. Gains and
losses on the sale, lapse or other termination of options on securities will
generally be treated as gains and losses from the sale of securities (assuming
they do not qualify as Section 1256 contracts). If an option written by the
Fund on securities lapses or is terminated through a closing transaction, such
as a repurchase by the Fund of the option from its holder, the Fund will
generally realize capital gain or loss. If securities are sold by the Fund
pursuant to the exercise of a call option written by it, the Fund will include
the premium received in the sale proceeds of the securities delivered in
determining the amount of gain or loss on the sale. Certain of the Fund's
transactions may be subject to wash sale, short sale and straddle provisions
of the Internal Revenue Code. In addition, debt securities acquired by the
Fund may be subject to original issue discount and market discount rules.
Special rules apply to most options on stock indices, futures contracts and
options thereon, and forward foreign currency exchange contracts in which the
Fund may invest. See "Investment Objective and Policies." These investments
will generally constitute Section 1256 contracts and will be required to be
"marked to market" for federal income tax purposes at the end of the Fund's
taxable year; that is, treated as having been sold at market value. Except
with respect to forward foreign currency exchange contracts, sixty percent of
any gain or loss recognized on such deemed sales and on actual dispositions
will be treated as long-term capital gain or loss, and the remainder will be
treated as short-term capital gain or loss.
Gain or loss on the sale, lapse or other termination of options on stock and
on narrowly-based stock indices will be capital gain or loss and will be long-
term or short-term depending on the holding period of the option. In addition,
positions which are part of a straddle will be subject to certain wash sale
and short sale provisions of the Internal Revenue Code. In the case of a
straddle, the Fund may be required to defer the recognition of losses on
positions it holds to the extent of any unrecognized gain on offsetting
positions held by the Fund.
The Fund's ability to hold foreign currencies or engage in hedging
activities may be limited by the requirement that it must derive less than 30%
of its gross income from gains from the sale of securities held for less than
three months.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such liabilities are
treated as ordinary income or ordinary loss. Similarly, gains or losses on
forward foreign currency exchange contracts or dispositions of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss. These gains,
referred to under the Internal Revenue Code as "Section 988" gains or losses,
increase or decrease the amount of the Fund's investment company taxable
income available to be distributed to its shareholders as ordinary income,
rather than increasing or decreasing the amount of the Fund's net capital
gain. If Section 988 losses exceed other investment company taxable year, the
Fund would not be able to make any ordinary dividend distributions, or
distributions made before the losses were realized would be recharacterized as
a return of capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his or her Fund shares.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by
the per share amount of the dividends. Furthermore, such dividends, although
in effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
Any loss realized on a sale, redemption or exchange of shares of the Fund by
a shareholder will be disallowed to the extent the shares are replaced within
a 61-day period (beginning 30 days before the disposition of share). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
A shareholder who acquires shares of the Fund and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes
of calculating gain or loss realized upon a sale or exchange of shares of the
Fund.
The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A shares as a result of the higher distribution-
related fee applicable to the Class B and Class C shares. The per share
distributions of net capital gains, if any, will be paid in the same amount
for Class A, Class B and Class C shares. See "Net Asset Value."
Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a
nominee or fiduciary) who is a nonresident alien individual, a foreign
corporation or a foreign partnership
B-24
<PAGE>
(foreign shareholder) are subject to a 30% (or lower treaty rate) withholding
tax upon the gross amount of the dividends unless the dividends are
effectively connected with a U.S. trade or business conducted by the foreign
shareholder. Capital gain dividends paid to a foreign shareholder are not
subject to withholding tax. A foreign shareholder will, however, be required
to pay U.S. income tax on any dividends and capital gain distributions which
are effectively connected with a U.S. trade or business of the foreign
shareholder.
Since the Fund is likely to have a substantial portion of its assets
invested in securities of foreign issuers, the amount of the Fund's dividends
eligible for the corporate dividends received deduction will be minimal.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine in advance the effective
rate of foreign tax to which the Fund will be subject, since the amount of the
Fund's assets to be invested in various countries is not known.
If the Fund is liable for foreign income taxes, the Fund expects to meet the
requirements of the Internal Revenue Code for "passing-through" to its
shareholders foreign income taxes paid, but there can be no assurance that the
Fund will do so. For the fiscal year ended May 31, 1993, the Fund did not
elect under the Internal Revenue Code to "pass-through" to its shareholders
foreign income taxes paid by the Fund, since at the close of its taxable year
less than 50% of the value of the Fund's total assets consisted of securities
of foreign corporations. If the Fund elects to "pass-through" the foreign
taxes, shareholders will be required to: (i) include in gross income (in
addition to taxable dividends actually received) their pro rata share of the
foreign income taxes paid by the Fund; and (ii) treat their pro rata share of
foreign income taxes as paid by them. Shareholders are then permitted either
to deduct their pro rata share of foreign income taxes in computing their
taxable income or use it as a foreign tax credit against U.S. income taxes. No
deduction for foreign taxes may be claimed by a shareholder who does not
itemize deductions. Foreign shareholders may not deduct or claim a credit for
foreign tax unless the dividends paid to them by the Fund are effectively
connected with a U.S. trade or business.
The amount of foreign taxes for which a shareholder may claim a credit in
any year will generally be subject to a separate limitation for "passive
income," which includes, among other things, dividends, interest and certain
foreign currency gains. Gain or loss from the sale of a security or from a
Section 988 transaction which is treated as ordinary income or loss (or would
have been so treated absent an election by the Fund) will be treated as
derived from sources within the United States, potentially reducing the amount
allowable as a credit under the limitation.
Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year and, if so, such notification will designate (a) the
shareholder's portion of the foreign taxes paid by the Fund and (b) the
portion of the dividend which represents income derived from foreign sources.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
Pennsylvania Personal Property Tax. The Fund has obtained a written letter
of determination from the Pennsylvania Department of Revenue that the Fund is
subject to the Pennsylvania foreign franchise and corporate net income tax.
Accordingly, it is expected that Fund shares will be exempt from Pennsylvania
personal property taxes. The Fund anticipates that it will continue such
business activities but reserves the right to suspend them at any time,
resulting in the termination of the exemption.
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURN. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B and Class C shares. See "How the Fund
Calculates Performance" in the Prospectus.
Average annual total return is computed according to the following formula:
P(1+T)/n/ = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods.
B-25
<PAGE>
Average annual total return takes into account any applicable initial or
contingent deferred sales charges but does not take into account any federal
or state income taxes that may be payable upon redemption.
The average annual total return for Class A shares for the one year and
since inception periods ended December 31, 1993 was 52.0% and 11.1%,
respectively. Without the fee waiver the average annual total return with
respect to the Class A shares of the Fund for the one year and since inception
periods would have been % and %, respectively. The average annual
total return for Class B shares for the one and five year and since inception
periods ended December 31, 1993 was 11.1%, 14.4% and 13.0%, respectively.
Without the fee waiver the average annual total return with respect to the
Class B shares of the Fund for the one and five year and since inception
periods would have been %, % and %, respectively. During these
periods, no Class C shares were outstanding.
AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B
and Class C shares. See "How the Fund Calculates Performance" in the
Prospectus.
Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:
ERV-P
-----
P
Where: P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods .
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.
The aggregate total return for Class A shares for the one year and since
inception periods ended November 30, 1993 was 46.2% and 45.2%, respectively.
Without the fee waiver the aggregate total return for Class A shares for the
one year and since inception periods would have been % and %,
respectively. The aggregate total return for Class B shares for the one, five
and since inception periods ended November 30, 1993 was 45.0%, 77.9% and
89.6%, respectively. Without the fee waiver the aggregate total return for
Class B shares for the one, five and since inception periods would have been
%, %, and %, respectively. During these periods, no Class C
shares were outstanding.
YIELD. The Fund may from time to time advertise its yield as calculated over
a 30-day period. Yield is calculated separately for Class A, Class B and Class
C shares. This yield will be computed by dividing the Fund's net investment
income per share earned during this 30-day period by the maximum offering
price per share on the last day of the period. Yield is calculated according
to the following formula:
a -- b
________
YIELD = 2 [( +1)/6/ - 1]
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period.
The Fund's 30-day yields for the period ended May 31, 1993 were % and %
for the Class A and Class B shares, respectively. During this period, no Class
C shares were outstanding.
B-26
<PAGE>
From time to time, the performance of the Fund may be measured against
various indices. Set forth below is a chart which compares the performance of
different types of investments over the long-term and the rate of
inflation./1/
(ART)
/1/Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1993
Yearbook", (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Common stock returns are based on the Standard & Poor's 500
Stock Index, a market-weighted, unmanaged index of 500 common stocks in a
variety of industry sectors. It is a commonly used indicator of broad stock
price movements. This chart is for illustrative purposes only, and is not
intended to represent the performance of any particular investment or fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities
and cash and in that capacity maintains certain financial and accounting books
and records pursuant to an agreement with the Fund. Subcustodians provide
custodial services for the Fund's foreign assets held outside the United
States. See "How the Fund is Managed--Custodian and Transfer and Dividend
Disbursing Agent" in the Prospectus.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the
Fund. PMFS is a wholly-owned subsidiary of PMF. PMFS provides customary
transfer agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, the payment of dividends and distributions and
related functions. For these services, PMFS receives an annual fee per
shareholder account, a new account set-up fee for each manually established
account and a monthly inactive zero balance account fee per shareholder
account. PMFS is also reimbursed for its out-of-pocket expenses, including but
not limited to postage, stationery, printing, allocable communication expenses
and other costs. For the fiscal year ended May 31, 1993, the Fund incurred
fees of approximately $89,000 for PMFS's services.
Price Waterhouse, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Fund's independent accountants and in that capacity audits the
Fund's annual financial statements.
B-27
<PAGE>
- --------------------------------------
PRUDENTIAL GLOBAL GENESIS FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--95.4%
COMMON STOCKS--83.5%
AUSTRALIA--2.9%
200,000 Bank of Melbourne Ltd.*................................ $ 734,607
(Banking)
1,000,000 Sea World Property Ltd................................. 418,794
(Leisure & tourism) -----------
1,153,401
-----------
FEDERAL REPUBLIC OF GERMANY--3.8%
954 Bilfinger & Berger AG.................................. 570,656
(Construction & housing)
928 Computer 2000 (Rights)*................................ 384,303
(Business & public services)
110 Weru AG* (New)......................................... 88,749
(Construction & housing)
550 Weru AG* (Old)......................................... 450,677
(Construction & housing) -----------
1,494,385
-----------
FRANCE--3.1%
4,819 Manutan................................................ 533,271
(Retail)
4,700 Plastic Omnium SA...................................... 701,656
(Automobiles) -----------
1,234,927
-----------
HONG KONG--13.7%
650,000 Acme Landis Holdings................................... 147,278
(Construction & housing)
500,000 Fairwood Holdings Corp. ............................... 244,384
(Retail)
1,032,000 Giordano Holdings Ltd. ................................ 801,708
(Retail)
200,000 Goldlion Holdings Ltd.*................................ 230,465
(Health & personnal care)
100,000 Guoco Group Ltd.*...................................... 265,424
(Financial services)
2,000,000 Hung Hing Printing Group Ltd. ......................... 524,372
(Broadcasting & publishing)
690,000 JCG Holdings*.......................................... 390,853
(Financial services)
1,000,000 Lamex Holdings Ltd.*................................... 323,687
(Textiles & apparel)
900,000 Liu Chong Hing Investment Ltd. ........................ 891,435
(Real estate)
4,000,000 Techtronic Industries Ltd. ............................ 554,152
(Machinery & engineering)
500,000 Tem Fat Hing Fung (Holdings) Ltd. ..................... 129,474
(Metals & steel)
500,000 Yaohan International Caterers Ltd. .................... 202,304
(Food & household products)
2,100,000 Yips Hang Cheung Holdings.............................. 700,136
(Chemicals) -----------
5,405,672
-----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- -------------------------------------------------------------------------------
<C> <S> <C>
INDIA--0.4%
12,800 Reliance Industries Ltd.*............................. $ 156,800
(Chemicals) -----------
JAPAN--16.2%
13,500 Aoyama Trading Co. Ltd. .............................. 832,222
(Retail)
5,500 Capcom Ltd. .......................................... 453,952
(Recreation & other consumer goods)
15,000 Fukuda Corp. ......................................... 222,429
(Construction & housing)
37,000 Juntendo Co. ......................................... 448,589
(Retail)
47,000 Kaneshita Construction Co. ........................... 692,562
(Construction & housing)
9,900 Koei Co. ............................................. 461,646
(Recreation & other consumer goods)
13,000 Nishimatsu Construction Co., Ltd. .................... 146,701
(Construction & housing)
31,000 P.S. Concrete......................................... 852,879
(Construction & housing)
5,800 Sega Enterprises Ltd. ................................ 530,100
(Recreation & other consumer goods)
30,000 Shin Nippon Machinery Co. Ltd. ....................... 355,328
(Machinery & engineering)
32,000 Sho-Bond Construction Co. Ltd. ....................... 805,782
(Construction & housing)
10,000 Tsutsumi Jewelry Ltd. ................................ 606,202
(Retail) -----------
6,408,392
-----------
KOREA--6.8%
9,000 Daishin Securities*................................... 211,065
(Financial services)
25,000 Dong-Ah Construction Ind. Co. Ltd..................... 623,714
(Construction & housing)
56,528 Hanjin Heavy Industries*.............................. 640,977
(Transportation/shipping)
18,690 Pusan Steel Pipe*..................................... 536,232
(Steel)
25,300 Shinwon Corp.*........................................ 678,538
(Textiles & apparel) -----------
2,690,526
-----------
MALAYSIA--12.2%
123,000 Arab-Malaysian Finance................................ 407,755
(Banking)
27,000 Dunlop Estates Berhad................................. 62,840
(Industrial components)
100,000 Georgetown Holdings...................................
(Textiles & apparel) 103,657
500,000 Idris Hydraulic*......................................
(Forest products) 621,944
</TABLE>
See Notes to Financial Statements.
B-28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- -------------------------------------------------------------------------------
<C> <S> <C>
MALAYSIA--(CONT'D)
459,000 Kedah Cement Holdings Berhad.......................... $ 646,352
(Building & related industries)
88,000 Magnum Corp. Berhad................................... 375,200
(Leisure & tourism)
304,000 Malayan Cement Berhad................................. 681,445
(Building & related industries)
151,000 MGR Corp.*............................................ 463,662
(Forest products)
400,000 Minho Berhad*......................................... 666,536
(Forest products)
203,000 Resorts World......................................... 794,054
(Leisure & tourism) -----------
4,823,445
-----------
MEXICO--1.3%
66,000 Grupo Financiero Banamex Acci* (Class C).............. 331,956
(Banking)
20,500 Transportacion Maritima Mexico (ADR).................. 166,563
(Transportation/shipping) -----------
498,519
-----------
NETHERLANDS--0.5%
10,850 Royal Boskalis Westminster NV......................... 212,733
(Construction & housing)
SINGAPORE--8.6%
146,000 Kim England Holdings.................................. 182,727
(Financial services)
500,000 QAF Ltd. ............................................. 457,658
(Food & household products)
138,000 Sembawang Maritime Ltd.*.............................. 404,302
(Transportation/shipping)
50,000 Sembawang Shipyards Ltd. ............................. 426,525
(Machinery & engineering)
470,000 Swens Asia Pacific*................................... 342,403
(Food & household products)
600,000 Tiger Medicals Ltd. .................................. 851,805
(Health & personal care)
450,000 Wing Tai Holdings Ltd. ............................... 728,518
(Multi-industry) -----------
3,393,938
-----------
SPAIN--1.5%
9,600 Construcciones y Aux Ferr*............................ 374,056
(Construction & housing)
19,125 Pryca SA.............................................. 229,348
(Retail) -----------
603,404
-----------
SWEDEN--1.3%
17,150 Hennes & Mauritz B Free*.............................. 507,411
(Retail) -----------
UNITED KINGDOM--3.8%
80,000 Dorling Kindersley Holdings Ltd. ..................... 350,000
(Broadcasting & publishing)
61,500 Lloyds Chemists Plc. ................................. 298,852
(Health & personal care)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
<C> <S> <C>
10,700 Micro Focus Group Ex L*................................ $ 381,188
(Multi-industry)
90,000 Powerscreen International.............................. 450,000
(Construction & housing) -----------
1,480,040
-----------
UNITED STATES--7.4%
25,000 ADVO, Inc. ............................................ 531,250
(Commercial services)
15,900 Cirrus Logic, Inc.* ................................... 274,275
(Electronics)
17,800 Jacobs Engineering Group, Inc. (Rights)*............... 436,100
(Environmental services)
20,000 Learning Co.*.......................................... 360,000
(Computer software & services)
14,300 Mid-American Waste Systems, Inc. ...................... 155,513
(Environmental services)
10,000 Piper Jaffray, Inc. ................................... 265,000
(Financial services)
10,000 S3, Inc.* ............................................. 281,250
(Electronics)
16,500 Sierra On-Line, Inc.*.................................. 181,500
(Computer software & services)
2,000 SLM International, Inc.*............................... 65,500
(Leisure & tourism)
2,300 Stewart & Stevenson Services, Inc. .................... 94,875
(Machinery & engineering)
5,000 T. Rowe Price & Associates, Inc. ...................... 231,875
(Financial services)
10,000 Trident Microsystems, Inc.*............................ 68,750
(Electronics) -----------
2,945,888
-----------
TOTAL COMMON STOCKS
(cost $26,892,520).................................... 33,009,481
-----------
PREFERRED STOCKS--7.7%
FEDERAL REPUBLIC OF GERMANY--2.2%
1,060 Hornbach AG............................................ 865,238
(Retail) -----------
FINLAND--1.0%
14,000 Nokia Corp.*........................................... 404,375
(Multi-industry) -----------
KOREA--2.4%
19,000 Daishin Securities*.................................... 433,730
(Financial services)
15,000 Mando Machinery Corp. ................................. 525,791
(Machinery & engineering) -----------
959,521
-----------
NETHERLANDS--2.1%
42,100 Royal Boskalis Westminster NV*......................... 825,444
(Construction & housing) -----------
TOTAL PREFERRED STOCKS
(cost $1,317,633)..................................... 3,054,578
-----------
</TABLE>
See Notes to Financial Statements.
B-29
<PAGE>
- --------------------------------------
PRUDENTIAL GLOBAL GENESIS FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
<C> <S> <C>
WARRANT--2.0%
JAPAN
750 Nissen Co. Ltd.,*
warrants expiring Nov. '96
@ (Yen)1,681 (cost $265,753)........................ $ 803,656
-----------
(Retail)
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------
<C> <S> <C>
CORPORATE BOND--2.2%
JAPAN
(Yen)64,000 Capcom Ltd.,
3.90%, 9/30/96,
(cost $782,360)..................................... 883,973
-----------
(Recreation & other consumer goods)
TOTAL LONG-TERM INVESTMENTS
(cost $29,258,266).................................. 37,751,688
-----------
SHORT-TERM INVESTMENTS--3.5%
REPURCHASE AGREEMENT
$1,367 Joint Repurchase Agreement Account
2.9544%, 6/1/93
(cost $1,367,000; Note 5)........................... 1,367,000
-----------
TOTAL INVESTMENTS--98.9%
(cost $30,625,266; Note 4).......................... 39,118,688
Other assets in excess of liabilities--1.1%.......... 452,265
-----------
NET ASSETS--100%..................................... $39,570,953
===========
</TABLE>
- ---------
* Non-income producing security.
ADR--American Depository Receipt.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $30,625,266).......................... $39,118,688
Foreign currency, at value (cost $1,681,252)...................... 1,729,356
Receivable for investments sold................................... 566,793
Receivable for Fund shares sold................................... 510,593
Dividends and interest receivable................................. 78,733
Deferred expenses................................................. 2,037
-----------
Total assets.................................................... 42,006,200
-----------
LIABILITIES
Payable for investments purchased................................. 2,100,122
Accrued expenses and other liabilities............................ 200,952
Payable for Fund shares reacquired................................ 95,568
Due to Distributors............................................... 29,427
Withholding taxes payable......................................... 9,178
-----------
Total liabilities............................................... 2,435,247
-----------
NET ASSETS $39,570,953
===========
Net assets were comprised of:
Common stock, at par............................................. $ 26,443
Paid-in capital in excess of par................................. 31,905,838
-----------
31,932,281
Accumulated net investment loss.................................. (1,391,696)
Accumulated net realized gain on investment and foreign currency
transactions.................................................... 491,840
Net unrealized appreciation on investments and foreign
currencies...................................................... 8,538,528
-----------
Net assets, May 31, 1993......................................... $39,570,953
===========
Class A:
Net asset value and redemption price per share
($3,434,969 / 223,933 shares of common stock issued and
outstanding).................................................... $15.34
Maximum sales charge (5.25% of offering price)................... .85
------
Maximum offering price to public................................. $16.19
======
Class B:
Net asset value, offering and redemption price per share
($36,135,984 / 2,420,372 shares of common stock issued and
outstanding).................................................... $14.93
======
</TABLE>
See Notes to Financial Statements.
B-30
<PAGE>
- --------------------------------------
PRUDENTIAL GLOBAL GENESIS FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1993
- --------------------------------------
PRUDENTIAL GLOBAL GENESIS FUND
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MAY 31, 1993 AND 1992
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of $65,226)........... $ 602,393
Interest.......................................................... 186,653
----------
Total income..................................................... 789,046
----------
Expenses
Management fee, net of waiver of $346,674......................... --
Distribution fee--Class A......................................... 6,212
Distribution fee--Class B......................................... 315,614
Custodian's fees and expenses..................................... 142,000
Transfer agent's fees and expenses................................ 116,000
Audit fee......................................................... 60,000
Registration fees................................................. 41,000
Directors' fees................................................... 30,000
Amortization of deferred organization expenses.................... 19,800
Reports to shareholders........................................... 20,000
Legal fees........................................................ 10,000
Miscellaneous..................................................... 7,303
----------
Total expenses................................................... 767,929
----------
Net investment income.............................................. 21,117
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain on:
Investment transactions........................................... 3,817,533
Foreign currency transactions..................................... 45,625
----------
3,863,158
----------
Net change in unrealized appreciation on:
Investments....................................................... 2,220,132
Foreign currencies................................................ 31,149
----------
2,251,281
----------
Net gain on investments and foreign currencies..................... 6,114,439
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $6,135,556
==========
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS 1993 1992
----------- -----------
Operations
Net investment income (loss)......................... $ 21,117 $ (205,722)
Net realized gain (loss) on investment and foreign
currency transactions................................ 3,863,158 (1,392,182)
Net change in unrealized appreciation/depreciation on
investments and foreign currencies................... 2,251,281 3,403,341
----------- -----------
Net increase in net assets resulting from operations.. 6,135,556 1,805,437
----------- -----------
Fund share transactions (Note 6)
Net proceeds from shares subscribed.................. 12,830,751 22,659,765
Cost of shares reacquired............................ (18,868,583) (29,250,847)
----------- -----------
Net decrease in net assets from Fund share
transactions........................................ (6,037,832) (6,591,082)
----------- -----------
Total increase (decrease)............................. 97,724 (4,785,645)
NET ASSETS
Beginning of year..................................... 39,473,229 44,258,874
----------- -----------
End of year........................................... $39,570,953 $39,473,229
=========== ===========
</TABLE>
See Notes to Financial Statements.
B-31
<PAGE>
- --------------------------------------
PRUDENTIAL GLOBAL GENESIS FUND
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Prudential-Bache Global Genesis Fund, Inc., doing business as Prudential
Global Genesis Fund (the "Fund"), is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. The
Fund's investment objective is long-term growth of capital by investing pri-
marily in equity securities of foreign and domestic companies with market cap-
italizations of less than U.S.$750 million.
NOTE 1. ACCOUNTING The following is a summary of significant accounting poli-
POLICIES cies followed by the Fund in the
preparation of its financial statements.
Security Valuation: Securities traded on an exchange (whether domestic or for-
eign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market (in-
cluding securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked pric-
es.
Short-term securities which mature in more than 60 days are valued at cur-
rent market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian 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.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented using the foreign exchange
rates and market values at the close of the fiscal year, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of securities held at the end of the fiscal year.
Similarly, the Fund does not isolate the effect of changes in foreign exchange
rates from the fluctuations arising from changes in the market prices of long-
term portfolio securities sold during the fiscal year.
Net realized gain on foreign currency transactions of $45,625 represents net
foreign exchange gains from sales and maturities of short-term securities,
disposition of foreign currencies, currency gains or losses realized between
the trade and settlement dates on security transactions, gains or losses from
the sale of purchased currency options, and the difference between the amounts
of dividends, interest and foreign taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net currency gains
and losses from valuing foreign currency denominated assets, except portfolio
investments, and liabilities at fiscal period end exchange rates are reflected
as a component of unrealized appreciation on foreign currencies.
Foreign security and currency transactions may involve certain considera-
tions and risks not typically associated with those of domestic origin as a
result of, among other factors, the level of governmental supervision and reg-
ulation of foreign securities markets and the possibility of political or eco-
nomic instability.
Securities Transactions and Investment Income: Securities transactions are re-
corded 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 an accrual basis.
Net investment income, other than distribution fees, and unrealized and re-
alized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the
day.
Taxes: It is the Fund's policy to continue to meet the requirements of the In-
ternal Revenue Code applicable to regulated investment companies and to dis-
tribute all of its taxable income to shareholders. Therefore, no federal in-
come tax provision is required.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates.
Dividends and Distributions: The Fund expects to pay dividends out of net in-
vestment income and make distributions of any net capital gains, at least an-
nually, if any. Dividends and distributions are recorded on the ex-dividend
date.
Deferred Organization Expenses: Prudential Securities Incorporated ("PSI") in-
curred expenses of approximately $150,000 in connection with the organization
and initial registration of the Fund and was reimbursed in that amount by the
Fund. These costs were deferred and amortized by the Fund over a period of 60
months ended January, 1993.
NOTE 2. AGREEMENTSThe Fund has a management agreement with Prudential Mutual
Fund Management, Inc. ("PMF"). Pursuant to this agreement, PMF has responsi-
bility for all investment advisory services and supervises the subadviser's
performance of such services. PMF has entered into a subadvisory agreement
with The Prudential Investment Corporation ("PIC"); PIC furnishes investment
advisory services in connection with the management of the Fund. PMF pays for
the services of PIC, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
B-32
<PAGE>
The management fee paid PMF is computed daily and payable monthly, at an an-
nual rate of 1% of the average daily net assets of the Fund. For the year
ended May 31, 1993, PMF agreed to voluntarily waive 100% of its management fee
totalling $346,674 ($0.12 per share or 1% of average net assets).
PMF has agreed that, in any fiscal year, it will reimburse the Fund for ex-
penses (including the fees to PMF but excluding interest, taxes, brokerage
commissions, distribution fees, litigation and indemnification expenses, por-
tions of certain expenses as are attributable to its foreign investments and
other extraordinary expenses) in excess of the most restrictive expense limi-
tation imposed by state securities commissions. The most restrictive expense
limitation is presently believed to be 2.5% of the Fund's average daily net
assets up to $30 million, 2.0% of the next $70 million of average daily net
assets and 1.5% of the average daily net assets in excess of $100 million.
Such expense reimbursement, if any, will be estimated and accrued daily and
payable monthly. No reimbursement was required for the year ended May 31,
1993.
The Fund has distribution agreements with Prudential Mutual Fund Distribu-
tors, Inc. ("PMFD"), which acts as the distributor of the Class A shares of
the Fund, and PSI, which acts as distributor of the Class B shares of the Fund
(collectively the "Distributors"). To reimburse the Distributors for their ex-
penses incurred in distributing the Fund's Class A and Class B shares, the
Fund, pursuant to plans of distribution, pays the Distributors a reimbursement
accrued daily and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its distribution-
related expenses with respect to Class A shares at an annual rate of up to .30
of 1% of the average daily net assets of the Class A shares. Such expenses un-
der the Class A Plan were .20 of 1% of the average daily net assets of the
Class A shares for the year ended May 31, 1993. PMFD pays various broker-deal-
ers, including PSI and Pruco Securities Corporation ("Prusec") affiliated bro-
ker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its distribution-
related expenses with respect to Class B shares at an annual rate of up to 1%
of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for payments of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Fund under the plans
and the receipt of initial sales charges (Class A only) and contingent de-
ferred sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $19,800 in
front-end sales charges resulting from sales of Class A shares during the year
ended May 31, 1993. From these fees, PMFD paid such sales charges to dealers
(PSI and Prusec) which in turn paid commissions to salespersons.
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through
the imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant
to the Class B Plan. For the year ended May 31, 1993, PSI advised the Fund
that it received approximately $145,500 in contingent deferred sales charges
imposed upon certain redemptions by investors. PSI, as distributor, has also
advised the Fund that at May 31, 1993, the amount of distribution expenses
incurred by PSI and not yet reimbursed by the Fund or recovered through
contingent deferred sales charges approximated $1,178,000. This amount may be
recovered through future payments under the Class B Plan or contingent
deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as Distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect),
wholly-owned subsidiaries of The Prudential Insurance Company of America.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services, Inc. ("PMFS"), a wholly-
owned subsidiary of PMF, serves as the Fund's transfer
agent and during
the year ended May 31, 1993, the Fund incurred fees of approximately $89,000
for the services of PMFS. As of May 31, 1993, approximately $15,000 of such
fees were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates. For
the fiscal year ended May 31, 1993, PSI and/or its foreign affiliates earned
approximately $1,710 in brokerage commissions from portfolio transactions exe-
cuted on behalf of the Fund.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than
short-term investments, for the
year ended May 31, 1993 aggregated $21,341,204 and $26,282,948, respectively.
The federal income tax basis of the Fund's investments at May 31, 1993 was
$30,626,254 and accordingly, net unrealized appreciation for federal income
tax purposes was $8,492,434 (gross unrealized appreciation--$9,461,817; gross
unrealized depreciation--$969,383). For federal income tax purposes, the Fund
fully utilized its capital loss carryforward.
NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund along with other affiliated registered investment
companies, transfers uninvested cash balances into a single
joint
account, the daily aggregate balance of which is invested in one or more re-
purchase agreements collateralized by U.S. Treasury or federal agency obliga-
tions. As of May 31, 1993, the Fund had a 0.12% undivided interest in the re-
purchase agreements in the
B-33
<PAGE>
joint account. The undivided interest for the Fund represented $1,367,000 in
principal amount. As of such date, each repurchase agreement in the joint ac-
count and the collateral therefor were as follows:
Bear, Stearns & Co., Inc., 2.90%, dated 5/28/93, in the principal amount of
$285,000,000, repurchase price $285,091,833, due 6/1/93; collateralized by
$27,547,000 U.S. Treasury Bonds, 8.00%, due 11/15/21, $200,000,000 U.S. Trea-
sury Notes, 4.625%, due 12/31/94, and $50,000,000 U.S. Treasury Notes, 7.00%,
due 4/15/99; approximate aggregate value including accrued interest--
$290,886,191.
First Boston Corp., 2.95%, dated 5/28/93, in the principal amount of
$200,000,000, repurchase price $200,065,556, due 6/1/93; collateralized by
$7,510,000 U.S. Treasury Bonds, 10.75%, due 5/15/03, and $200,000,000 U.S.
Treasury Bills, 3.38%, due 4/7/94; approximate aggregate value including
accrued interest--$204,172,226.
J.P. Morgan Securities, Inc., 2.98%, dated 5/28/93, in the principal amount
of $325,000,000, repurchase price $325,107,611, due 6/1/93; collateralized by
$250,000,000 U.S. Treasury Bonds, 8.00%, due 11/15/21, and $30,518,000 U.S.
Treasury Bonds, 15.75%, due 11/15/01; approximate aggregate value including
accrued interest--$332,366,575.
Morgan Stanley & Co. Inc., 2.98%, dated 5/28/93, in the principal amount of
$315,000,000, repurchase price $315,104,300, due 6/1/93; collateralized by
$66,440,000 U.S. Treasury Notes, 4.00%, due 9/30/94, $100,000,000 U.S. Trea-
sury Notes, 4.25%, due 8/31/94, and $150,000,000 U.S. Treasury Notes, 4.25%,
due 7/31/94; approximate aggregate value including accrued interest--
$321,631,152.
NOTE 6. CAPITAL The Fund offers both Class A and Class B shares. Class A
shares are sold with a front-end sales charge of up to 5.25%. Class B shares
are sold with a contingent deferred sales charge which declines from 5% to
zero depending on the period of time the shares are held. Both classes of
shares have equal rights as to earnings, assets and voting privileges except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
There are 500 million shares of common stock, $.01 par value per share,
divided into two classes, designated Class A and B common stock, each of which
consists of 250 million authorized shares. Transactions in shares of common
stock were as follows:
<TABLE>
<CAPTION>
Class A SHARES AMOUNT
- ------- ---------- -----------
<S> <C> <C>
Year ended May 31, 1993:
Shares sold........................................... 70,451 $ 936,730
Shares reacquired..................................... (149,896) (1,845,560)
---------- -----------
Net decrease in shares outstanding.................... (79,445) $ (908,830)
========== ===========
Year ended May 31, 1992:
Shares sold........................................... 257,138 $ 3,142,969
Shares reacquired..................................... (293,348) (3,578,192)
---------- -----------
Net decrease in shares outstanding.................... (36,210) $ (435,223)
========== ===========
<CAPTION>
Class B SHARES AMOUNT
- ------- ---------- -----------
<S> <C> <C>
Year ended May 31, 1993:
Shares sold........................................... 914,538 $11,894,021
Shares reacquired..................................... (1,374,192) (17,023,023)
---------- -----------
Net decrease in shares outstanding.................... (459,654) $(5,129,002)
========== ===========
Year ended May 31, 1992:
Shares sold........................................... 1,617,185 $19,516,796
Shares reacquired..................................... (2,138,066) (25,672,655)
---------- -----------
Net decrease in shares outstanding.................... (520,881) $(6,155,859)
========== ===========
</TABLE>
B-34
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL GLOBAL GENESIS FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
periods indicated:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------ -----------------------------------------------
JANUARY 22,
1990@
YEARS ENDED MAY 31, THROUGH YEAR ENDED MAY 31,
---------------------- MAY 31, -----------------------------------------------
PER SHARE OPERATING 1993++ 1992++ 1991 1990 1993++ 1992++ 1991 1990 1989
PERFORMANCE: ------ ------ ------ ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $12.62 $11.95 $12.62 $12.41 $ 12.38 $ 11.82 $ 12.58 $ 12.28 $ 10.80
------ ------ ------ ------ ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(loss)+................ .10 .02 (.03) (.04) -- (.07) (.15) (.14) (.13)
Net realized and
unrealized gain (loss)
on investment and
foreign currency
transactions........... 2.62 .65 (.64) .25 2.55 .63 (.61) 1.30 1.74
------ ------ ------ ------ ------- ------- ------- ------- -------
Total from investment
operations........... 2.72 .67 (.67) .21 2.55 .56 (.76) 1.16 1.61
------ ------ ------ ------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Distributions paid to
shareholders from net
realized gains on
investment and foreign
currency transactions.. -- -- -- -- -- -- -- (.86) (.13)
------ ------ ------ ------ ------- ------- ------- ------- -------
Net asset value, end of
period................. $15.34 $12.62 $11.95 $12.62 $ 14.93 $ 12.38 $ 11.82 $ 12.58 $ 12.28
====== ====== ====== ====== ======= ======= ======= ======= =======
TOTAL RETURN (1):....... 21.55% 5.61% (5.31)% 1.69% 20.60% 4.74% (6.04)% 9.72% 15.10%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)........... $3,435 $3,829 $4,059 $2,137 $36,136 $35,644 $40,200 $39,868 $13,254
Average net assets
(000).................. $3,106 $3,771 $2,569 $1,204 $31,561 $37,236 $37,689 $26,161 $11,495
Ratios to average net
assets:
Expenses, including
distribution fees+.... 1.49% 1.50% 2.72%# 3.90%** 2.29% 2.30% 3.48%# 3.66%# 3.52%#
Expenses, excluding
distribution fees+.... 1.29% 1.30% 2.52%# 3.70%** 1.29% 1.30% 2.48%# 2.70%# 2.52%#
Net investment income
(loss)+............... 0.79% 0.19% (0.61)% (1.71)%** (0.01)% (0.57)% (1.45)% (1.76)% (1.18)%
Portfolio turnover rate. 67% 57% 95% 72% 67% 57% 95% 72% 60%
</TABLE>
- ---------
@ Commencement of offering of Class A shares.
** Annualized.
+ Net of expense subsidies and/or fee waivers (all reported periods except
1991).
++ Calculated based upon average shares outstanding during the fiscal period.
# Reclassified foreign withholding taxes as a reduction to related income for
comparative purposes.
(1) Total return does not consider the effects of sales loads. Total returns
for periods of less than a full year are not annualized.
See Notes to Financial Statements.
B-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Prudential Global Genesis Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the selected per share data and
ratios (which appear under the heading "Financial Highlights") present fairly,
in all material respects, the financial position of Prudential Global Genesis
Fund (the "Fund") at May 31, 1993, 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 selected per share data and ratios for each of the
five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and selected per share data
and ratios (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at May 31, 1993 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
July 8, 1993
B-36
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
---------- ------------------------------------------------------ ----------
<C> <S> <C>
LONG-TERM INVESTMENTS--88.2%
COMMON STOCKS--80.4%
AUSTRALIA--2.9%
1,530,600 AAPC, Ltd*............................................ $ 866,469
(Merchandising)
349,098 Bank of Melbourne, Ltd................................ 1,466,093
(Banking)
1,715,400 Sea World Property, Ltd. ............................. 959,794
----------
(Leisure & tourism)
3,292,356
----------
FEDERAL REPUBLIC OF GERMANY--2.6%
1,684 Bilfinger & Berger AG................................. 830,476
(Construction & housing)
1,553 Computer 2000 (Rights)................................ 770,405
(Business & public services)
641+ Hornbach AG
(cost $338,972-purchased-1993)...................... 392,804
(Merchandising)
1,135 Weru AG............................................... 910,808
----------
(Construction & housing)
2,904,493
----------
FRANCE--3.3%
18,000 Lapeyre............................................... 829,927
(Building & related industries)
5,319 Manutan 619,846
(Merchandising)
15,000 Naf Naf*.............................................. 800,540
(Merchandising)
5,800 Plastic Omnium SA..................................... 617,125
(Automobiles)
9,500 Rexel................................................. 922,564
----------
(Electronics)
3,790,002
----------
HONG KONG--11.0%
11,066,000 CNT Group, Ltd........................................ 1,661,726
(Multi-industry)
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
---------- ------------------------------------------------------- ----------
<C> <S> <C>
3,218,000 Fairwood Holdings Corp................................ 1,499,688
(Merchandising)
1,660,000 Giordano Holdings, Ltd................................ 897,175
(Merchandising)
372,000 Guoco Group, Ltd. .................................... 1,685,481
(Financial services)
4,866,000 HunHing Printing Group, Ltd. ......................... $1,433,066
(Broadcasting & publishing)
1,056,000 JCG Holdings.......................................... 840,721
(Financial services)
1,887,000 Liu Chong Hing Investment, Ltd. ...................... 2,100,791
(Real estate)
6,431,000 Techtronic Industries, Ltd. .......................... 1,240,443
(Machinery & engineering)
1,901,000 Yaohan International Caterers, Ltd. .................. 719,814
(Food & household products)
1,546,000 Yips Hang Cheung Holdings ............................ 480,322
----------
(Chemicals)
12,559,227
----------
INDONESIA--0.8%
220,000 Sekar Laut* (Multi-industry).......................... 915,207
----------
JAPAN--11.2%
55,000 Aiwa Co. (Appliances & household durables)............ 813,467
24,000 Aoyama Trading Co., Ltd. ............................. 1,633,733
(Merchandising)
1,000 Autobacs Seven Co. ................................... 107,482
(Automotive)
23,000 Higashi Nihon House .................................. 1,183,225
(Construction & housing)
7,000 Japan Associates Finance Co. ......................... 610,904
(Financial services)
29,000 Juntendo Co. ......................................... 253,089
(Merchandising)
</TABLE>
See Notes to Financial Statements
B-37
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
------ ---------------------------------------------------------- ----------
<C> <S> <C>
Japan--(cont'd)
21,000 Koei Co. ................................................ $1,099,628
(Recreation & other consumer goods)
16,000 Kyocera, Ltd. ........................................... 745,212
(Electronics)
29,000 Mitsui Home Co. )........................................ 482,201
(Construction & housing
13,000 Nichiei Co. )............................................ 1,062,882
(Financial services
32,000 Nissen Co., Ltd. ......................................... 1,381,654
(Merchandising)
6,000 P.S. Concrete* ........................................... 115,199
(Construction & housing)
10,800 Sega Enterprises, Ltd. ................................... 791,732
(Recreation & other consumer goods)
39,000 Sho-Bond Construction Co., Ltd. .......................... 1,038,997
(Construction & housing)
19,000 Tsutsumi Jewelry, Ltd. ................................... 1,518,534
(Merchandising)
----------
12,837,939
----------
Korea--3.8%
1,000 Daewoo Securities Co., Ltd. .............................. 32,174
(Financial services)
9,000 Daishin Securities* ...................................... 212,721
(Financial services)
Dong-Ah Construction Ind. Co., Ltd
4,997 (New)*.................................................... 160,775
25,800 (Old)* ................................................... 852,444
(Construction & housing)
Hanjin Heavy Industries
2,641 (New)*.................................................... 38,564
62,387 (Old)*.................................................... 910,985
(Transportation/shipping)
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
------ ---------------------------------------------------------- ----------
<C> <S> <C>
15,000 Kun Young Construction Corp.* ............................ $ 250,588
(Construction & housing)
22,680 Pusan Steel Pipe* ........................................ 791,457
(Steel)
Samsung Electronics Co
288 (New)*.................................................... 12,759
5,700 (Old)* ................................................... 349,152
(Electronics)
25,300 Shinwon Corp.* ........................................... 729,477
----------
(Textiles & apparel)
4,341,096
----------
Malaysia--14.5%
110,000 Aokam Perdana Berhad .................................... 1,075,059
(Forest products)
190,000 Arab-Malaysian Finance Berhad* .......................... 765,051
(Banking)
170,000 Berjaya Sports Toto ..................................... 382,134
(Real estate)
545,000 Federal Furniture Holdings* ............................. 931,059
(Appliances & household durables)
399,000 Granite Industries Berhad* .............................. 2,292,924
(Leisure & tourism)
70,000 Hong Leong Industries Berhad ............................ 380,375
(Building & related industries)
22,000 Kedah Cement Holdings Berhad ............................ 33,886
(Building & related industries)
297,500 Magnum Corp. Berhad* .................................... 709,441
(Leisure & tourism)
256,500 Malayan Cement Berhad ................................... 457,248
(Building & related industries)
456,000 Malayan Cement Berhad Class B ........................... 806,550
(Building & related industries)
222,000 MGR Corp.* .............................................. 676,935
(Forest products)
506,000 Minho Berhad* ........................................... 1,285,770
(Forest products)
</TABLE>
See Notes To Financial Statements.
B-38
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
--------- --------------------------------------------------------- ----------
<C> <S> <C>
MALAYSIA--(CONT'D)
303,000 Multi-Purpose Holdings Berhad............................ $ 769,937
(Multi-industry)
200,000 Park May Berhad.......................................... 985,144
(Transportation/shipping)
816,500 Pilecon Engineering Berhad............................... 1,643,853
----------
(Machinery & Engineering)
328,000 Resorts World............................................ 1,782,330
(Leisure & tourism)
394,000 Tech Resources Industries Berhad*........................ 1,617,279
----------
(Data processing & reproduction) 16,594,975
----------
MEXICO--1.6%
Grupo Financiero Banamex Acci.
69,000 Class A.................................................. 514,793
60,200 Class C (Old)*........................................... 449,138
6,460 Class L (New)*........................................... 42,679
87,500 Transportacion Maritima Mexico (ADR)*.................... 853,125
----------
(Transportation/shipping)
1,859,735
----------
NETHERLANDS--1.4%
67,650 Royal Boskalis Westminster NV............................ 1,600,663
----------
(Construction & housing)
SINGAPORE--9.1%
717,000 Kim England Holdings..................................... 1,487,775
(Financial services)
1,404,000 QAF, Ltd. ............................................... 1,263,600
(Food & household products)
284,250 Sembawang Maritime, Ltd. ................................ 1,270,242
(Transportation/shipping)
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
------- ----------------------------------------------------------- ----------
<C> <S> <C>
Sembawang Maritime, Ltd.,
173,000 Convertible unsecured loan stock........................... $ 243,281
(Transportation/shipping)
124,000 Sembawang Shipyard, Ltd. .................................. 1,038,500
(Machinery & engineering)
921,000 Tiger Medicals, Ltd.*...................................... 1,496,625
(Health & personal care)
751,000 Van Der Horst*............................................. 1,821,175
(Machinery & engineering)
724,000 Wing Tai Holdings Ltd. .................................... 1,737,600
(Multi-Industry) ----------
10,358,798
----------
SPAIN--1.6%
12,600 Azkoyen SA................................................. 418,194
(Machinery & engineering)
16,270 Construcciones y Aux Ferr*................................. 699,573
(Construction & housing)
63,425 Pryca SA*.................................................. 682,910
----------
(Merchandising)
1,800,677
----------
SWEDEN--0.7%
28,150 Hennes & Mauritz B Free.................................... 805,903
----------
(Merchandising)
UNITED KINGDOM--3.1%
244,900 Darling Kindersley Holdings, Ltd........................... 1,132,751
(Broadcasting & publishing)
214,400 Lloyds Chemists Plc........................................ 1,007,621
(Health & personal care)
27,800 Micro Focus Group Ex L*.................................... 551,965
(Multi-Industry)
195,600 Powerscreen International.................................. 887,266
----------
(Construction & housing)
3,579,603
----------
UNITED STATES--12.8%
37,100 Adaptec, Inc.*............................................. 1,224,300
(Electronics)
</TABLE>
See Notes to Financial Statements.
B-39
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
------ ----------------------------------------------------------- -----------
<C> <S> <C>
UNITED STATES--(CONT'D)
40,000 Barnes & Noble, Inc.*...................................... $ 1,160,000
(Merchandising)
35,000 Cirrus Logic, Inc.*........................................ 1,205,313
(Electronics)
61,600 Haverty Furniture Cos, Inc................................. 1,047,200
(Merchandising)
50,000 Holophone Corp.*........................................... 737,500
(Electronics)
35,000 Itron, Inc.*............................................... 538,125
(Electronics)
20,000 Iwerks Entertainment, Inc.* ............................... 557,500
(Leisure & tourism)
Jacobs Engineering Group, Inc.*
37,900 (Rights)................................................... 942,763
(Machinery & engineering)
41,800 Jones Apparel Group, Inc.*................................. 1,316,700
(Textiles & apparel)
69,000 Kemet Corp.*............................................... 1,009,125
(Multi-industry)
35,500 Media Vision, Inc.*........................................ 1,384,500
(Business & public services)
31,200 Piper Jaffray, Inc......................................... 1,099,800
(Financial services)
38,300 S3, Inc.*.................................................. 1,316,563
(Electronics)
16,700 T. Rowe Price & Associates, Inc............................ 1,008,263
-----------
(Financial services)
14,547,652
-----------
Total common stocks
(cost US$77,278,199)....................................... 91,788,326
-----------
PREFERRED STOCKS--5.0%
AUSTRALIA--0.2%
24,226 Bank of Melbourne.......................................... 210,499
-----------
(Banking)
AUSTRIA--0.7%
7,420 Maculan Holding AG......................................... 763,710
-----------
(Construction & housing)
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
------------ ----------------------------------------------------- -----------
<C> <S> <C>
FEDERAL REPUBLIC OF GERMANY--1.4%
1,710 Hornbach AG*......................................... $ 1,636,698
-----------
(Merchandising)
FINLAND--1.8%
43,300 Nokia Corp........................................... 2,070,563
-----------
(Multi-industry)
KOREA--0.9%
19,000 Daishin Securities*.................................. 423,215
(Financial services)
15,000 Mando Machinery Corp................................. 605,123
-----------
(Machinery & engineering)
1,028,338
-----------
Total preferred stocks
(cost US$4,553,923).................................. 5,709,808
-----------
WARRANTS*--0.4%
JAPAN
50 Autobacs Seven Co.,
expiring Feb. '95 (Yen) 8,089 ....................... 140,625
(Automotive)
218 Nissen Co., Ltd.,
expiring Nov. '96 (Yen) 1,681 ....................... 308,529
-----------
(Merchandising)
Total warrants
(cost US$263,392).................................... 449,154
-----------
PRINCIPAL
AMOUNT
(000) CORPORATE BONDS--2.4%
--------- JAPAN--1.0%
(Yen) 89,000 Capcom, Ltd.,
3.90%, 9/30/96....................................... 1,178,163
-----------
(Recreation & other consumer goods)
MALAYSIA--0.5%
USD 500 Gujurat Ambuja Cement,
3.50%, 6/30/99....................................... 590,000
-----------
(Building & related industries)
</TABLE>
See Notes to Financial Statements.
B-40
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
--------- ------------------------ ------------
<C> <S> <C>
SINGAPORE--0.1%
SED 201 QAF, Ltd.,
2.00%, 11/3/98.......... $ 161,280
------------
(Food & householdproducts)
THAILAND--0.8%
USD 600 Land & House Public Co.,
Ltd., 5.00%, 4/29/03.... 855,000
------------
(Construction & housing)
Total corporate bonds
(cost US$2,529,121)..... 2,784,443
------------
Total long-term investments
(cost US$84,624,635).... 100,731,731
------------
SHORT-TERM INVESTMENTS--9.8%
REPURCHASE AGREEMENT
USD11,258 Joint Repurchase
Agreement Account,
3.21%, 12/1/93
(cost US$11,258,000;
Note 5)................. 11,258,000
------------
TOTAL INVESTMENTS--98.0%
(cost US$95,882,635;
Note 4)................. 111,989,731
Other assets in excess
of liabilities--2.0%... 2,240,504
------------
NET ASSETS--100% $114,230,235
============
</TABLE>
- ----------
* Non-income producing security.
+ Security restricted as to resale. The value of such security represents
approximately .34% of net assets.
ADR--American Depository Receipt.
See Notes to Financial Statements.
B-41
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS NOVEMBER 30, 1993
-----------------
<S> <C>
Investments, at value (cost $95,882,635)..................... $ 111,989,731
Foreign currency, at value (cost $1,862,381)................. 1,849,554
Cash......................................................... 21,208
Receivable for Fund shares sold.............................. 2,589,643
Receivable for investments sold.............................. 470,428
Dividends and interest receivable............................ 103,630
Deferred expenses............................................ 675
-----------------
Total assets............................................... 117,024,869
-----------------
LIABILITIES
Payable for investments purchased............................ 1,681,865
Payable for Fund shares reacquired........................... 867,850
Accrued expenses and other liabilities....................... 110,645
Due to Distributors.......................................... 77,875
Due to Manager............................................... 44,791
Withholding taxes payable.................................... 11,608
-----------------
Total liabilities............................................ 2,794,634
-----------------
NET ASSETS................................................... $ 114,230,235
=================
Net assets were comprised of:
Common stock, at par........................................ $ 65,758
Paid-in capital in excess of par............................ 96,336,369
-----------------
96,402,127
Accumulated net investment loss.............................. (337,079)
Accumulated net realized gains on investment and foreign
currency transactions....................................... 2,069,998
Net unrealized appreciation on investments and foreign
currencies.................................................. 16,095,189
-----------------
Net assets, November 30, 1993............................... $ 114,230,235
=================
Class A:
Net asset value and redemption price per share ($18,313,567
divided by 1,032,475 shares of common stock issued and
outstanding)............................................... $ 17.74
Maximum sales charge (5.25% of offering price).............. .98
-----------------
Maximum offering price to public............................ $ 18.72
=================
Class B:
Net asset value, offering and redemption price per share
($95,916,668 divided by 5,543,347 shares of common stock
issued and outstanding)..................................... $ 17.30
================
</TABLE>
See Notes to Financial Statements.
B-42
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
NOVEMBER 30,
1993
---------------------------------------------------------------- ------------
<S> <C>
NET INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $41,201)......... $ 335,734
Interest (net of foreign withholding taxes of $1,378)........... 74,004
----------
Total income.................................................... 409,738
----------
Expenses
Management fee, net of waiver of $273,289....................... 44,791
Distribution fee--Class A....................................... 8,270
Distribution fee--Class B....................................... 276,728
Transfer agent's fees and expenses.............................. 65,000
Custodian's fees and expenses................................... 64,000
Audit fee....................................................... 30,000
Registration fees............................................... 18,000
Directors' fees................................................. 12,500
Reports to shareholders......................................... 7,500
Legal fees...................................................... 5,000
Miscellaneous................................................... 6,812
----------
Total expenses................................................. 538,601
----------
Net investment loss.............................................. (128,863)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain on:
Investment transactions......................................... 1,974,524
Foreign currency transactions................................... 54,176
----------
2,028,700
----------
Net change in unrealized appreciation/depreciation of:
Investments..................................................... 7,613,674
Foreign currencies.............................................. (57,013)
----------
7,556,661
----------
Net gain on investments and foreign currencies................... 9,585,361
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $9,456,498
==========
</TABLE>
See Notes to Financial Statements.
PRUDENTIAL GLOBAL GENESIS FUND
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
NOVEMBER 30, MAY 31,
1993 1993
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss)....................... $ (128,863) $ 21,117
Net realized gain on investment and foreign
currency transactions............................. 2,028,700 3,863,158
Net change in unrealized appreciation/depreciation
of investments and foreign currencies............. 7,556,661 2,251,281
------------ -----------
Net increase in net assets resulting from
operations........................................ 9,456,498 6,135,556
------------ -----------
Dividends and distributions (Note 1)
Dividends to shareholders in excess of net
investment income
Class A............................................ (49,544) --
Class B............................................ (148,152) --
------------ -----------
(197,696) --
------------ -----------
Distributions to shareholders from net realized
gains on investment and foreign currency
transactions
Class A............................................ (29,710) --
Class B............................................ (266,381) --
------------ -----------
(296,091) --
------------ -----------
Fund share transactions (Note 6)
Net proceeds from shares subscribed................ 81,863,659 12,830,751
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions....... 467,012 --
Cost of shares reacquired.......................... (16,634,100) (18,868,583)
------------ -----------
Net increase (decrease) in net assets from Fund
share transactions................................ 65,696,571 (6,037,832)
------------ -----------
Total increase...................................... 74,659,282 97,724
NET ASSETS
Beginning of period................................. 39,570,953 39,473,229
------------ -----------
End of period....................................... $114,230,235 $39,570,953
============ ===========
</TABLE>
See Notes to Financial Statements.
B-43
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Prudential-Bache Global Genesis Fund, Inc., doing business as Prudential
Global Genesis Fund (the "Fund"), is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. The
Fund's investment objective is long-term growth of capital by investing
primarily in equity securities of foreign and domestic companies with market
capitalizations of less than U.S.$750 million.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION: Securities traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Securities for which market quotations are not readily available, including
restricted securities, will be valued at fair value as determined in good faith
according to a pricing procedure developed by the Investment Adviser under
procedures established by and under the general supervison of the Fund's Board
of Directors.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian 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.
The Fund may invest up to 5% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition
under securities law ("restricted securities"). With regards to the restricted
security held by the Fund at November 30, 1993, the Fund may not demand
registration by the issuer. Restricted securities are valued pursuant to the
valuation procedures noted above.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented using the foreign exchange
rates and market values at the close of the fiscal period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of securities held at the end of the fiscal
period. Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of long-term portfolio securities sold during the fiscal period.
Net realized gain on foreign currency transactions of $54,176 represents net
foreign exchange gains from disposition of foreign currencies, currency gains
or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest
and foreign taxes recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets and liabilities (other than investments)
at fiscal period end exchange rates are reflected as a component of unrealized
appreciation on foreign currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic
origin as a result of, among other factors, the possibility of political or
economic instability and the level of governmental supervision and regulation
of foreign securities markets.
SECURITIES TRANSACTIONS AND 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 an accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to
B-44
<PAGE>
each class of shares of the Fund based upon the relative proportion of net
assets of each class at the beginning of the day.
FEDERAL INCOME 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 income to shareholders.
Therefore, no federal income tax provision is required.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates.
DIVIDENDS AND DISTRIBUTIONS: The Fund expects to pay dividends of net investment
income and distributions of net realized capital gains, if any, at least
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for wash sale transactions.
RECLASSIFICATION OF CAPITAL ACCOUNTS: Effective June 1, 1993, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. As a result of this statement, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined
in accordance with income tax regulations. The effect caused by adopting this
statement was to decrease paid-in capital by $1,226,725, decrease accumulated
net investment loss by $1,381,176 and decrease accumulated net realized gains
on investments by $154,451 with respect to amounts reported through May 31,
1993. Net investment income, net realized gains and net assets were affected
by this change.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Mutual Fund Management,
Inc. ("PMF"). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of
such services. PMF has entered into a subadvisory agreement with The
Prudential Investment Corporation ("PIC"); PIC furnishes investment advisory
services in connection with the management of the Fund. PMF pays for the
services of PIC, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of 1% of the average daily net assets of the Fund. For the period
ended October 31, 1993, PMF voluntarily waived 100% of its management fee.
Effective November 1, 1993, PMF reduced the management fee waiver to 50%
totalling $273,289 ($.13 per share or .86% (annualized) of average net
assets).
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. ("PMFD"), which acts as the distributor of the Class A
shares of the Fund, and PSI, which acts as distributor of the Class B shares
of the Fund (collectively the "Distributors"). To reimburse the Distributors
for their expenses incurred in distributing the Fund's Class A and Class B
shares, the Fund, pursuant to plans of distribution, pays the Distributors a
reimbursement accrued daily and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its distribution-
related expenses with respect to Class A shares at an annual rate of up to .30
of 1% of the average daily net assets of the Class A shares. Such expenses
under the Class A Plan were .20 of 1% of the average daily net assets of the
Class A shares for the six months ended November 30, 1993. PMFD pays various
broker-dealers, including PSI and Pruco Securities Corporation ("Prusec"),
affiliated broker-dealers, for account servicing fees and other expenses
incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its distribution-
related expenses with respect to Class B shares at an annual rate of up to 1%
of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for payments of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Fund under the plans
and the receipt of initial sales charges (Class A only) and contingent
deferred sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $246,200 in
front-end sales charges resulting from sales of Class A shares during the six
months ended November 30, 1993. From these fees, PMFD paid such sales charges
to dealers (PSI and Prusec) which in turn paid commissions to salespersons.
B-45
<PAGE>
With respect to the Class B Plan, at any given time, the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through
the imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant
to the Class B Plan. For the six months ended November 30, 1993, PSI advised
the Fund that it received approximately $37,200 in contingent deferred sales
charges imposed upon certain redemptions by investors. PSI, as distributor,
has also advised the Fund that at November 30, 1993, the amount of
distribution expenses incurred by PSI and not yet reimbursed by the Fund or
recovered through contingent deferred sales charges approximated $2,432,000.
This amount may be recovered through future payments under the Class B Plan or
contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services, Inc. ("PMFS"), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the six months ended
November 30, 1993, the Fund incurred fees of approximately $60,000 for the
services of PMFS. As of November 30, 1993, approximately $27,000 of such fees
were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates.
For the six months ended November 30, 1993, PSI and/or its foreign
affiliates earned approximately $3,200 in brokerage commissions from portfolio
transactions executed on behalf of the Fund.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments, for the six months ended November 30, 1993 aggregated $65,440,520
and $12,048,676, respectively.
The federal income tax basis of the Fund's investments at November 30, 1993
was $95,896,047 and accordingly, net unrealized appreciation for federal
income tax purposes was $16,093,684 (gross unrealized appreciation--$18,355,050;
gross unrealized depreciation--$2,261,366).
NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund along with other affiliated registered investment companies,
transfers uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or federal agency obligations. As of November
30, 1993, the Fund had a 0.7% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Fund represented
$11,258,000 in principal amount. As of such date, each repurchase agreement in
the joint account and the collateral therefor were as follows:
Bear Stearns & Co., 3.23%, dated 11/30/93, in the principal amount of
$484,000,000, repurchase price $484,043,426, due 12/1/93; collateralized by
$190,685,000 U.S. Treasury Notes, 4.25%, due 11/30/95 and $300,000,000 U.S.
Treasury Notes, 5.75%, due 8/15/03; approximate aggregate value including
accrued interest--$496,292,534.
Goldman Sachs & Co., 3.18%, dated 11/30/93, in the principal amount of
$287,000,000, repurchase price $287,025,352, due 12/1/93; collateralized by
$213,355,000 U.S. Treasury Bonds, 10.375%, due 11/15/12; approximate value
including accrued interest--$297,013,953.
Smith Barney Shearson, Inc., 3.22%, dated 11/30/93, in the principal amount
of $175,000,000, repurchase price $175,015,653, due 12/1/93; collateralized by
$20,000,000 U.S. Treasury Bills, 3.22%, due 12/16/93; $20,000,000 U.S.
Treasury Notes, 4.875%, due 1/31/94; $50,000,000 U.S. Treasury Bills, 3.22%
due 3/24/94; $560,000 U.S. Treasury Bills, 3.22%, due 3/31/94; $30,000,000
U.S. Treasury Bonds, 7.50%, due 11/15/16; $19,455,000 U.S. Treasury Bonds,
8.125% due 8/15/21 and $26,000,000 U.S. Treasury Bonds, 8.00%, due 11/15/21;
approximate aggregate value including accrued interest--$179,435,385.
J.P. Morgan Secruities, Inc., 3.20%, dated 11/30/93, in the principal amount
of $325,000,000, repurchase price $325,028,889, due 12/1/93; collateralized by
$50,000,000 U.S. Treasury Notes, 4.25%, due 7/31/95; $23,113,000 U.S. Treasury
Notes, 6.00%, due 11/30/97; $50,000,000 U.S. Treasury Notes, 4.875% due
1/31/94; $50,000,000 U.S. Treasury Notes, 8.625, due 8/15/94; $100,000,000
U.S. Treasury Notes, 5.75%, due 3/31/94 and $50,000,000 U.S. Treasury Notes,
5.125%, due 2/28/98; approximate aggregate value including accrued
interest--$331,826,945.
B-46
<PAGE>
Kidder Peabody & Co., 3.23%, dated 11/30/93, in the principal amount of
$375,000,000, repurchase price $375,033,646, due 12/1/93; collateralized by
$16,765,000 U.S. Treasury Notes, 9.25%, due 1/15/96 and $298,000,000 U.S.
Treasury Bonds, 8.125%, due 8/15/21; approximate aggregate value including
accrued interest--$387,047,017.
NOTE 6. CAPITAL
The Fund offers both Class A and Class B shares. Class A shares are sold with a
front-end sales charge of up to 5.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Both classes of shares have equal
rights as to earnings, assets and voting privileges except that each class
bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan. There are 500 million shares of common stock,
$.01 par value per share, divided into two classes, designated Class A and B
common stock, each of which consists of 250 million authorized shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
- ------- --------- -----------
<S> <C> <C>
Six months ended November 30, 1993:
Shares sold.............................................. 1,097,407 $18,879,421
Shares issued in reinvestment of dividends and
distributions........................................... 4,664 72,705
Shares reacquired........................................ (293,529) (5,191,685)
--------- -----------
Net increase in shares outstanding....................... 808,542 $13,760,441
========= ===========
Year ended May 31, 1993:
Shares sold.............................................. 70,451 $ 936,730
Shares reacquired........................................ (149,896) (1,845,560)
--------- -----------
Net decrease in shares outstanding....................... (79,445) $ (908,830)
========= ===========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
- ------- ----------- ------------
<S> <C> <C>
Six months ended November 30, 1993:
Shares sold........................................... 3,787,863 $ 62,984,238
Shares issued in reinvestment of dividends and
distributions........................................ 25,873 394,307
Shares reacquired..................................... (690,761) (11,442,415)
----------- ------------
Net increase in shares outstanding.................... 3,122,975 $ 51,936,130
=========== ============
Year ended May 31, 1993:
Shares sold........................................... 914,538 $ 11,894,021
Shares reacquired..................................... (1,374,192) (17,023,023)
----------- ------------
Net decrease in shares outstanding.................... (459,654) $(5,129,002)
=========== ============
</TABLE>
B-47
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
JANUARY 22,
PER SHARE SIX MONTHS 1990@
OPERATING ENDED YEAR ENDED MAY 31, THROUGH
PERFORMANCE: NOVEMBER 30, ---------------------- MAY 31,
1993++ 1993++ 1992++ 1991 1990
------------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $15.34 $12.62 $11.95 $12.62 $12.41
------- ------ ------ ------ ------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income (loss)+.. .03 .10 .02 (.03) (.04)
Net realized and
unrealized gain
(loss) on
investment and
foreign currency
transactions.... 2.61 2.62 .65 (.64) .25
------- ------ ------ ------ ------
Total from
investment
operations..... 2.64 2.72 .67 (.67) .21
------- ------ ------ ------ ------
LESS
DISTRIBUTIONS
Dividends from
net investment
income.......... (.15) -- -- -- --
Distributions
paid to
shareholders
from net
realized gains
on investment
and foreign
currency
transactions.... (.09) -- -- -- --
------- ------ ------ ------ ------
Total
distributions.. (.24) -- -- -- --
------- ------ ------ ------ ------
Net asset value,
end of period $ 17.74 $15.34 $12.62 $11.95 $12.62
======= ====== ====== ====== ======
TOTAL RETURN (1):. 17.43% 21.55% 5.61% (5.31)% 1.69%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period (000). $18,313 $3,435 $3,829 $4,059 $2,137
Average net
assets (000).... $ 8,248 $3,106 $3,771 $2,569 $1,204
Ratios to average
net assets:
Expenses,
including
distribution
fees+.......... 1.00%** 1.49% 1.50% 2.72%# 3.90%**
Expenses,
excluding
distribution
fees+.......... .80%** 1.29% 1.30% 2.52%# 3.70%**
Net investment
income (loss)+. .25%** .79% .19% (.61)% (1.71)%**
Portfolio
turnover rate... 20% 67% 57% 95% 72%
<CAPTION>
CLASS B
----------------------------------------------------------------
PER SHARE SIX MONTHS
OPERATING ENDED YEAR ENDED MAY 31,
PERFORMANCE: NOVEMBER 30, -------------------------------------------------
1993++ 1993++ 1992++ 1991 1990 1989
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $14.93 $12.38 $11.82 $12.58 $12.28 $10.80
-------------- --------- --------- --------- --------- ---------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income (loss)+ (.07) -- (.07) (.15) (.14) (.13)
Net realized and
unrealized gain
(loss) on
investment and
foreign currency
transactions.... 2.58 2.55 .63 (.61) 1.30 1.74
-------------- --------- --------- --------- --------- ---------
Total from
investment
operations..... 2.51 2.55 .56 (.76) 1.16 1.61
-------------- --------- --------- --------- --------- ---------
LESS
DISTRIBUTIONS
Dividends from
net investment
income.......... (.05) -- -- -- -- --
Distributions
paid to
shareholders
from net
realized gains
on investment
and foreign
currency
transactions.... (.09) -- -- -- (.86) (.13)
-------------- --------- --------- --------- --------- ---------
Total
distributions.. (.14) -- -- -- -- --
-------------- --------- --------- --------- --------- ---------
Net asset value,
end of period $ 17.30 $ 14.93 $ 12.38 $ 11.82 $ 12.58 $ 12.28
============== ========= ========= ========= ========= =========
TOTAL RETURN (1):. 16.94% 20.60% 4.74% (6.04)% 9.72% 15.10%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period (000). $95,917 $36,136 $35,644 $40,200 $39,868 $13,254
Average net
assets (000).... $55,194 $31,561 $37,236 $37,689 $26,161 $11,495
Ratios to average
net assets:
Expenses,
including
distribution
fees+.......... 1.80%** 2.29% 2.30% 3.48%# 3.66%# 3.52%#
Expenses,
excluding
distribution
fees+.......... .80%** 1.29% 1.30% 2.48%# 2.70%# 2.52%#
Net investment
income (loss)+. (.50)%** (.01)% (.57)% (1.45)% (1.76)% (1.18)%
Portfolio
turnover rate... 20% 67% 57% 95% 72% 60%
</TABLE>
- ---------
@ Commencement of offering of Class A shares.
** Annualized.
+ Net of expense subsidies and/or fee waivers (all reported periods except
1991).
++ Calculated based upon average shares outstanding during the fiscal period.
# Restated to reflect reclassification of foreign withholding taxes as a
reduction of related income.
(1) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on
the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a full
year are not annualized.
See Notes to Financial Statements.
B-48
<PAGE>
DESCRIPTION OF SECURITY RATINGS
MOODY'S INVESTORS SERVICE
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
SHORT-TERM DEBT
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt which have an original maturity not exceeding one
year.
P-1: Issues rated "Prime-1" or "P-1" (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations.
P-2: Issues rated "Prime-2" or "P-2" (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations.
STANDARD & POOR'S CORPORATION
BOND RATINGS
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher-rated categories.
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is overwhelming or very strong. A "+" designation is applied to
those issues rated A-1 which possess an overwhelming degree of safety.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as high for issues
designated A-1.
A-1
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
(1) Financial statements included in the Prospectus constituting Part A
of this Registration Statement:
Financial Highlights.
(2) Financial statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:
Portfolio of Investments at May 31, 1993.
Statement of Assets and Liabilities at May 31, 1993.
Statement of Operations for the fiscal year ended May 31, 1993.
Statement of Changes in Net Assets for the fiscal years ended May 31,
1993 and 1992.
Notes to Financial Statements. (Part B)
Financial Highlights
Report of Independent Accountants.
(B) EXHIBITS:
1.(a) Amended Articles of Incorporation of the Registrant, incorporated
by reference to Exhibit No. 1 to the Registration Statement on Form
N-1A (File No. 33-15985) filed on July 22, 1987.
(b) Amendment to Articles of Incorporation, incorporated by reference
to Exhibit No. 1(b) to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-15985) filed on July
31, 1989.
(c) Amendment to Articles of Incorporation, incorporated by reference
to Exhibit No. 1(c) to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A (File No. 33-15985) filed on
December 28, 1989.
(d) Form of Amended and Restated Articles of Incorporation.*
2.By-Laws of the Registrant, as amended, incorporated by reference to
Exhibit No. 2 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-15985) filed on October 13, 1987.
(b) Amendment to By-Laws, incorporated by reference to Exhibit No.
2(b) to Post-Effective Amendment No. 2 to the Registration Statement
on Form N-1A (File No. 33-15985) filed on July 31, 1989.
(c) Form of Restated By-Laws.*
4.(a) Specimen certificate for shares of common stock, $.01 par value,
of the Registrant, incorporated by reference to Exhibit No. 4 to
Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-15985) filed on July 28, 1988.
(b) Specimen certificate for Class A shares of common stock, $.01 par
value, of the Registrant, incorporated by reference to Exhibit No.
4(b) to Post-Effective Amendment No. 5 to the Registration Statement
on Form N-1A (File No. 33-15985) filed on September 28, 1990.
5.(a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc., incorporated by reference to Exhibit No. 5(a)
to Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A (File No. 33-15985) filed on December 28, 1989.
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, incorporated by
reference to Exhibit No. 5(b) to Post-Effective Amendment No. 4 to
the Registration Statement on Form N-1A (File No. 33-15985) filed on
December 28, 1989.
C-1
<PAGE>
6.(a) Distribution Agreement (Class A Shares) between the Fund and
Prudential Mutual Fund Distributors, Inc.*
(b) Distribution Agreement (Class B Shares) between the Fund and
Prudential Securities Incorporated.*
(c) Form of Distribution and Service Agreement for Class A shares.*
(d) Form of Distribution and Service Agreement for Class B shares.*
(e) Form of Distribution and Service Agreement for Class C shares.*
8.Custodian Contract between the Registrant and State Street Bank and
Trust Company, incorporated by reference to Exhibit No. 8 to Post-
Effective Amendment No. 2 to the Registration Statement on Form N-1A
(File No. 33-15985) filed on July 31, 1989.
9.Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc., incorporated by reference to
Exhibit No. 9 to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-15985) filed on July 31, 1989.
10.Opinion of Counsel, incorporated by reference to Exhibit No. 10 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-15985) filed on October 13, 1987.
11.Consent of Independent Accountants.*
13.Purchase Agreement, incorporated by reference to Exhibit No. 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-15985) filed on October 13, 1987.
15.(a) Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (Class A Shares).*
(b) Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (Class B Shares).*
(c) Form of Distribution and Service Plan for Class A shares.*
(d) Form of Distribution and Service Plan for Class B shares.*
(e) Form of Distribution and Service Plan for Class C shares.*
16.(a) Schedule of Computation of Performance Quotations for Class B
shares, incorporated by reference to Exhibit No. 16 to Post-Effective
Amendment No. 2 to the Registration Statement on Form N-1A (File No.
33-15985) filed on July 31, 1989.
(b) Schedule of Computation of Performance Quotations for Class A
shares, incorporated by reference to Exhibit No. 16(b) to Post-
Effective Amendment No. 5 to the Registration Statement on Form N-1A
(File No. 33-15985) filed on September 28, 1990
Other Exhibits:
Powers of Attorney for:
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Louis A. Weil, III
Executed copies filed under Other Exhibits to Post-Effective Amendment No. 3
to the Registration Statement on Form N-1A (File No. 33-15985) filed on
November 3, 1989.
- ---------
* Filed herewith.
C-2
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of March 31, 1994, there were 1,829 and 6,129 record holders of Class A
and Class B shares, respectively, of common stock, $.01 par value per share,
of the Registrant.
ITEM 27. INDEMNIFICATION.
As permitted by Sections 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Article VI of the Fund's By-Laws (Exhibit 2 to
the Registration Statement), officers, directors, employees and agents of the
Registrant will not be liable to the Registrant, any stockholder, officer,
director, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 2-418 of Maryland General Corporation Law permits indemnification of
directors who acted in good faith and reasonably believed that the conduct was
in the best interests of the Registrant. As permitted by Section 17(i) of the
1940 Act, pursuant to Section 10 of each Distribution Agreement (Exhibits 6(a)
and 6(b) to the Registration Statement), each Distributor of the Registrant
may be indemnified against liabilities which it may incur, except liabilities
arising from bad faith, gross negligence, willful misfeasance or reckless
disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) 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 1940 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 connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the shares 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 1940 Act and will be governed
by the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of
indemnification payments to officers and directors under certain
circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from
reckless disregard by them of their respective obligations and duties under
the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and each Distribution Agreement in a manner
consistent with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act so long as the interpretation of Sections 17(h) and 17(i)
of such Act remain in effect and are consistently applied.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(A) PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
See "How the Fund Is Managed-Manager" in the Prospectus constituting Part A
of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed on November 13, 1987).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
C-3
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice President Executive Vice President and Director of Marketing,
and Director of Marketing PMF
John D. Brookmeyer, Jr. Director Senior Vice President, The Prudential Insurance
Two Gateway Center Company of America (Prudential); Senior Vice
Newark, NJ 07102 President (PIC)
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential
Securities
Fred A. Fiandaca Executive Vice President, Executive Vice President, Chief Operating Officer and
Raritan Plaza One Chief Operating Officer and Director, PMF; Chairman, Chief Operating Officer and
Edison, NJ 08847 Director Director, Prudential Mutual Fund Services, Inc.
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential
Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and
President, General Secretary, PMF; Senior
Counsel and Vice President, Prudential Securities
Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Financial and
President, Chief Administrative Officer,
Financial and Treasurer and Director, PMF; Senior Vice President,
Administrative Officer, Prudential Securities
Treasurer and Director
Eugene B. Heimberg Director Senior Vice President, Prudential; President, Director
Prudential Plaza and Chief Investment Officer, PIC
Newark, NJ 07102
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President and Director, Prudential
Securities; Director,
Prudential Securities Group (PSG)
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF;
Executive Officer Executive Vice President, Director and Member of
and Director Operating Committee, Prudential Securities; Director,
PSG
S. Jane Rose Senior Vice Senior Vice President, Senior Counsel and Assistant
President, Senior Secretary, PMF;
Counsel and Senior Vice President and Senior Counsel, Prudential
Assistant Secretary Securities
Donald G. Southwell Director Senior Vice President, Prudential; Director, PSG
213 Washington Street
Newark, NJ 07102
</TABLE>
(B) PRUDENTIAL INVESTMENT CORPORATION (PIC)
See "How the Fund is Managed--Subadvisers" in the Prospectus constituting
Part A of this Registration Statement and "Subadviser" in the Statement of
Additional Information constituting Part B of this Registration Statement.
The business and other connections of PIC's directors and executive officers
are as set forth below. Except as otherwise indicated, the address of each
person is Prudential Plaza, Newark, NJ 07102.
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President, Vice President, Prudential; Senior Vice President,
Chief Financial and Chief Financial and Compliance Officer, PIC
Compliance Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice Presi-
Two Gateway Center dent, PIC
Newark, NJ 07102
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice Presi-
Two Gateway Center dent, PIC
Newark, NJ 07102
Eugene B. Heimberg President, Director and Senior Vice President, Prudential; President, Director
Chief Investment Officer and Chief Investment Officer, PIC
Garnett L. Keith, Jr. Director Vice Chairman and Director, Prudential; Director, PIC
Harry E. Knapp, Jr. Vice President Vice President, Prudential; Vice President, PIC
Four Gateway Center
Newark, NJ 07102
William P. Link Senior Vice President Executive Vice President, Prudential; Senior Vice
Four Gateway Center President, PIC
Newark, NJ 07102
Robert E. Riley Executive Vice Executive Vice President, Prudential; Executive Vice
800 Boylston Avenue President President, PIC; Director of PSG
Boston, MA 02199
James W. Stevens Executive Vice Executive Vice President, Prudential; Executive Vice
Four Gateway Center President President, PIC;
Newark, NJ 07102 Director, PSG
Robert C. Winters Director Chairman of the Board and Chief Executive Officer,
Prudential; Director, PIC; Chairman of the Board, PSG
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential; Executive Vice President,
President PIC
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a)(i) Prudential Securities Incorporated is distributor for Prudential
Government Securities Trust (Intermediate Term Series), The Target Portfolio
Trust and for Class B shares of The BlackRock Government Income Trust,
Prudential Adjustable Rate Securities Fund, Inc., Prudential California
Municipal Fund (California Series), Prudential Equity Fund, Inc., Prudential
Equity Income Fund, Prudential FlexiFund, Prudential Global Fund, Inc.,
Prudential-Bache Global Genesis Fund, Inc. (d/b/a Prudential Global Genesis
Fund), Prudential-Bache Global Natural Resources Fund, Inc. (d/b/a Prudential
Global Natural Resources Fund), Prudential-Bache GNMA Fund, Inc. (d/b/a
Prudential GNMA Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a
Prudential Government Plus Fund), Prudential Growth Fund, Inc., Prudential-
Bache Growth Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity
Fund), Prudential-Bache High Yield Fund, Inc. (d/b/a Prudential High Yield
Fund), Prudential IncomeVertible (R) Fund, Inc., Prudential Intermediate
Global Income Fund, Inc., Prudential Multi-Sector Fund, Inc., Prudential
Municipal Bond Fund, Prudential Municipal Series Fund (except Connecticut
Money Market Series, Massachusetts Money Market Series, New York Money Market
Series, New Jersey Money Market Series and Florida Series), Prudential-Bache
National Municipals Fund, Inc. (d/b/a Prudential National Municipals Fund),
Prudential Pacific Growth Fund, Prudential Short-Term Global Income Fund,
Inc., Prudential U.S. Government Fund, Prudential-Bache Utility Fund, Inc.
(d/b/a Prudential Utility Fund), Global Utility Fund, Inc. and Nicholas-
Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund). Prudential
Securities is also a depositor for the following unit investment trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trusts Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
C-5
<PAGE>
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Inc. is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series and California
Income Series), Prudential Government Securities Trust (Money Market Series
and U.S. Treasury Money Market Series), Prudential Institutional Liquidity
Portfolio, Inc., Prudential-Bache MoneyMart Assets Inc. (d/b/a Prudential
MoneyMart Assets Fund), Prudential Municipal Series Fund (Connecticut Money
Market Series, Massachusetts Money Market Series, New York Money Market
Series, New Jersey Money Market Series and Florida Series), Prudential-Bache
Special Money Market Fund, Inc. (d/b/a Prudential Special Money Market Fund),
Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a Prudential Tax-Free Money
Fund), and for Class A shares of Prudential Adjustable Rate Securities Fund,
Inc., The BlackRock Government Income Trust, Prudential California Municipal
Series (California Series), Prudential Equity Fund, Inc., Prudential Equity
Income Fund, Prudential FlexiFund, Prudential Global Fund, Inc., Prudential-
Bache Global Genesis Fund, Inc. (d/b/a Prudential Global Genesis Fund),
Prudential-Bache Global Natural Resources Fund, Inc. (d/b/a Prudential Global
Natural Resources Fund), Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential
GNMA Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a Prudential
Government Plus Fund), Prudential Growth Fund, Inc., Prudential-Bache Growth
Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity Fund), Prudential-
Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund), Prudential
IncomeVertible (R) Fund, Inc., Prudential Intermediate Global Income Fund,
Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential-Bache National Municipals Fund,
Inc. (d/b/a Prudential National Municipals Fund), Prudential Pacific Growth
Fund, Prudential Short-Term Global Income Fund, Inc., Prudential-Bache
Structured Maturity Fund, Inc. (d/b/a Prudential Structured Maturity Fund),
Prudential U.S. Government Fund, Prudential-Bache Utility Fund, Inc. (d/b/a
Prudential Utility Fund) and Global Utility Fund, Inc. and Nicholas-Applegate
Fund, Inc. (Nicholas-Applegate Growth Equity Fund).
(b)(i) Information concerning the officers and directors of
Prudential Securities Incorporated is set forth below.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME* UNDERWRITER REGISTRANT
- ----- ------------- -------------
<S> <C> <C>
Alan D. Hogan...... Executive Vice President, Chief None
Administrative Officer and
Director
Howard A. Knight... Executive Vice President, None
Director, Corporate Strategy and
New Business Development
George A. Murray... Executive Vice President and Director None
John P. Murray..... Executive Vice President and Director of Risk None
Management
Leland B. Paton.... Executive Vice President and Director None
Richard A. Redeker. Director None
Hardwick Simmons... Chief Executive Officer, President and None
Director
Lee Spencer........ Interim General Counsel None
</TABLE>
- ---------
* The address of each person named is One Seaport Plaza, New York, NY 10292.
C-6
<PAGE>
(ii) Information concerning the officers and directors of Prudential Mutual
Fund Distributors, Inc. is set forth below.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME * UNDERWRITER REGISTRANT
- ------ ------------- --------------
<S> <C> <C>
Joanne Accurso-Soto..... Vice President None
Dennis Annarumma........ Vice President, Assistant Treasurer and Assistant None
Comptroller
Phyllis J. Berman....... Vice President None
Fred A. Fiandaca........ President, Chief Executive Officer and Director None
Raritan Plaza One
Edison, NJ 08847
Stephen P. Fisher....... Vice President None
Frank W. Giordano....... Executive Vice President, General Counsel, None
Secretary and Director
Robert F. Gunia......... Executive Vice President, Treasurer, Comptroller Vice President
and Director
Andrew J. Varley........ Vice President None
Anita L. Whelan......... Vice President and Assistant Secretary None
</TABLE>
- ---------
* The address of each person named is One Seaport Plaza, New York 10292 unless
otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices
of State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts, The Prudential Investment Corporation, Prudential Plaza, 745
Broad Street, Newark, New Jersey, the Registrant, One Seaport Plaza, New York,
New York, and Prudential Mutual Fund Services, Inc., Raritan Plaza One,
Edison, New Jersey. Documents required by Rules 31a-1(b)(5), (6), (7), (9),
(10) and (11) and 31a-1(f) will be kept at Three Gateway Center, documents
required by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One Seaport Plaza and
the remaining accounts, books and other documents required by such other
pertinent provisions of Section 31(a) and the Rules promulgated thereunder
will be kept by State Street Bank and Trust Company and Prudential Mutual Fund
Services, Inc.
ITEM 31. MANAGEMENT SERVICES
Other than as set forth under the captions "How the Fund is Managed--
Manager" and "How the Fund is Managed--Distributor" in the Prospectus and the
captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service
contract.
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes to furnish each person to whom a Prospectus
is delivered with a copy of Registrant's latest annual report to shareholder
upon request and without charge.
C-7
<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 pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York, on the 9th day of May, 1994.
PRUDENTIAL-BACHE GLOBAL GENESIS FUND, INC.
/s/ Lawrence C. McQuade
---------------------------------
(LAWRENCE C. MCQUADE, PRESIDENT)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
Treasurer and
Principal Financial and
/s/ Susan C. Cote Accounting Officer May 9, 1994
- ---------------------------
SUSANC.COTE
/s/ Edward D. Beach Director May 9, 1994
- ---------------------------
EDWARD D. BEACH
/s/ Donald D. Lennox Director May 9, 1994
- ---------------------------
DONALD D. LENNOX
/s/ Douglas H. McCorkindale Director May 9, 1994
- ---------------------------
DOUGLAS H. MCCORKINDALE
/s/ Lawrence C. McQuade Director and President May 9, 1994
- ---------------------------
LAWRENCE C. MCQUADE
/s/ Thomas T. Mooney Director May 9, 1994
- ---------------------------
THOMAS T. MOONEY
/s/ Richard A. Redeker Director May 9, 1994
- ---------------------------
RICHARD A. REDEKER
/s/ Louis A. Weil, III Director May 9, 1994
- ---------------------------
LOUIS A. WEIL, III
</TABLE>
C-8
<PAGE>
PRUDENTIAL GLOBAL GENESIS FUND
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
-------------- ----------- -----------
<C> <S> <C>
1(a) Amended Articles of Incorporation of the
Registrant, incorporated by reference to Exhibit
No. 1 to the Registration Statement on Form N-1A
(File No. 33-15985) filed on July 22, 1987. --
1(b) Amendment to Articles of Incorporation,
incorporated by reference to Exhibit No. 1(b) to
Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-
15985) filed on July 31, 1989. --
1(c) Amendment to Articles of Incorporation,
incorporated by reference to Exhibit No. 1(c) to
Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A (File No. 33-
15985) filed on December 28, 1989. --
1(d) Form of Amended and Restated Articles of
Incorporation.*
2(a) By-Laws of the Registrant, as amended,
incorporated by reference to Exhibit No. 2 to
Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-15985) filed
on October 13, 1987. --
2(b) Amendment to By-Laws, incorporated by reference
to Exhibit No. 2(b) to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A
(File No. 33-15985) filed on July 31, 1989. --
2(c) Form of Restated By-Laws.*
4(a) Specimen certificate for shares of common stock,
$.01 par value, of the Registrant, incorporated
by reference to Exhibit No. 4 to Post-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-15985) filed on July 28,
1988. --
4(b) Specimen certificate for Class A shares of common
stock, $.01 par value, of the Registrant,
incorporated by reference to Exhibit No. 4(b) to
Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A (File No. 33-
15985) filed on September 28, 1990. --
5(a) Management Agreement between the Registrant and
Prudential Mutual Fund Management, Inc.,
incorporated by reference to Exhibit No. 5(a) to
Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A (File No. 33-
15985) filed on December 28, 1989. --
5(b) Subadvisory Agreement between Prudential Mutual
Fund Management, Inc. and The Prudential
Investment Corporation, incorporated by reference
to Exhibit No. 5(b) to Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A
(File No. 33-15985) filed on December 28, 1989. --
6(a) Distribution Agreement (Class A Shares) between
the Fund and Prudential Mutual Fund Distributors,
Inc.*
6(b) Distribution Agreement (Class B Shares) between
the Fund and Prudential Securities Incorporated.*
6(c) Form of Distribution and Service Agreement for
Class A shares.*
6(d) Form of Distribution and Service Agreement for
Class B shares.*
6(e) Form of Distribution and Service Agreement for
Class C shares.*
8 Custodian Contract between the Registrant and
State Street Bank and Trust Company, incorporated
by reference to Exhibit No. 8 to Post-Effective
Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-15985) filed on July 31,
1989. --
9 Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services,
Inc., incorporated by reference to Exhibit No. 9
to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-
15985) filed on July 31, 1989.
10 Opinion of Counsel, incorporated by reference to
Exhibit No. 10 to Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A (File
No. 33-15985) filed on October 13, 1987. --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
-------------- ----------- -----------
<C> <S> <C>
11 Consent of Independent Accountants.*
13 Purchase Agreement, incorporated by reference to
Exhibit No. 13 to Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A (File
No. 33-15985) filed on October 13, 1987. --
15(a) Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940
(Class A Shares).*
15(b) Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940
(Class B Shares).*
15(c) Form of Distribution and Service Plan for Class A
shares.*
15(d) Form of Distribution and Service Plan for Class B
shares.*
15(e) Form of Distribution and Service Plan for Class C
shares.*
16(a) Schedule of Computation of Performance Quotations
for Class B shares, incorporated by reference to
Exhibit No. 16 to Post-Effective Amendment No. 2
to the Registration Statement on Form N-1A (File
No. 33-15985) filed on July 31, 1989. --
16(b) Schedule of Computation of Performance Quotations
for Class A shares, incorporated by reference to
Exhibit No. 16(b) to Post-Effective Amendment No.
5 to the Registration Statement on Form N-1A
(File No. 33-15985) filed on September 28, 1990. --
</TABLE>
- ---------
* Filed herewith.
<PAGE>
Exhibit 1(d)
ARTICLES OF RESTATEMENT
OF
PRUDENTIAL GLOBAL GENESIS FUND, INC.
PRUDENTIAL GLOBAL GENESIS FUND, INC., a Maryland corporation, having its
principal office in the city of Baltimore (hereinafter called the
"Corporation"), hereby certifies to the State of Department of Assessments and
Taxation of Maryland, that:
FIRST: The charter of the Corporation is restated as follows:
ARTICLE I.
I, the incorporator, KARIN JAGEL FLYNN, whose post office address is One
First National Plaza, Suite 3300, Chicago, Illinois 60603, being at least
eighteen years of age, am, under and by virtue of the General Laws of the State
of Maryland authorizing the formation of corporations, forming a corporation.
ARTICLE II.
The name of the corporation (hereinafter called the "Corporation") is
Prudential Global Genesis Fund, Inc.
ARTICLE III.
Purposes
--------
The purpose for which the Corporation is formed is to act as an open-end
investment company of the management type registered as such with the Securities
and Exchange Commission pursuant to the Investment Company Act of 1940 and to
exercise and generally to enjoy all of the powers, rights and privileges granted
to, or conferred upon, corporations by the General Laws of the State of Maryland
now or hereinafter in force.
-1-
<PAGE>
ARTICLE IV.
Address in Maryland
-------------------
The post office address of the place at which the principal office of the
Corporation in the State of Maryland is located is c/o CT Corporation System, 32
south Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is the CT Corporation System,
and its post office address is 32 South Street, Baltimore, Maryland 21202. Said
resident agent is a corporation of the State of Maryland.
ARTICLE V.
Common Stock
------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is 500,000,000 shares of the par value
of $.01 per share and of the aggregate par value of $5,000,000 to be divided
initially into three classes, consisting of 166,666,666.6 shares of Class A
Common Stock, 166,666,666.7 shares of Class B Common Stock and 166,666,666.7
shares of Class C Common Stock.
(a) Each share of Class A Common Stock, Class B Common Stock and
Class C Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical voting, dividend,
liquidation and other rights except that (i) Expenses related to the
distribution of each class of shares shall be borne solely by such
class; (ii) The bearing of such expenses solely by shares of each class
shall be appropriately reflected (in the manner determined by the Board
of Directors) in the net asset value, dividends, distribution and
liquidation rights of the shares of such class; (iii) The Class A Common
Stock shall be subject to a front-end sales load and a Rule 12b-1
distribution fee as determined by the Board of Directors from time to
time; (iv) The Class B Common Stock shall be subject to a contingent
deferred sales charge
-2-
<PAGE>
and a Rule 12b-1 distribution fee as determined by the Board of
Directors from time to time; and (v) The Class C Common Stock shall be
subject to a contingent deferred sales and a Rule 12b-1 distribution fee
as determined by the Board of Directors from time to time. All shares of
each particular class shall represent an equal proportionate interest in
that class, and each share of any particular class shall be equal to
each other share of that class.
(b) Each share of the Class B Common Stock of the Corporation,
shall be converted automatically, and without any action or choice on
the part of the holder thereof, into shares (including fractions
thereof) of the Class A Common Stock of the Corporation (computed in the
manner hereinafter described), at the applicable net asset value of each
Class, at the time of the calculation of the net asset value of such
Class B Common Stock at such times which may vary between shares
originally issued for cash and shares acquired through the automatic
reinvestment of dividends and distributions with respect to Class B
Common Stock (each "Conversion Date") determined by the Board of
Directors in accordance with applicable laws, rules, regulations and
interpretations of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. and pursuant to such
procedures as may be established from time to time by the Board of
Directors and disclosed in the Corporation's then current prospectus for
such Class A and Class B Common Stock.
(c) The number of shares of the Class A Common Stock of the
Corporation into which a share of the Class B Common Stock is converted
pursuant to Paragraph (1)(b) hereof shall equal the number (including
for this purpose fractions of a share) obtained by dividing the net
asset value per share of the Class B Common Stock for purposes of sales
and redemptions thereof at the time of the calculation of the net asset
value on the Conversion Date by the net asset value per share of the
Class A Common Stock for purposes of sales and redemptions thereof at
the time of the calculation of the net asset value on the Conversion
Date.
(d) On the Conversion Date, the shares of the Class B Common Stock
of the Corporation converted into shares of the Class A Common Stock
will cease to accrue
-3-
<PAGE>
dividends and will no longer be outstanding and the rights of the
holders thereof will cease (except the right to receive declared but
unpaid dividends to the Conversion Date).
(e) The Board of Directors shall have full power and authority to
adopt such other terms and conditions concerning the conversion of
shares of the Class B Common Stock to shares of the Class A Common Stock
as they deem appropriate; provided such terms and conditions are not
inconsistent with the terms contained in this Section 1 and subject to
any restrictions or requirements under the Investment Company Act of
1940 and the rules, regulations and interpretations thereof promulgated
or issued by the Securities and Exchange Commission, any conditions or
limitations contained in an order issued by the Securities and Exchange
Commission applicable to the Corporation, or any restrictions or
requirements under the Internal Revenue Code of 1986, as amended, and
the rules, regulations and interpretations promulgated or issued
thereunder.
Section 2. The Board of Directors may, in its discretion, classify and
reclassify any unissued shares of the capital stock of the Corporation into one
or more additional or other classes or series by setting or changing in any one
or more respects the designations, conversion or other rights, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares and pursuant to such classification or reclassification to
increase or decrease the number of authorized shares of any existing class or
series. If designated by the Board of Directors, particular classes or series
of capital stock may relate to separate portfolios of investments.
Section 3. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class and series of capital stock of the
Corporation shall be entitled to dividends and distributions in such amounts and
at such times, as may be determined by the Board of Directors, and the dividends
and distributions paid with respect to the various classes or series of capital
stock may vary among such classes or series. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the shares of a particular class or series
-4-
<PAGE>
of capital stock may be charged to and borne solely by such class or series and
the bearing of expenses solely by a class or series may be appropriately
reflected (in a manner determined by the Board of Directors) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the shares of each such class or series of capital
stock.
Section 4. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to one
vote for each share standing in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all shares of all
classes and series shall vote together as a single class; provided, however,
that (a) as to any matter with respect to which a separate vote of any class or
series is required by the Investment Company Act of 1940, as amended, and in
effect from time to time, or any rules, regulations or orders issued thereunder,
or by the Maryland General Corporation Law, such requirement as to a separate
vote by that class or series shall apply in lieu of a general vote of all
classes and series as described above; (b) in the event that the separate vote
requirements referred to in (a) above apply with respect to one or more classes
or series, then subject to paragraph (c) below, the shares of all other classes
and series not entitled to a separate vote shall vote together as a single
class; and (c) as to any matter which in the judgment of the Board of Directors
(which shall be conclusive) does not affect the interest of a particular class
or series, such class or series shall not be entitled to any vote and only the
holders of shares of the one or more affected classes and series shall be
entitled to vote.
Section 5. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of shares of capital
stock of the Corporation shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation (as such
liabilities may affect one
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or more of the classes of shares of capital stock of the Corporation) to share
ratably in the remaining net assets of the Corporation; provided, however, that
in the event the capital stock of the Corporation shall be classified or
reclassified into series, holders of any shares of capital stock within such
series shall be entitled to share ratably out of assets belonging to such series
pursuant to the provisions of Section 7(c) of this Article V.
Section 6. Each share of any class of the capital stock of the Corporation,
and in the event the capital stock of the Corporation shall be classified or
reclassified into series, each share of any class of Capital Stock of the
Corporation within such series shall be subject to the following provisions:
(a) The net asset value of each outstanding share of capital stock of
the Corporation (or of a class or series, in the event the capital stock of
the Corporation shall be so classified or reclassified, subject to
subsection (b) of this Section 6, shall be the quotient obtained by
dividing the value of the net assets of the Corporation (or the net assets
of the Corporation attributable or belonging to that class or series as
designated by the Board of Directors pursuant to Articles Supplementary) by
the total number of outstanding shares of capital stock of the Corporation
(or of such class or series, in the event the capital stock of the
Corporation shall be classified or reclassified into series). Subject to
subsection (b) of this Section 6, the value of the net assets of the
Corporation (or of such class or series, in the event the capital stock of
the Corporation shall be classified or reclassified into series) shall be
determined pursuant to the procedures or methods (which procedures or
methods, in the event the capital stock of the Corporation shall be
classified or reclassified into series, may differ from class to class or
from series to series) prescribed or approved by the Board of Directors in
its discretion, and shall be determined at the time or times (which time or
times may, in the event the capital stock of the Corporation shall be
classified into classes or series, differ from series to series) prescribed
or approved by the Board of Directors in its discretion. In addition,
subject to subsection (b) of this Section 6, the Board of Directors, in its
discretion, may suspend the
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<PAGE>
daily determination of net asset value of any share of any series or class
of capital stock of the Corporation.
(b) The net asset value of each share of the capital stock of the
Corporation or any class or series thereof shall be determined in
accordance with any applicable provision of the Investment Company Act of
1940, as amended (the "Investment Company Act"), any applicable rule,
regulation or order of the Securities and Exchange Commission thereunder,
and any applicable rule or regulation made or adopted by any securities
association registered under the Securities Exchange Act of 1934.
(c) All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the stockholder pursuant to the
applicable provisions of the Investment Company Act and laws of the State
of Maryland, including any applicable rules and regulations thereunder.
Each holder of a share of any class or series, upon request to the
Corporation (if such holder's shares are certificated, such request being
accompanied by surrender of the appropriate stock certificate or
certificates in proper form for transfer), shall be entitled to require the
Corporation to redeem all or any part of such shares standing in the name
of such holder on the books of the Corporation (or as represented by share
certificates surrendered to the Corporation by such redeeming holder) at a
redemption price per share determined in accordance with subsection (a) of
this Section 6.
(d) Notwithstanding subsection (c) of this Section 6, the Board of
Directors of the Corporation may suspend the right of the holders of shares
of any or all classes or series of capital stock to require the Corporation
to redeem such shares or may suspend any purchase of such shares:
(i) for any period (A) during which the New York Stock Exchange
is closed, other than customary weekend and holiday closings, or (B)
during which trading on the New York Stock Exchange is restricted;
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<PAGE>
(ii) for any period during which an emergency, as defined by the
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (A) disposal by the Corporation of
securities owned by it and belonging to the affected series of capital
stock (or the Corporation, if the shares of capital stock of the
Corporation have not been classified or reclassified into series) is not
reasonably practicable, or (B) it is not reasonably practicable for the
Corporation fairly to determine the value of the net assets of the
affected series of capital stock; or
(iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of the holders of shares of capital stock of the Corporation.
(e) All shares of the capital stock of the Corporation now or hereafter
authorized shall be subject to redemption and redeemable at the option of
the Corporation. The Board of Directors may by resolution from time to time
authorize the Corporation to require the redemption of all or any part of
the outstanding shares of any class or series upon the sending of written
notice thereof to each holder whose shares are to be redeemed and upon such
terms and conditions as the Board of Directors, in its discretion shall
deem advisable, out of funds legally available therefor, at the net asset
value per share of that class or series determined in accordance with
subsections (a) and (b) of this Section 6 and take all other steps deemed
necessary or advisable in connection therewith.
(f) The Board of Directors may by resolution from time to time authorize
the purchase by the Corporation, either directly or through an agent, of
shares of any class or series of the capital stock of the Corporation upon
such terms and conditions and for such consideration as the Board of
Directors, in its discretion, shall deem advisable out of funds legally
available therefor at prices per share not in excess of the net asset value
per share of that class or series determined in accordance with subsections
(a) and (b) of this
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<PAGE>
Section 6. and to take all other steps deemed necessary or advisable in
connection therewith.
(g) Except as otherwise permitted by the Investment Company Act of 1940,
payment of the redemption price of shares of any class or series of the
capital stock of the Corporation surrendered to the Corporation for
redemption pursuant to the provisions of subsection (c) of this Section 6
or for purchase by the Corporation pursuant to the provisions of
subsections (e) or (f) of this Section 6 shall be made by the Corporation
within seven days after surrender of such shares to the Corporation for
such purpose. Any such payment may be made in whole or in part in portfolio
securities or in cash, as the Board of Directors, in its discretion, shall
deem advisable, and no stockholder shall have the right, other than as
determined by the Board of Directors, to have his or her shares redeemed in
portfolio securities.
(h) In the absence of any specification as to the purposes for which
shares are redeemed or repurchased by the Corporation, all shares so
redeemed or repurchased shall be deemed to be acquired for retirement in
the sense contemplated by the laws of the State of Maryland. Shares of any
class or series retired by repurchase or redemption shall thereafter have
the status of authorized but unissued shares of such class or series.
Section 7. In the event the Directors shall authorize the classification
or reclassification of shares into classes or series, the Board of Directors may
(but shall not be obligated to) provide that each class or series shall have the
following powers, preferences and voting or other special rights, and the
qualifications, restrictions and limitations thereof shall be as follows:
(a) All consideration received by the Corporation for the issue or sale
of shares of capital stock of each series, together with all income,
earnings, profits, and proceeds received thereon, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to the series with
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<PAGE>
respect to which such assets, payments or funds were received by the Corporation
for all purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation. Such assets, payments and
funds, including any proceeds derived from the sale, exchange or liquidation
thereof and any assets derived from any reinvestment of such proceeds in
whatever form the same may be, are herein referred to as "assets belonging to"
such series.
(b) The Board of Directors may from time to time declare and pay dividends
or distributions, in additional shares of capital stock of such series or in
cash, on any or all series of capital stock, the amount of such dividends and
the means of payment being wholly in the discretion of the Board of Directors.
(i) Dividends or distributions on shares of any series shall be paid
only out of earned surplus or other lawfully available assets belonging to
such series.
(ii) Inasmuch as one goal of the Corporation is to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended, or any successor or comparable statute thereto, and Regulations
promulgated thereunder, and inasmuch as the computation of net income and
gains for federal income tax purposes may vary from the computation thereof
on the books of the Corporation, the Board of Directors shall have the
power, in its discretion, to distribute in any fiscal year as dividends,
including dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability for the Corporation for federal income tax
in respect of that year. In furtherance, and not in limitation of the
foregoing, in the event that a series has a net capital loss for a fiscal
year, and to the extent that the net capital loss offsets net capital gains
from such series, the
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<PAGE>
amount to be deemed available for distribution to that series with the
net capital gain may be reduced by the amount offset.
(c) In the event of the liquidation or dissolution of the Corporation,
holders of shares of capital stock of each series shall be entitled to
receive, as a series, out of the assets of the Corporation available for
distribution to such holders, but other than general assets not belonging
to any particular series, the assets belonging to such series; and the
assets so distributable to the holders of shares of capital stock of any
series shall be distributed, subject to the provisions of subsection (d) of
this Section 7, among such stockholders in proportion to the number of
shares of such series held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging
to any particular series and available for distribution, such distribution
shall be made to the holders of all series in proportion to the net asset
value of the respective series determined in accordance with the charter of
the Corporation.
(d) The assets belonging to any series shall be charged with the
liabilities in respect to such series, and shall also be charged with its
share of the general liabilities of the Corporation, in proportion to the
asset value of the respective series determined in accordance with the
charter of the Corporation. The determination of the Board of Directors
shall be conclusive as to the amount of liabilities, including accrued
expenses and reserves, as to the allocation of the same as to a given
series, and as to whether the same or general assets of the Corporation are
allocable to one or more classes.
Section 8. Any fractional shares shall carry proportionately all the rights
of a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
Section 9. No holder of shares of Common Stock of the Corporation shall, as
such holder, have any pre-emptive right to purchase or subscribe for any shares
of the Common Stock of the Corporation of any class or series which it may issue
or sell (whether out of the number of
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<PAGE>
shares authorized by the Articles of Incorporation, or out of any shares of the
Common Stock of the Corporation acquired by it after the issue thereof, or
otherwise).
Section 10. All persons who shall acquire any shares of capital stock of
the Corporation shall acquire the same subject to the provisions of the charter
and By-Laws of the Corporation. All shares of Common Stock of the Corporation
issued on or before the date of the filing of this amendment to the Articles of
Incorporation shall without further act of the Board of Directors or the holders
of such shares be deemed to be shares of Class B Common Stock.
ARTICLE VI.
Directors
---------
The initial number of directors of the Corporation shall be two, and the
names of those who shall act as such until the first meeting of stockholders and
until their successors are duly elected and qualify are as follows:
Michael J. Downey
Andrew H. Freund
However, the By-Laws of the Corporation may fix the number of directors at no
less than three and may authorize the Board of Directors, by the vote of a
majority of the entire Board of Directors, to increase or decrease the number of
directors within a limit specified in the By-Laws (provided that, if there are
no Shares outstanding, the number of directors may be less than three but not
less than one), and to fill the vacancies created by any such increase in the
number of directors. Unless otherwise provided by the By-Laws of the
Corporation, the directors of the Corporation need not be stockholders.
The By-Laws of the Corporation may divide the directors of the Corporation
into classes and prescribe the tenure of office of the several classes; but no
class shall be elected for a period shorter than one year or for a period longer
than five years, and the term of office of at least one class shall expire each
year.
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<PAGE>
ARTICLE VII.
Miscellaneous
-------------
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for creating,
defining, limiting and regulating the powers of the Corporation, the directors
and the stockholders.
Section 1. The Board of Directors shall have the management and control of
the property, business and affairs of the Corporation and is hereby vested with
all the powers possessed by the Corporation itself so far as is not inconsistent
with law or these Articles of Incorporation. In furtherance and without
limitation of the foregoing provisions, it is expressly declared that, subject
to these Articles of Incorporation, the Board of Directors shall have power:
(a) To make, alter, amend or repeal from time to time the By-Laws of
the Corporation except as such power may otherwise be limited in the By-
Laws.
(b) To issue shares of any class or series of the capital stock of the
Corporation.
(c) To authorize the purchase of shares of any class or series in the
open market or otherwise, at prices not in excess of their net asset value
for shares of that class, series or class within such series determined in
accordance with subsections (a) and (b) of Section 6 of Article V hereof,
provided that the Corporation has assets legally available for such
purpose, and to pay for such shares in cash, securities or other assets
then held or owned by the Corporation.
(d) To declare and pay dividends and distributions from funds legally
available therefor on shares of such class or series, in such amounts, if
any, and in such manner (including declaration by means of a formula or
other similar method of determination whether or not the amount of the
dividend or distribution so declared can be calculated at the time of such
declaration) and to the holders of record as of such date, as the Board of
Directors may determine.
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<PAGE>
(e) To take any and all action necessary or appropriate to maintain a
constant net asset value per share of any class, series or class within such
series.
Section 2. Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles applied by or pursuant to the direction of the Board of Directors or
as otherwise required or permitted by the Securities and Exchange Commission,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of shares, past, present and future, of each class or series, and shares
are issued and sold on the condition and undertaking, evidenced by acceptance of
certificates for such shares by, or confirmation of such shares being held for
the account of, any stockholder, that any and all such determinations shall be
binding as aforesaid.
Nothing in this Section 2 shall be construed to protect any director or
officer of this Corporation against liability to the Corporation or its
stockholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Section 3. The directors of the Corporation may receive compensation for
their services, subject, however, to such limitations with respect thereto as
may be determined from time to time by the holders of shares of capital stock of
the Corporation.
Section 4. Except as required by law, the holders of shares of capital
stock of the Corporation shall have only such right to inspect the records,
documents, accounts and books of the Corporation as may be granted by the Board
of Directors of the Corporation.
Section 5. Any vote of the holders of shares of capital stock of the
Corporation authorizing liquidation of the Corporation or proceedings for its
dissolution may authorize the Board of Directors to determine, as provided
herein, or if provision is not made herein, in accordance with generally
accepted accounting principles, which assets are the assets belonging to the
Corporation or any series thereof available for distribution to the holders of
the Corporation or any series thereof (pursuant to the provisions of Section 7
of Article V hereof) and may divide, or authorize the Board of Directors to
divide, such assets among the
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<PAGE>
stockholders of the shares of capital stock of the Corporation or any series
thereof in such manner as to ensure that each such holder receives an amount
from the proceeds of such liquidation or dissolution that such holder is
entitled to, as determined pursuant to the provisions of Sections 3 and 7 of
Article V hereof.
Section 6. A director or officer of the Corporation shall not be liable to
the Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent such exemption from
liability or limitation thereof is not permitted by law (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended.
No amendment, modification or repeal of this Article VII shall adversely
affect any right or protection of a director or officer that exists at the time
of such amendment, modification or repeal.
ARTICLE VIII.
Amendments
----------
The Corporation reserves the right from time to time to amend, alter or
repeal any of the provisions of these Articles of Incorporation (including any
amendment that changes the terms of any of the outstanding Shares by
classification, reclassification or otherwise), and to add or insert any other
provisions that may, under the statutes of the State of Maryland at the time in
force, be lawfully contained in articles of incorporation, and all rights at any
time conferred upon the stockholders of the Corporation by these Articles of
Incorporation are subject to the provisions of this Article VIII.
The term "Articles of Incorporation" as used herein and in the By-Laws of
the Corporation shall be deemed to mean these Articles of Incorporation as from
time to time amended and restated.
SECOND: The provisions set forth in these Articles of Restatement
constitute all of the provisions of the charter of the Corporation as hereby
amended and currently in effect. These Articles do not amend the charter of the
Corporation.
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<PAGE>
THIRD: The restatement of the charter of the Corporation has been approved
by unanimous the affirmative vote of a majority of the Directors at a meeting
duly called and held on _____________, 1994. The Corporation has seven
Directors, Edward D. Beach, Donald D. Lennox, Douglas H. McCorkindale, Lawrence
C. McQuade, Thomas T. Mooney, Richard A. Redeker and Louis A. Weil, III,
currently in office.
IN WITNESS WHEREOF, the Articles of Restatement have been executed on
behalf of Prudential Global Genesis Fund, Inc. this ____ day of ______________,
1994.
PRUDENTIAL GLOBAL GENESIS
FUND, INC.
By:
-------------------------
Lawrence C. McQuade
President
Attest
[Seal]
____________________________________
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<PAGE>
The undersigned, President of Prudential Global Genesis Fund, Inc., who
executed on behalf of said Corporation the foregoing Articles of Restatement, of
which this certificate is made a part, hereby acknowledges that these Articles
of Restatement are the act of the Corporation and affirms that to the best of
his knowledge, information and belief all matters and facts set forth therein
relating to the authorization and approval of the Articles of Restatement are
true in all material respects and that this statement is made under the
penalties of perjury.
----------------------------------
Lawrence C. McQuade
President
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<PAGE>
EXHIBIT 2(c)
Prudential Global Genesis Fund, Inc.
Restated By-Laws
as Amended through _______________, 1994
<PAGE>
Prudential Global Genesis Fund, Inc.
By-Laws
ARTICLE I.
Stockholders
------------
Section 1. Place of Meeting. All meetings of the stockholders shall be
----------------
held at the principal office of the Corporation in the State of Maryland or at
such other place within the United States as may from time to time be designated
by the Board of Directors and stated in the notice of such meeting.
Section 2. Annual Meetings. The annual meeting of the stockholders of the
---------------
Corporation shall be held in the month of September of each year on such date
and at such hour as may from time to time be designated by the Board of
Directors and stated in the notice of such meeting, for the purpose of electing
directors for the ensuing year and for the transaction of such business as may
properly be brought before the meeting; provided however, that an annual meeting
of stockholders is not required to be held in any year in which the election of
directors is not required to be acted upon by stockholders pursuant to the
Investment Company Act of 1940.
Section 3. Meetings. Meetings of the stockholders for any purpose or
--------
purposes may be called by the Chairman of the Board, the President or a majority
of the Board of Directors, and shall be called by the Secretary upon receipt of
the request in writing signed by stockholders holding not less than 25% of the
common stock issued and outstanding and entitled to vote thereat. Such request
shall state the purpose or purposes of the proposed meeting. The Secretary
shall inform such stockholders of the reasonably estimated costs of preparing
and mailing such notice of meeting and upon payment to the Corporation of such
costs, the Secretary shall give notice stating the purpose or purposes of the
meeting as required in this Article and by-law to all stockholders entitled to
notice of such meeting. No meeting need be called upon the request of the
holders of shares entitled to cast less than a majority of all votes entitled to
be cast at such
2
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meeting to consider any matter which is substantially the same as a matter voted
upon at any meeting of stockholders held during the preceding twelve months.
Section 4. Notice of Meetings of Stockholders. Not less than ten days'
----------------------------------
held not more than ninety days' written or printed notice of every meeting of
stockholders, stating the time and place thereof and the general nature of the
business proposed to be transacted thereat, shall be given to each stockholder
entitled to vote thereat by leaving the same with such stockholder or at such
stockholder's residence or usual place of business or by mailing it, postage
prepaid, and addressed to such stockholder at such stockholder's address as it
appears upon the books of the Corporation. If mailed, notice shall be deemed to
be given when deposited in the United States mail addressed to the stockholder
as aforesaid.
No notice of the time, place or purpose of any meeting of stockholders need
be given to any stockholder who attends in person or by proxy or to any
stockholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
Section 5. Record Dates. The Board of Directors may fix, in advance, a
------------
held not exceeding ninety days preceding the date of any meeting of
stockholders, any dividend payment date or any date for the allotment of rights,
as a record date for the determination of the stockholders entitled to notice of
and to vote at such meeting or entitled to receive such dividends or rights, as
the case may be; and only stockholders of record on such date shall be entitled
to notice of and to vote at such meeting or to receive such dividends or rights,
as the case may be. In the case of a meeting of stockholders, such date shall
not be less than ten days prior to the date fixed for such meeting.
Section 6. Quorum, Adjournment of Meetings. The presence in person or by
-------------------------------
proxy of the holders of record of one-third of the shares of the common stock of
the Corporation issued and outstanding and entitled to vote thereat shall
constitute a quorum at all meetings of the stockholders except as otherwise
provided in the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the holders of a
3
<PAGE>
majority of the stock present in person or by proxy shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until stockholders owning the requisite amount of stock entitled to
vote at such meeting shall be present. At such adjourned meeting at which
stockholders owning the requisite amount of stock entitled to vote thereat shall
be represented, any business may be transacted which might have been transacted
at the meeting as originally notified.
Section 7. Voting and Inspectors. At all meetings, stockholders of record
---------------------
entitled to vote thereat shall have one vote for each share of common stock
standing in his name on the books of the Corporation (and such stockholders of
record holding fractional shares, if any, shall have proportionate voting
rights) on the date for the determination of stockholders entitled to vote at
such meeting, either in person or by proxy appointed by instrument in writing
subscribed by such stockholder or his duly authorized attorney.
All elections shall be had and all questions decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of directors, the Chairman of the meeting may, and upon the
request of the holders of ten percent (10%) of the stock entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of director shall be appointed such
inspector.
Section 8. Conduct of Stockholders' Meetings. The meetings of the
---------------------------------
stockholders shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if he is not present, by a Vice-President, or
if none of them is present, by a Chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as a Secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act; if
neither the Secretary nor the Assistant Secretary is present, then the meeting
shall elect its Secretary.
4
<PAGE>
Section 9. Concerning Validity of Proxies, Ballots, etc. At every meeting
--------------------------------------------
of the stockholders, all proxies shall be received and taken in charge of and
all ballots shall be received and canvassed by the Secretary of the meeting, who
shall decide all questions concerning the qualification of voters, the validity
of the proxies and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the Chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
ARTICLE II.
Board of Directors
------------------
Section 1. Number and Tenure of Office. The business and affairs of the
---------------------------
Corporation shall be conducted and managed by a Board of Directors of not less
than three nor more than twelve directors, as may be determined from time to
time by vote of a majority of the directors then in office, provided that if
there is no stock outstanding the number of directors may be less than three but
not less than one. Directors need not be stockholders.
Section 2. Vacancies. In case of any vacancy in the Board of Directors
---------
through death, resignation or other cause, other than an increase in the number
of directors, a majority of the remaining directors, although a majority is less
than a quorum, by an affirmative vote, may elect a successor to hold office
until the next meeting of stockholders or until his successor is chosen and
qualifies.
Section 3. Increase or Decrease in Number of Directors. The Board of
-------------------------------------------
Directors, by the vote of a majority of the entire Board, may increase the
number of directors and may elect directors to fill the vacancies created by any
such increase in the number of directors until the next meeting of stockholders
or until their successors are duly chosen and qualified. The Board of
Directors, by the vote of a majority of the entire Board, may likewise decrease
the number of directors to a number not less than three.
Section 4. Place of Meeting. The directors may hold their meetings, have
----------------
one or more offices, and keep the books of the Corporation, outside the State of
Maryland, at any office or offices of the Corporation or at any other place as
they may from time to time by resolution
5
<PAGE>
determine, or in the case of meetings, as they may from time to time by
resolution determine or as shall be specified or fixed in the respective notices
or waivers of notice thereof.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such time and on such notice as the directors may from time to
time determine.
Section 6. Special Meetings. Special meetings of the Board of Directors
----------------
may be held from time to time upon call of the Chairman of the Board, the
President, the Secretary or two or more of the directors, by oral or telegraphic
or written notice duly served on or sent or mailed to each director not less
than one day before such meeting. No notice need be given to any director who
attends in person or to any director who, in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives such
notice. Such notice or waiver of notice need not state the purpose or purposes
of such meeting.
Section 7. Quorum. One-third of the directors then in office shall
------
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the directors present at any meeting at which there
is a quorum shall be the act of the directors, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation or by these
By-Laws.
Section 8. Executive Committee. The Board of Directors may, by the
-------------------
affirmative vote of a majority of the whole Board, appoint from the directors an
Executive Committee to consist of such number of directors (not less than three)
as the Board may from time to time determine. The Chairman of the Committee
shall be elected by the Board of Directors. The Board of Directors by such
affirmative vote shall have power at any time to change the members of such
Committee and may fill vacancies in the Committee by election from the
directors. When the Board of Directors is not in session, to the extent
permitted by law, the Executive Committee shall have and may exercise any or all
of the powers of the Board of Directors in the management of the business and
affairs of the Corporation. The Executive Committee may fix
6
<PAGE>
its own rules of procedure, and may meet when and as provided by such rules or
by resolution of the Board of Directors, but in every case the presence of a
majority shall be necessary to constitute a quorum. During the absence of a
member of the Executive Committee, the remaining members may appoint a member of
the Board of Directors to act in his place.
Section 9. Other Committees. The Board of Directors, by the affirmative
----------------
vote of a majority of the whole Board, may appoint from the directors other
committees which shall in each case consist of such number of directors (not
less than two) and shall have and may exercise such powers as the Board may
determine in the resolution appointing them. A majority of all the members of
any such committee may determine its action and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to change the members and powers of any
such committee, to fill vacancies and to discharge any such committee.
Section 10. Telephone Meetings. Members of the Board of Directors or a
------------------
committee of the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes presence in person at the
meeting.
Section 11. Action Without a Meeting. Any action required or permitted
------------------------
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board or
such committee.
Section 12. Compensation of Directors. No director shall receive any
-------------------------
stated salary or fees from the Corporation for his services as such if such
director is, other than by reason of being such director, an interested person
(as such term is defined by the Investment Company Act of 1940) of the
Corporation or of its investment adviser, administrator or principal
underwriter. Except as provided in the preceding sentence, directors shall be
entitled to receive
7
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such compensation from the Corporation for their services as may from time to
time be voted by the Board of Directors.
ARTICLE III
Officers
--------
Section 1. Executive Officers. The executive officers of the Corporation
------------------
shall be chosen by the Board of Directors. These may include a Chairman of the
Board of Directors (who shall be a director) and shall include a President (who
shall be a director), one or more Vice-Presidents (the number thereof to be
determined by the Board of Directors), a Secretary and a Treasurer. The Board
of Directors or the Executive Committee may also in its discretion appoint
Assistant Secretaries, Assistant Treasurers and other officers, agents and
employees, who shall have such authority and perform such duties as the Board or
the Executive Committee may determine. The Board of Directors may fill any
vacancy which may occur in any office. Any two offices, except those of
President and Vice-President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law or these By-Laws to be executed,
acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be
--------------
one year and until their respective successors are chosen and qualified. Any
officer may be removed from office at any time with or without cause by the vote
of a majority of the whole Board of Directors.
Section 3. Powers and Duties. The officers of the Corporation shall have
-----------------
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as may from time to time be conferred by the Board of
Directors or the Executive Committee.
ARTICLE IV.
Capital Stock
-------------
8
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Section 1. Certificates for Shares. Each stockholder of the Corporation
-----------------------
shall be entitled to a certificate or certificates for the full shares of stock
of the Corporation owned by him in such form as the Board from time to time
prescribe.
Section 2. Transfer of Shares. Shares of the Corporation shall be
------------------
transferable on the books of the Corporation by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the Corporation or its agents
may reasonably require; in the case of shares not represented by certificates,
the same or similar requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the Corporation,
-------------
containing the names and addresses of the stockholders and the number of shares
held by them respectively, shall be kept at the principal office of the
Corporation or, if the Corporation employs a Transfer Agent, at the office of
the Transfer Agent of the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors
--------------------------------------
or the Executive Committee may determine the conditions upon which a new
certificate of stock of the Corporation of any class may be issued in place of a
certificate which is alleged to have been lost, stolen or destroyed; and may, in
its discretion, require the owner of such certificate or such owner's legal
representative to give bond, with sufficient surety, to the Corporation and each
Transfer Agent, if any, to indemnify it and each such Transfer Agent against any
and all loss or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost, stolen or destroyed.
ARTICLE V.
Corporate Seal
--------------
The Board of Directors may provide for a suitable corporate seal, in such
form and bearing such inscriptions as it may determine.
ARTICLE VI.
9
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Fiscal Year
-----------
The fiscal year of the Corporation shall begin on the first day of June and
shall end on the last day of May in each year.
ARTICLE VII.
Indemnification
---------------
The Corporation shall indemnify directors, officers, employees and agents
of the Corporation against judgments, fines, settlements and expenses to the
fullest extent authorized and in the manner permitted, by applicable federal and
state law.
ARTICLE VIII.
Custodian
---------
Section 1. The Corporation shall have as custodian or custodians one or
more trust companies or banks of good standing, each having a capital, surplus
and undivided profits aggregating not less than fifty million dollars
($50,000,000), and, to the extent required by the Investment Company Act of
1940, the funds and securities held by the Corporation shall be kept in the
custody of one or more such custodians, provided such custodian or custodians
can be found ready and willing to act, and further provided that the Corporation
may use as subcustodians, for the purpose of holding any foreign securities and
related funds of the Corporation, such foreign banks as the Board of Directors
may approve and as shall be permitted by law.
Section 2. The Corporation shall upon the resignation or inability to
serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian;
(ii) require that the cash and securities owned by the Corporation be
delivered directly to the successor custodian; and
(iii) in the event that no successor custodian can be found, submit to
the stockholders before permitting delivery of the cash and securities owned
by the
10
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Corporation otherwise than to a successor custodian, the question whether or
not this Corporation shall be liquidated or shall function without a
custodian.
ARTICLE XI
Amendment of By-Laws
--------------------
The By-Laws of the Corporation may be altered, amended, added to or
repealed by the stockholders or by majority vote of the entire Board of
Directors; but any such alteration, amendment, addition or repeal of the By-Laws
by action of the Board of Directors may be altered or repealed by stockholders.
11
<PAGE>
EXHIBIT 99.6(a)
PRUDENTIAL-BACHE GLOBAL GENESIS FUND, INC.
Amended and Restated
Distribution Agreement
(Class A Shares)
----------------
Agreement, dated as of January 22, 1990 and amended and restated as of July
1, 1993, between Prudential-Bache Global Genesis Fund, Inc. a Maryland
Corporation (the Fund) and Prudential Mutual Fund Distributors, Inc., a Delaware
Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a [diversified,] open-end,
management investment company and it is in the interest of the Fund to offer its
Class A shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's Class A shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class A shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments by
the Fund to the Distributor with respect to the distribution of Class A shares
of the Fund and the maintenance of Class A shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Class A shares of the Fund to sell Class A shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class A shares of the Fund to the Distributor on the terms and conditions set
forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's Class A shares, except that:
2.1 The exclusive rights granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding shares of
any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class A shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class A shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class A Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the Fund the Class A
shares needed, but not more than the Class A shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class A shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers). The price which the
Distributor shall pay for the Class A shares so purchased from the Fund shall be
the net asset value, determined as set forth in the Prospectus.
3.2 The Class A shares are to be resold by the Distributor or selected
dealers, as described in Section 6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions in
Section 4.3 hereof or at such other times as may be determined by the Board of
Directors. The Fund shall also have the right to suspend the sale of its Class
A shares if a banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class A shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts for such Class A shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class A Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class A shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class A shares so
tendered in accordance with its Articles of Incorporation as amended from time
to time, and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class A shares shall be equal
to the net asset value determined as set forth in the Prospectus. All payments
by the Fund hereunder shall be made in the manner set forth in Section 4.2
below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh calendar day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Class A shares
shall be paid by the Fund to or for the account of the redeeming shareholder, in
each case in accordance with applicable provisions of the Prospectus.
4.3 Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed for other than customary weekends and
holidays, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to
3
<PAGE>
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Class A shares as
provided herein, the Fund agrees to sell its Class A shares so long as it has
Class A shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares, and this
shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized Class A shares and such steps as may be necessary
to register the same under the Securities Act, to the end that there will be
available for sale such number of Class A shares as the Distributor reasonably
may expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its Class A shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class A shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
A shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund, but shall not be obligated to sell any
specific number of Class A shares. Sales of the Class A shares shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall compensate
the selected dealers as set forth in the Prospectus.
6.2 In selling the Class A shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Class A shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Class A shares only to such selected dealers as
are members in good standing of the NASD. Class A shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any portion of any front-end
sales charge which is imposed on sales of Class A shares and not reallocated to
selected dealers as set forth in the Prospectus, subject to the limitations of
Article III, Section 26 of the NASD Rules of Fair Practice. Payment of these
amounts to the Distributor is not contingent upon the adoption or continuation
of the Plan.
Section 8. Reimbursement of the Distributor under the Plan
-----------------------------------------------
8.1 The Fund shall reimburse the Distributor for costs incurred by it in
performing its duties under the Distribution and Service Plan and this Agreement
including amounts paid on a
5
<PAGE>
reimbursement basis to Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), affiliates of the
Distributor, under the selected dealer agreements between the Distributor and
Prudential Securities and Prusec, respectively, amounts paid to other securities
dealers or financial institutions under selected dealer agreements between the
Distributor and such dealers and institutions and amounts paid for personal
service and/or the maintenance of shareholder accounts. Amounts reimbursable
under the Plan shall be accrued daily and paid monthly or at such other
intervals as the Board of Directors may determine but shall not be paid at a
rate that exceeds .30 of 1%, which amount includes a service fee of up to .25 of
1%, per annum of the average daily net assets of the Class A shares of the Fund.
Payment of the distribution and service fee shall be subject to the limitations
of Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions and account
servicing fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which have dealer
agreements with the Distributor. So long as the Plan (or any amendment thereto)
is in effect, at the request of the Board of Directors or any agent or
representative of the Fund, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.
8.3 Costs of the Distributor subject to reimbursement hereunder are costs
of performing distribution activities with respect to the Class A shares of the
Fund and may include, among others:
(a) amounts paid to Prudential Securities in reimbursement of
costs incurred by Prudential Securities in performing
services under a selected dealer agreement between
Prudential Securities and the Distributor for sale of Class
A shares of the Fund, including sales commissions and
trailer commissions paid to, or on account of, account
executives and indirect and overhead costs associated with
distribution activities, including central office and branch
expenses;
(b) amounts paid to Prusec in reimbursement of costs incurred by
Prusec in performing services under a selected dealer
agreement between Prusec and the Distributor for sale of
6
<PAGE>
Class A shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with distribution activities;
(c) sales commissions and trailer commissions paid to, or on
account of, broker-dealers and financial institutions (other
than Prudential Securities and Prusec) which have entered
into selected dealer agreements with the Distributor with
respect to Class A shares of the Fund;
(d) amounts paid to, or an account of, account executives of
Prudential Securities, Prusec, or of other broker-dealers or
financial institutions for personal service and/or the
maintenance of shareholder accounts; and
(e) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (a) and (b) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the continuous offering
of its Class A shares, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Class A shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer,
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5.4 hereof and the cost and
expense payable to
7
<PAGE>
each such state for continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 5.4 hereof. As set forth in
Section 8 above, the Fund shall also bear the expenses it assumes pursuant to
the Plan with respect to Class A shares, so long as the Plan is in effect.
9.2 If the Plan is terminated or discontinued, the costs previously
incurred by the Distributor in performing the duties set forth in Section 6
hereof shall be borne by the Distributor and will not be subject to
reimbursement by the Fund.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
directors or any such controlling person may incur under the Securities Act, or
under common law or otherwise, arising out of or based upon any untrue statement
of a material fact contained in the Registration Statement or Prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements in
either thereof not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor to the Fund
for use in the Registration Statement or Prospectus; provided, however, that
this indemnity agreement shall not inure to the benefit of any such officer,
director, trustee or controlling person unless a court of competent jurisdiction
shall determine in a final decision on the merits, that the person to be
indemnified was not liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement (disabling conduct), or, in
the absence of such a decision, a reasonable determination, based upon a review
of the facts, that the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of directors or trustees who
are neither "interested persons" of the Fund as defined in Section 2(a)(19) of
the Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors and any such controlling person as
aforesaid is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or directors, or any
such controlling person, such
8
<PAGE>
notification to be given by letter or telegram addressed to the Fund at its
principal business office. The Fund agrees promptly to notify the Distributor
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any Class A
shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its officers and
Directors or any such controlling person may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or be based upon
any alleged untrue statement of a material fact contained in information
furnished in writing by the Distributor to the Fund for use in the Registration
Statement or Prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or Prospectus or necessary to make
such information not misleading. The Distributor's agreement to indemnify the
Fund, its officers and Directors and any such controlling person as aforesaid,
is expressly conditioned upon the Distributor's being promptly notified of any
action brought against the Fund, its officers and Directors or any such
controlling person, such notification being given to the Distributor at its
principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class A shares of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), cast in person
at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the payment of
any penalty, by a majority of the Rule 12b-1 Directors or by vote of a majority
of the outstanding voting securities of the Class A shares of the Fund, or by
the Distributor, on sixty
9
<PAGE>
(60) days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
11.3 The terms "affiliated person," "assignment," "interested person" and
"vote of a majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class A shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Directors cast in
person at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: /s/ Robert F. Gunia
________________________
Robert F. Gunia
Executive Vice President
Prudential-Bache Global Genesis
Fund, Inc.
By: /s/ Lawrence C. McQuade
_______________________
Lawrence C. McQuade
President
/DSTAGRA.GGF/
10
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EXHIBIT 99.6(b)
PRUDENTIAL-BACHE GLOBAL GENESIS FUND, INC.
Amended and Restated
Distribution Agreement
(Class B Shares)
----------------
Agreement, dated as of September 18, 1987, as amended and restated as of
January 22, 1990 and amended and restated as of July 1, 1993, between
Prudential-Bache Global Genesis Fund, Inc., a Maryland Corporation (the Fund)
and Prudential Securities Incorporated, a Delaware Corporation (the
Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its Class B
shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's Class B shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments by
the Fund to the Distributor with respect to the distribution of Class B shares
of the Fund and the maintenance of Class B shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Class B shares of the Fund to sell Class B shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class B shares of the Fund to the Distributor on the terms and conditions set
forth below.
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Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's Class B shares, except that:
2.1 The exclusive rights granted to the Distributor to purchase Class B
shares from the Fund shall not apply to Class B shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding shares of
any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class B shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class B shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class B Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the Fund the Class B
shares needed, but not more than the Class B shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class B shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers). The price which the
Distributor shall pay for the Class B shares so purchased from the Fund shall be
the net asset value, determined as set forth in the Prospectus.
3.2 The Class B shares are to be resold by the Distributor or selected
dealers, as described in Section 6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
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3.3 The Fund shall have the right to suspend the sale of its Class B
shares at times when redemption is suspended pursuant to the conditions in
Section 4.3 hereof or at such other times as may be determined by the Board of
Directors. The Fund shall also have the right to suspend the sale of its Class
B shares if a banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class B shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class B shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts for such Class B shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class B shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class B shares so
tendered in accordance with its Articles of Incorporation as amended from time
to time, and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class B shares shall be equal
to the net asset value determined as set forth in the Prospectus. All payments
by the Fund hereunder shall be made in the manner set forth in Section 4.2
below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Class B shares
shall be paid by the Fund as follows: (a) any applicable contingent deferred
sales charge shall be paid to the Distributor and (b) the balance shall be paid
to or for the account of the redeeming shareholder, in each case in accordance
with applicable provisions of the Prospectus.
4.3 Redemption of Class B shares or payment may be suspended at times when
the New York Stock Exchange is closed for other than customary weekends and
holidays, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable
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or it is not reasonably practicable for the Fund fairly to determine the value
of its net assets, or during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Class B shares as
provided herein, the Fund agrees to sell its Class B shares so long as it has
Class B shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class B shares, and this
shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized Class B shares and such steps as may be necessary
to register the same under the Securities Act, to the end that there will be
available for sale such number of Class B shares as the Distributor reasonably
may expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its Class B shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class B shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
B shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material relating
to its affairs and
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activities as may be required by the Fund in connection with such
qualifications.
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund, but shall not be obligated to sell any
specific number of Class B shares. Sales of the Class B shares shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall compensate
the selected dealers as set forth in the Prospectus.
6.2 In selling the Class B shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Class B shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Class B shares only to such selected dealers as
are members in good standing of the NASD. Class B shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any contingent deferred sales
charge which is imposed with respect to repurchases and redemptions of Class B
shares as set forth in the Prospectus, subject to the limitations of Article
III, Section 26 of the NASD Rules of Fair Practice. Payment of these amounts to
the Distributor is not contingent upon the adoption or continuation of the Plan.
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Section 8. Reimbursement of the Distributor under the Plan
-----------------------------------------------
8.1 The Fund shall reimburse the Distributor for all costs incurred by it
in performing its duties under the Distribution and Service Plan and this
Agreement including amounts paid on a reimbursement basis to Pruco Securities
Corporation (Prusec), an affiliate of the Distributor, under the selected dealer
agreement between the Distributor and Prusec, amounts paid to other securities
dealers or financial institutions under selected dealer agreements between the
Distributor and such dealers and institutions and amounts paid for personal
service and/or the maintenance of shareholder accounts. Reimbursement shall only
be made to the extent that payments by investors pursuant to Section 7 hereof
are not sufficient to cover such costs. Amounts reimbursable under the Plan
shall be accrued daily and paid monthly or at such other intervals as the Board
of Directors may determine but shall not be paid at a rate that exceeds the
annual distribution and service fee of 1% (including an asset-based sales charge
of up to .75 of 1% and a service fee of up to .25 of 1%) per annum of the
average daily net assets of the Class B shares of the Fund. Amounts reimbursable
under the Plan that are not paid because they exceed .75 of 1% per annum of the
average daily net assets of the Class B shares (Carry Forward Amounts) shall be
carried forward and paid by the Fund as permitted within such payment limitation
so long as the Plan, including any amendments thereto, is in effect, subject to
the limitations of Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions (including
trailer commissions) and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor. So
long as the Plan (or any amendment thereto) is in effect, at the request of the
Board of Directors or any agent or representative of the Fund, the Distributor
shall provide such additional information as may reasonably be requested
concerning the activities of the Distributor hereunder and the costs incurred in
performing such activities.
8.3 Costs of the Distributor subject to reimbursement hereunder are all
costs of performing distribution activities with respect to the Class B shares
of the Fund and include, among others:
(a) sales commissions (including trailer commissions) paid to, or
on account of, account executives of the Distributor;
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(b) indirect and overhead costs of the Distributor associated
with performance of distribution activities, including central office
and branch expenses;
(c) amounts paid to Prusec in reimbursement of all costs incurred
by Prusec in performing services under a selected dealer agreement
between Prusec and the Distributor for sale of Class B shares of the
Fund, including sales commissions and trailer commissions paid to, or
on account of, agents and indirect and overhead costs associated with
distribution activities;
(d) sales commissions (including trailer commissions) paid to, or
on account of, broker-dealers and financial institutions (other than
Prusec) which have entered into selected dealer agreements with the
Distributor with respect to Class B shares of the Fund;
(e) amounts paid to, or an account of, account executives of the
Distributor or of other broker-dealers or financial institutions for
personal service and/or the maintenance of shareholder accounts;
(f) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing Fund
Prospectuses, and periodic financial reports and sales literature to
persons other than current shareholders of the Fund;
(g) to the extent permitted by applicable law, interest on
unreimbursed Carry Forward Amounts as defined in Section 8.1 at a rate
equal to that paid by Prudential Securities for bank borrowings as
such rate may vary from day to day, not to exceed that permitted under
Article III, Section 26, of the NASD Rules of Fair Practice; and
(h) to the extent permitted by applicable law, unreimbursed
distribution expenses incurred with respect to the sale of Class B
shares that have been exchanged into the Fund.
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Indirect and overhead costs referred to in clauses (b) and (c) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the continuous offering
of its Class B shares, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Class B shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer,
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5.4 hereof and the cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class B shares, so long as the
Plan is in effect.
9.2 Although the Fund is not liable for unreimbursed distribution
expenses, in the event of termination of the Plan, the Board of Directors of the
Fund may consider the appropriateness of having the Class B shares of the Fund
reimburse the Distributor for the then outstanding balance of all unreimbursed
distribution expenses plus interest thereon to the extent permitted by
applicable law from the date of this Agreement.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and Directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
Directors or any such controlling person may incur under the Securities Act, or
under common law or otherwise, arising out of or based upon any untrue statement
of a material fact contained in the Registration Statement or Prospectus
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or arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements in
either thereof not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor to the Fund
for use in the Registration Statement or Prospectus; provided, however, that
this indemnity agreement shall not inure to the benefit of any such officer,
Director or controlling person unless a court of competent jurisdiction shall
determine in a final decision on the merits, that the person to be indemnified
was not liable by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of Directors who are neither "interested persons"
of the Fund as defined in Section 2(a)(19) of the Investment Company Act nor
parties to the proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its officers and
Directors and any such controlling person as aforesaid is expressly conditioned
upon the Fund's being promptly notified of any action brought against the
Distributor, its officers or Directors, or any such controlling person, such
notification to be given in writing addressed to the Fund at its principal
business office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issue and sale of any Class B shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its officers and
Directors or any such controlling person may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or be based upon
any alleged untrue statement of a material fact contained in information
furnished in writing by the Distributor to the Fund for use in the Registration
Statement or Prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or Prospectus or necessary to
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make such information not misleading. The Distributor's agreement to indemnify
the Fund, its officers and Directors and any such controlling person as
aforesaid, is expressly conditioned upon the Distributor's being promptly
notified of any action brought against the Fund, its officers and Directors or
any such controlling person, such notification to be given to the Distributor in
writing at its principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class B shares of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), cast in person
at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the payment of
any penalty, by a majority of the Rule 12b-1 Directors or by vote of a majority
of the outstanding voting securities of the Class B shares of the Fund, or by
the Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
11.3 The terms "affiliated person," "assignment," "interested person" and
"vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class B shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Board of Directors
cast in person at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of
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the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year above written.
Prudential Securities
Incorporated
By: /s/ Robert F. Gunia
------------------------
Robert F. Gunia
Senior Vice President
Prudential-Bache Global
Genesis Fund, Inc.
By: /s/ Lawrence C. McQuade
-----------------------
Lawrence C. McQuade
President
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EXHIBIT 99.6(c)
PRUDENTIAL _________ FUND
Form of
Distribution Agreement
(Class A Shares)
----------------
Agreement made as of _____________199_, between Prudential ________ Fund [a
Maryland Corporation/Massachusetts Business Trust] (the Fund) and Prudential
Mutual Fund Distributors, Inc., a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its Class A
shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's Class A shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class A shares; and
WHEREAS, upon approval by the Class A shareholders of the Fund it is
contemplated that the Fund will adopt a plan of distribution pursuant to Rule
12b-1 under the Investment Company Act (the Plan) authorizing payments by the
Fund to the Distributor with respect to the distribution of Class A shares of
the Fund and the maintenance of Class A shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Class A shares of the Fund to sell Class A shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class A shares of the Fund to the Distributor on the terms and conditions set
forth below.
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Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's Class A shares, except that:
2.1 The exclusive rights granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding shares of
any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class A shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class A shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class A Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the Fund the Class A
shares needed, but not more than the Class A shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class A shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers). The price which the
Distributor shall pay for the Class A shares so purchased from the Fund shall be
the net asset value, determined as set forth in the Prospectus.
3.2 The Class A shares are to be resold by the Distributor or selected
dealers, as described in Section 6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
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3.3 The Fund shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions in
Section 4.3 hereof or at such other times as may be determined by the Board of
Directors. The Fund shall also have the right to suspend the sale of its Class
A shares if a banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class A shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts for such Class A shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class A Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class A shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class A shares so
tendered in accordance with its Articles of Incorporation as amended from time
to time, and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class A shares shall be equal
to the net asset value determined as set forth in the Prospectus. All payments
by the Fund hereunder shall be made in the manner set forth in Section 4.2
below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh calendar day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Class A shares
shall be paid by the Fund to or for the account of the redeeming shareholder, in
each case in accordance with applicable provisions of the Prospectus.
4.3 Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed for other than customary weekends and
holidays, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order,
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so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Class A shares as
provided herein, the Fund agrees to sell its Class A shares so long as it has
Class A shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares, and this
shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized Class A shares and such steps as may be necessary
to register the same under the Securities Act, to the end that there will be
available for sale such number of Class A shares as the Distributor reasonably
may expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its Class A shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class A shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
A shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund, but shall not be obligated to sell any
specific number of Class A shares. Sales of the Class A shares shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall compensate
the selected dealers as set forth in the Prospectus.
6.2 In selling the Class A shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Class A shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Class A shares only to such selected dealers as
are members in good standing of the NASD. Class A shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any portion of any front-end
sales charge which is imposed on sales of Class A shares and not reallocated to
selected dealers as set forth in the Prospectus, subject to the limitations of
Article III, Section 26 of the NASD Rules of Fair Practice. Payment of these
amounts to the Distributor is not contingent upon the adoption or continuation
of the Plan.
Section 8. Payment of the Distributor under the Plan
-----------------------------------------
8.1 The Fund shall pay to the Distributor as compensation for services
under the Distribution and Service Plan and this Agreement a fee of .30 of 1%
(including an asset-based sales charge of .05 of 1% and a service fee of .25 of
1%) per annum
5
<PAGE>
of the average daily net assets of the Class A shares of the Fund. Amounts
payable under the Plan shall be accrued daily and paid monthly or at such other
intervals as Directors/Trustees may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of the NASD Rules
of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions and account
servicing fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which have dealer
agreements with the Distributor. So long as the Plan (or any amendment thereto)
is in effect, at the request of the Board of Directors or any agent or
representative of the Fund, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.
8.3 Expenses of distribution with respect to the Class A shares of the
Fund include, among others:
(a) amounts paid to Prudential Securities for performing services
under a selected dealer agreement between Prudential
Securities and the Distributor for sale of Class A shares of
the Fund, including sales commissions and trailer commissions
paid to, or on account of, account executives and indirect
and overhead costs associated with distribution activities,
including central office and branch expenses;
(b) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor
for sale of Class A shares of the Fund, including sales
commissions and trailer commissions paid to, or on account
of, agents and indirect and overhead costs associated with
distribution activities;
(c) sales commissions and trailer commissions paid to, or on
account of, broker-dealers and financial institutions (other
than Prudential Securities and Prusec) which have entered
into selected dealer agreements with the Distributor with
respect to Class A shares of the Fund.
(d) amounts paid to, or an account of, account executives of
Prudential Securities, Prusec,
6
<PAGE>
or of other broker-dealers or financial institutions for
personal service and/or the maintenance of shareholder
accounts; and
(e) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (a) and (b) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Class A shares, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Class A shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer,
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5.4 hereof and the cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class A shares, so long as the
Plan is in effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and directors and any person who controls the Distributor within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Distributor, its
officers, directors or any such controlling person may incur under the
Securities Act, or under common law or
7
<PAGE>
otherwise, arising out of or based upon any untrue statement of a material fact
contained in the Registration Statement or Prospectus or arising out of or based
upon any alleged omission to state a material fact required to be stated in
either thereof or necessary to make the statements in either thereof not
misleading, except insofar as such claims, demands, liabilities or expenses
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus; provided, however, that this indemnity
agreement shall not inure to the benefit of any such officer, director, trustee
or controlling person unless a court of competent jurisdiction shall determine
in a final decision on the merits, that the person to be indemnified was not
liable by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of directors or trustees who are neither
"interested persons" of the Fund as defined in Section 2(a)(19) of the
Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors or trustees and any such controlling
person as aforesaid is expressly conditioned upon the Fund's being promptly
notified of any action brought against the Distributor, its officers or
directors or trustees, or any such controlling person, such notification to be
given by letter or telegram addressed to the Fund at its principal business
office. The Fund agrees promptly to notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issue and sale of any Class A shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors and any person who controls the Fund, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
officers and Directors or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state
8
<PAGE>
a material fact in connection with such information required to be stated in the
Registration Statement or Prospectus or necessary to make such information not
misleading. The Distributor's agreement to indemnify the Fund, its officers and
Directors and any such controlling person as aforesaid, is expressly conditioned
upon the Distributor's being promptly notified of any action brought against the
Fund, its officers and Directors or any such controlling person, such
notification being given to the Distributor at its principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class A shares of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), cast in person
at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Class A shares of the
Fund, or by the Distributor, on sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding
voting securities", when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class A shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Directors cast in
person at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the
9
<PAGE>
Investment Company Act. To the extent that the applicable law of the State of
New York, or any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act, the latter shall control.
*[Section 14. Liabilities of the Fund
-----------------------
The name "Prudential ___________ Trust" is the designation of the
Trustees under a Declaration of Trust dated ______, 19__ and all persons dealing
with the Fund must look solely to the property of the Fund for the enforcement
of any claims against the Fund, and neither the Trustees, officers, agents of
shareholders assume any personal liability for obligations entered into on
behalf of the Fund.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: ________________________
________________________
(Title)
Prudential______________Fund
By: _______________________
(Name)
(Title)
*For Massachusetts Business Trusts only.
10
<PAGE>
EXHIBIT 99.6(d)
PRUDENTIAL ___________ FUND
Form of
Distribution Agreement
(Class B Shares)
----------------
Agreement made as of ______ __, 199_, between Prudential ________ Fund, [a
Maryland Corporation/Massachusetts Business Trust] (the Fund) and Prudential
Securities Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its Class B
shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's Class B shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments by
the Fund to the Distributor with respect to the distribution of Class B shares
of the Fund and the maintenance of Class B shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Class B shares of the Fund to sell Class B shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class B shares of the Fund to the Distributor on the terms and conditions set
forth below.
1
<PAGE>
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's Class B shares, except that:
2.1 The exclusive rights granted to the Distributor to purchase Class B
shares from the Fund shall not apply to Class B shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding shares of
any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class B shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class B shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class B Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the Fund the Class B
shares needed, but not more than the Class B shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class B shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers). The price which the
Distributor shall pay for the Class B shares so purchased from the Fund shall be
the net asset value, determined as set forth in the Prospectus.
3.2 The Class B shares are to be resold by the Distributor or selected
dealers, as described in Section 6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of its Class B
shares at times when redemption is suspended pursuant
2
<PAGE>
to the conditions in Section 4.3 hereof or at such other times as may be
determined by the Board of Directors. The Fund shall also have the right to
suspend the sale of its Class B shares if a banking moratorium shall have been
declared by federal or New York authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class B shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class B shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts for such Class B shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class B shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class B shares so
tendered in accordance with its Articles of Incorporation as amended from time
to time, and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class B shares shall be equal
to the net asset value determined as set forth in the Prospectus. All payments
by the Fund hereunder shall be made in the manner set forth in Section 4.2
below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Class B shares
shall be paid by the Fund as follows: (a) any applicable contingent deferred
sales charge shall be paid to the Distributor and (b) the balance shall be paid
to or for the account of the redeeming shareholder, in each case in accordance
with applicable provisions of the Prospectus.
4.3 Redemption of Class B shares or payment may be suspended at times when
the New York Stock Exchange is closed for other than customary weekends and
holidays, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order,
3
<PAGE>
so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Class B shares as
provided herein, the Fund agrees to sell its Class B shares so long as it has
Class B shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class B shares, and this
shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized Class B shares and such steps as may be necessary
to register the same under the Securities Act, to the end that there will be
available for sale such number of Class B shares as the Distributor reasonably
may expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its Class B shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class B shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
B shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund, but shall not be obligated to sell any
specific number of Class B shares. Sales of the Class B shares shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall compensate
the selected dealers as set forth in the Prospectus.
6.2 In selling the Class B shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Class B shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Class B shares only to such selected dealers as
are members in good standing of the NASD. Class B shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any contingent deferred sales
charge which is imposed with respect to repurchases and redemptions of Class B
shares as set forth in the Prospectus, subject to the limitations of Article
III, Section 26 of the NASD Rules of Fair Practice. Payment of these amounts to
the Distributor is not contingent upon the adoption or continuation of the Plan.
Section 8. Payment of the Distributor under the Plan
-----------------------------------------
8.1 The Fund shall pay to the Distributor as compensation for services
under the Distribution and Service Plan and this Agreement a fee of 1%
(including an asset-based sales charge of .75 of 1% and a service fee of .25 of
1%) per annum of
5
<PAGE>
the average daily net assets of the Class B shares of the Fund. Amounts payable
under the Plan shall be accrued daily and paid monthly or at such other
intervals as Directors/Trustees may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of the NASD Rules
of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions (including
trailer commissions) and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor. So
long as the Plan (or any amendment thereto) is in effect, at the request of the
Board of Directors or any agent or representative of the Fund, the Distributor
shall provide such additional information as may reasonably be requested
concerning the activities of the Distributor hereunder and the costs incurred in
performing such activities.
8.3 Expenses of distribution with respect to the Class B shares of the
Fund include, among others:
(a) sales commissions (including trailer commissions) paid to, or
on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated
with performance of distribution activities, including
central office and branch expenses;
(c) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor
for sale of Class B shares of the Fund, including sales
commissions and trailer commissions paid to, or on account
of, agents and indirect and overhead costs associated with
distribution activities;
(d) sales commissions (including trailer commissions) paid to, or
on account of, broker-dealers and financial institutions
(other than Prusec) which have entered into selected dealer
agreements with the Distributor with respect to Class B
shares of the Fund;
(e) amounts paid to, or an account of, account executives of the
Distributor or of other broker-dealers or financial
institutions for
6
<PAGE>
personal service and/or the maintenance of shareholder
accounts; and
(f) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (b) and (c) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Class B shares, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Class B shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer,
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5.4 hereof and the cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class B shares, so long as the
Plan is in effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and Directors and any person who controls the Distributor within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Distributor, its
officers, Directors or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or based upon
any untrue statement of a
7
<PAGE>
material fact contained in the Registration Statement or Prospectus or arising
out of or based upon any alleged omission to state a material fact required to
be stated in either thereof or necessary to make the statements in either
thereof not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by the Distributor to the Fund for use in
the Registration Statement or Prospectus; provided, however, that this indemnity
agreement shall not inure to the benefit of any such officer, Director or
controlling person unless a court of competent jurisdiction shall determine in a
final decision on the merits, that the person to be indemnified was not liable
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of Directors who are neither "interested persons"
of the Fund as defined in Section 2(a)(19) of the Investment Company Act nor
parties to the proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its officers and
Directors and any such controlling person as aforesaid is expressly conditioned
upon the Fund's being promptly notified of any action brought against the
Distributor, its officers or Directors, or any such controlling person, such
notification to be given in writing addressed to the Fund at its principal
business office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issue and sale of any Class B shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors and any person who controls the Fund, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
officers and Directors or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement or Prospectus or necessary
to
8
<PAGE>
make such information not misleading. The Distributor's agreement to indemnify
the Fund, its officers and Directors and any such controlling person as
aforesaid, is expressly conditioned upon the Distributor's being promptly
notified of any action brought against the Fund, its officers and Directors or
any such controlling person, such notification to be given to the Distributor in
writing at its principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class B shares of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), cast in person
at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Class B shares of the
Fund, or by the Distributor, on sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class B shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Board of Directors
cast in person at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict
9
<PAGE>
with the applicable provisions of the Investment Company Act, the latter shall
control.
*[Section 14. Liabilities of the Fund
-----------------------
The name "Prudential ___________ Trust" is the designation of the
Trustees under a Declaration of Trust dated ______, 19__ and all persons dealing
with the Fund must look solely to the property of the Fund for the enforcement
of any claims against the Fund, and neither the Trustees, officers, agents of
shareholders assume any personal liability for obligations entered into on
behalf of the Fund.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential ________Fund
By: _______________________
(Name)
(Title)
*For Massachusetts Business Trusts only.
10
<PAGE>
EXHIBIT 99.6(e)
PRUDENTIAL ___________ FUND
Form of
Distribution Agreement
(Class C Shares)
----------------
Agreement made as of ______ __, 199_, between Prudential ________ Fund, [a
Maryland Corporation/Massachusetts Business Trust] (the Fund) and Prudential
Securities Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its Class C
shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's Class C shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class C shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments by
the Fund to the Distributor with respect to the distribution of Class C shares
of the Fund and the maintenance of Class C shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Class C shares of the Fund to sell Class C shares to the
public and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund hereby agrees during the term of this Agreement to sell
Class C shares of the Fund to the Distributor on the terms and conditions set
forth below.
1
<PAGE>
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's Class C shares, except that:
2.1 The exclusive rights granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding shares of
any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class C shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class C shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean
the Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class C Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the Fund the Class C
shares needed, but not more than the Class C shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class C shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers). The price which the
Distributor shall pay for the Class C shares so purchased from the Fund shall be
the net asset value, determined as set forth in the Prospectus.
3.2 The Class C shares are to be resold by the Distributor or selected
dealers, as described in Section 6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant
2
<PAGE>
to the conditions in Section 4.3 hereof or at such other times as may be
determined by the Board of Directors. The Fund shall also have the right to
suspend the sale of its Class C shares if a banking moratorium shall have been
declared by federal or New York authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class C shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts for such Class C shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class C shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class C shares so
tendered in accordance with its Articles of Incorporation as amended from time
to time, and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class C shares shall be equal
to the net asset value determined as set forth in the Prospectus. All payments
by the Fund hereunder shall be made in the manner set forth in Section 4.2
below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Class C shares
shall be paid by the Fund as follows: (a) any applicable contingent deferred
sales charge shall be paid to the Distributor and (b) the balance shall be paid
to or for the account of the redeeming shareholder, in each case in accordance
with applicable provisions of the Prospectus.
4.3 Redemption of Class C shares or payment may be suspended at times when
the New York Stock Exchange is closed for other than customary weekends and
holidays, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order,
3
<PAGE>
so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Class C shares as
provided herein, the Fund agrees to sell its Class C shares so long as it has
Class C shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class C shares, and this
shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized Class C shares and such steps as may be necessary
to register the same under the Securities Act, to the end that there will be
available for sale such number of Class C shares as the Distributor reasonably
may expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its Class C shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class C shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
C shares. Any such qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund, but shall not be obligated to sell any
specific number of Class C shares. Sales of the Class C shares shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall compensate
the selected dealers as set forth in the Prospectus.
6.2 In selling the Class C shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Class C shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Class C shares only to such selected dealers as
are members in good standing of the NASD. Class C shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any contingent deferred sales
charge which is imposed with respect to repurchases and redemptions of Class C
shares as set forth in the Prospectus, subject to the limitations of Article
III, Section 26 of the NASD Rules of Fair Practice. Payment of these amounts to
the Distributor is not contingent upon the adoption or continuation of the Plan.
Section 8. Payment of the Distributor under the Plan
-----------------------------------------
8.1 The Fund shall pay to the Distributor as compensation for services
under the Distribution and Service Plan and this Agreement a fee of 1%
(including an asset-based sales charge of .75 of 1% and a service fee of .25 of
1%) per annum of
5
<PAGE>
the average daily net assets of the Class C shares of the Fund. Amounts payable
under the Plan shall be accrued daily and paid monthly or at such other
intervals as Directors/Trustees may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of the NASD Rules
of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions (including
trailer commissions) and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor. So
long as the Plan (or any amendment thereto) is in effect, at the request of the
Board of Directors or any agent or representative of the Fund, the Distributor
shall provide such additional information as may reasonably be requested
concerning the activities of the Distributor hereunder and the costs incurred in
performing such activities.
8.3 Expenses of distribution with respect to the Class C shares of the
Fund include, among others:
(a) sales commissions (including trailer commissions) paid to, or
on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of distribution activities, including central office and
branch expenses;
(c) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor for sale
of Class C shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with distribution activities;
(d) sales commissions (including trailer commissions) paid to, or
on account of, broker-dealers and financial institutions (other than
Prusec) which have entered into selected dealer agreements with the
Distributor with respect to Class C shares of the Fund;
(e) amounts paid to, or an account of, account executives of the
Distributor or of other broker-dealers or financial institutions for
6
<PAGE>
personal service and/or the maintenance of shareholder accounts; and
(f) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing Fund
Prospectuses, and periodic financial reports and sales literature to
persons other than current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (b) and (c) of the
foregoing sentence include (i) lease expenses, (ii) salaries and benefits of
personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the continuous
offering of its Class C shares, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Class C shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer,
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5.4 hereof and the cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear the expenses
it assumes pursuant to the Plan with respect to Class C shares, so long as the
Plan is in effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and Directors and any person who controls the Distributor within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Distributor, its
officers, Directors or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or based upon
any untrue statement of a
7
<PAGE>
material fact contained in the Registration Statement or Prospectus or arising
out of or based upon any alleged omission to state a material fact required to
be stated in either thereof or necessary to make the statements in either
thereof not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by the Distributor to the Fund for use in
the Registration Statement or Prospectus; provided, however, that this indemnity
agreement shall not inure to the benefit of any such officer, Director or
controlling person unless a court of competent jurisdiction shall determine in a
final decision on the merits, that the person to be indemnified was not liable
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of Directors who are neither "interested persons"
of the Fund as defined in Section 2(a)(19) of the Investment Company Act nor
parties to the proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its officers and
Directors and any such controlling person as aforesaid is expressly conditioned
upon the Fund's being promptly notified of any action brought against the
Distributor, its officers or Directors, or any such controlling person, such
notification to be given in writing addressed to the Fund at its principal
business office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issue and sale of any Class C shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors and any person who controls the Fund, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
officers and Directors or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement or Prospectus or necessary
to
8
<PAGE>
make such information not misleading. The Distributor's agreement to indemnify
the Fund, its officers and Directors and any such controlling person as
aforesaid, is expressly conditioned upon the Distributor's being promptly
notified of any action brought against the Fund, its officers and Directors or
any such controlling person, such notification to be given to the Distributor in
writing at its principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class C shares of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the Fund's
Plan or in any agreement related thereto (Rule 12b-1 Directors), cast in person
at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Class C shares of the
Fund, or by the
Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
11.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Class C shares of the
Fund, and (b) by the vote of a majority of the Rule 12b-1 Board of Directors
cast in person at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict
9
<PAGE>
with the applicable provisions of the Investment Company Act, the latter shall
control.
*[Section 14. Liabilities of the Fund
-----------------------
The name "Prudential ___________ Trust" is the designation of the
Trustees under a Declaration of Trust dated ______, 19__ and all persons dealing
with the Fund must look solely to the property of the Fund for the enforcement
of any claims against the Fund, and neither the Trustees, officers, agents of
shareholders assume any personal liability for obligations entered into on
behalf of the Fund.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential ________Fund
By: _______________________
(Name)
(Title)
*For Massachusetts Business Trusts only.
10
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 9 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated July
8, 1993, relating to the financial statements and financial highlights of
Prudential Global Genesis Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Custodian and Transfer and
Dividend Disbursing Agent and Independent Accountants" in such Statement of
Additional Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
May 6, 1994
<PAGE>
EXHIBIT 99.15(a)
PRUDENTIAL-BACHE GLOBAL GENESIS FUND, INC.
Distribution and Service Plan
(Class A Shares)
--------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential-Bache Global Genesis Fund, Inc. (the
Fund) and by Prudential Mutual Fund Distributors, Inc., the Fund's distributor
(the Distributor).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will employ the Distributor to distribute
Class A shares issued by the Fund (Class A shares). Under the Distribution
Agreement, the Distributor will be entitled to receive payments from investors
of front-end sales charges with respect to the sale of Class A shares. Under
the Plan, the Fund intends to reimburse the Distributor for costs incurred by
the Distributor in distributing Class A shares of the Fund and to pay the
Distributor a service fee for the maintenance of Class A shareholder accounts.
A majority of the Board of Directors or Trustees of the Fund, including a
majority of those Directors or Trustees who are not "interested persons" of the
Fund (as defined in the Investment Company Act) and who have no direct or
indirect financial interest
<PAGE>
in the operation of this Plan or any agreements related to it (the Rule 12b-1
Directors or Trustees), have determined by votes cast in person at a meeting
called for the purpose of voting on this Plan that there is a reasonable
likelihood that adoption of this Plan will benefit the Fund and its
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of Class
A shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class A shares of the
Fund and to service shareholder accounts using all of the facilities of the
distribution networks of Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), including sales personnel
and branch office and central support systems, and also using such
2
<PAGE>
other qualified broker-dealers and financial institutions as the Distributor may
select. Services provided and activities undertaken to distribute Class A
shares of the Fund are referred to herein as "Distribution Activities."
2. Payment of Service Fee
-----------------------
The Fund shall reimburse the Distributor for costs incurred by it in
providing personal service and/or maintaining shareholder accounts at a rate not
to exceed .25 of 1% per annum of the average daily net assets of the Class A
shares (service fee). The Fund shall calculate and accrue daily amounts
reimbursable by the Class A shares of the Fund hereunder and shall pay such
amounts monthly or at such other intervals as the Board of Directors or Trustees
may determine. Costs of the Distributor subject to reimbursement hereunder
include account servicing fees and indirect and overhead costs associated with
providing personal service and/or maintaining shareholder accounts.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall reimburse the Distributor for costs incurred by it in
performing Distribution Activities at a rate which, together with the service
fee (described in Section 2 hereof), shall not exceed .30 of 1% per annum of the
average daily net assets of the Class A shares of the Fund. The Fund shall
calculate and accrue daily amounts reimbursable by the Class A shares of the
Fund hereunder and shall pay such amounts monthly or at such other intervals as
the Board of Directors or Trustees may determine.
3
<PAGE>
Amounts paid to the Distributor by the Class A shares of the Fund will not
be used to pay the distribution expenses incurred with respect to the Class B
shares of the Fund except that distribution expenses attributable to the Fund as
a whole will be allocated to the Class A shares according to the ratio of the
sales of Class A shares to the total sales of the Fund's shares over the Fund's
fiscal year or such other allocation method approved by the Board of Directors
or Trustees. The allocation of distribution expenses among Classes will be
subject to the review of the Board of Directors or Trustees. Payments hereunder
will be applied to distribution expenses in the order in which they are
incurred, unless otherwise determined by the Board of Directors or Trustees.
Costs of the Distributor subject to reimbursement hereunder are costs of
performing Distribution Activities and may include, among others:
(a) amounts paid to Prudential Securities in reimbursement of
costs incurred by Prudential Securities in performing services under a
selected dealer agreement between Prudential Securities and the
Distributor for sale of Class A shares of the Fund, including sales
commissions and trailer commissions paid to, or on account of, account
executives and indirect and overhead costs associated with
Distribution Activities, including central office and branch expenses;
(b) amounts paid to Prusec in reimbursement of costs incurred by
Prusec in performing services under a selected dealer agreement
between Prusec and the Distributor for sale of Class A shares of the
Fund, including sales commissions and trailer commissions paid to, or
on account of, agents and indirect and overhead costs associated with
Distribution Activities;
4
<PAGE>
(c) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than current
shareholders of the Fund; and
(d) sales commissions (including trailer commissions) paid to, or
on account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into selected
dealer agreements with the Distributor with respect to shares of the
Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Fund will provide to the Board of Directors
or Trustees of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors or Trustees of the Fund such
additional information as the Board or Trustees shall from time to time
reasonably request, including information about Distribution Activities
undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the Fund
of the commissions and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor.
5
<PAGE>
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class A shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors or Trustees of the Fund and a majority of the
Rule 12b-1 Directors or Trustees by votes cast in person at a meeting called for
the purpose of voting on the continuation of the Plan.
6. Termination
-----------
This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class A shares of
the Fund.
7. Amendments
----------
The Plan may not be amended to change the distribution expenses to be paid
as provided for in Section 3 hereof so as to increase materially the amounts
payable under this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund. All material amendments of
6
<PAGE>
the Plan, including the addition or deletion of categories of expenditures which
are reimbursable hereunder, shall be approved by a majority of the Board of
Directors or the Trustees of the Fund and a majority of the Rule 12b-1 Directors
or Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.
8. Non-interested Directors or Trustees
------------------------------------
While the Plan is in effect, the selection and nomination of the Directors
or Trustees who are not "interested persons" of the Fund (non-interested
Directors or Trustees) shall be committed to the discretion of the non-
interested Directors or Trustees.
9. Records
-------
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated as of January 22, 1990 and
amended and restated as of July 1, 1993.
7
<PAGE>
EXHIBIT 99.15(b)
PRUDENTIAL-BACHE GLOBAL GENESIS FUND, INC.
Distribution and Service Plan
(Class B Shares)
--------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential-Bache Global Genesis Fund, Inc. (the
Fund) and by Prudential Securities Incorporated (Prudential Securities), the
Fund's distributor (the Distributor).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will continue to employ the Distributor to
distribute Class B shares issued by the Fund (Class B shares). Under the
Distribution Agreement, the Distributor will be entitled to receive payments
from investors of contingent deferred sales charges imposed with respect to
certain repurchases and redemptions of Class B shares. Under the Plan, the Fund
wishes to reimburse the Distributor for costs incurred by the Distributor in
distributing Class B shares of the Fund and to pay the Distributor a service fee
for the maintenance of Class B shareholder accounts. A majority of the Board of
Directors or Trustees of the Fund including a majority who are not "interested
persons" of the Fund (as defined in the Investment Company Act) and who have no
direct or indirect financial interest in the operation
<PAGE>
of this Plan or any agreements related to it (the Rule 12b-1 Directors or
Trustees), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined below) are
primarily intended to result in the sale of Class B shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the Investment
Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class B shares of the
Fund and to service shareholder accounts using all of the facilities of the
Prudential Securities distribution network including sales personnel and branch
office and central support systems, and also using such other qualified broker-
dealers and financial institutions as the Distributor may select, including
2
<PAGE>
Pruco Securities Corporation (Prusec). Services provided and activities
undertaken to distribute Class B shares of the Fund are referred to herein as
"Distribution Activities."
2. Payment of Service Fee
-----------------------
The Fund shall reimburse the Distributor for costs incurred by it in
providing personal service and/or maintaining shareholder accounts at a rate not
to exceed .25 of 1% per annum of the average daily net assets of the Class B
shares (service fee). The Fund shall calculate and accrue daily amounts
reimbursable by the Class B shares of the Fund hereunder and shall pay such
amounts monthly or at such other intervals as the Board of Directors or Trustees
may determine. Costs of the Distributor subject to reimbursement hereunder
include account servicing fees and indirect and overhead costs associated with
providing personal service and/or maintaining shareholder accounts.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall reimburse the Distributor at a rate which, together with the
service fee (described in Section 2 hereof), shall not exceed 1% per annum of
the average daily net assets of the Class B shares of the Fund for costs
incurred by it in performing Distribution Activities. The Fund shall calculate
and accrue daily amounts reimbursable by the Class B shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors or Trustees may determine. Proceeds from contingent deferred
sales charges will be applied to reduce the costs incurred in performing
Distribution Activities.
3
<PAGE>
The Fund shall carry forward amounts reimbursable that are not paid because they
exceed .75 of 1% per annum of the average daily net assets of the Class B shares
of the Fund (Carry Forward Amounts) and shall pay such amounts within the .75 of
1% per annum payment rate limitation so long as this Plan, including any
amendments hereto, is in effect, subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice. Although the Fund is not liable
for unreimbursed distribution expenses, in the event of termination or
discontinuation of the Plan, the Board of Directors or Trustees may consider the
appropriateness of having the Class B shares of the Fund reimburse the
Distributor for the then outstanding Carry Forward Amounts plus interest thereon
to the extent permitted by applicable law or regulation from the effective date
of the Plan.
Amounts paid to the Distributor by the Class B shares of the Fund will not
be used to pay the distribution expenses incurred with respect to the Class A
shares of the Fund except that distribution expenses attributable to the Fund as
a whole will be allocated to the Class B shares according to the ratio of the
sale of Class B shares to the total sales of the Fund's shares over the Fund's
fiscal year or such other allocation method approved by the Board of Directors
or Trustees. The allocation of distribution expenses among Classes will be
subject to the review of the Board of Directors or Trustees. Payments hereunder
will be applied to distribution expenses in the order in which they are
incurred, unless otherwise determined by the Board of Directors or Trustees.
4
<PAGE>
Costs of the Distributor subject to reimbursement hereunder are all costs
of performing Distribution Activities and include, among others:
(a) sales commissions (including trailer commissions) paid to, or
on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated
with performance of distribution activities including central
office and branch expenses;
(c) amounts paid to Prusec in reimbursement of all costs incurred
by Prusec in performing services under a selected dealer
agreement between Prusec and the Distributor for sale of
Class B shares of the Fund, including sales commissions and
trailer commissions paid to, or on account of, agents and
indirect and overhead costs associated with distribution
activities;
(d) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund prospectuses, statements of additional information and
periodic financial reports and sales literature to persons
other than current shareholders of the Fund;
(e) sales commissions (including trailer commissions) paid to, or
on account of, broker-dealers and other financial
institutions (other than Prusec) which have entered into
selected dealer agreements with the Distributor with respect
to shares of the Fund;
(f) to the extent permitted by law, interest on unreimbursed
Carry Forward Amounts as defined in Section 3 at a rate equal
to that paid by Prudential Securities for bank borrowings as
such rate may vary from day to day, not to exceed that
permitted under Article III, Section 26, of the NASD Rules of
Fair Practice; and
5
<PAGE>
(g) unreimbursed distribution expenses incurred with respect to
the sale of Class B shares which have been exchanged into the
Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Fund will provide to the Board of Directors
or Trustees of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors or Trustees of the Fund such
additional information as they shall from time to time reasonably request,
including information about Distribution Activities undertaken or to be
undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the Fund
of the commissions and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class B shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in
6
<PAGE>
full force and effect thereafter for so long as such continuance is specifically
approved at least annually by a majority of the Board of Directors or Trustees
of the Fund and a majority of the Rule 12b-1 Directors or Trustees by votes cast
in person at a meeting called for the purpose of voting on the continuation of
the Plan.
6. Termination
-----------
This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class B shares of
the Fund.
7. Amendments
----------
The Plan may not be amended to change the distribution expenses to be paid
as provided for in Section 3 hereof so as to increase materially the amounts
payable under this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund. All material amendments of the
Plan, including the addition or deletion of categories of expenditures which are
reimbursable hereunder, shall be approved by a majority of the Board of
Directors or Trustees of the Fund and a majority of the Rule 12b-1 Directors or
Trustees by votes cast in person at a meeting called for the purpose of voting
on the Plan.
8. Non-interested Directors or Trustees
------------------------------------
While the Plan is in effect, the selection and nomination of the Directors
or Trustees who are not "interested persons" of the
7
<PAGE>
Fund (non-interested Directors or Trustees) shall be committed to the discretion
of the non-interested Directors or Trustees.
9. Records
-------
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated as of January 22, 1990 and
amended and restated as of July 1, 1993
8
<PAGE>
EXHIBIT 99.15(c)
PRUDENTIAL ________ FUND
Form of
Distribution and Service Plan
(Class A Shares)
---------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential __________ Fund (the Fund) and by
Prudential Mutual Fund Distributors, Inc., the Fund's distributor (the
Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class A shares issued by the Fund
(Class A shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class A shares.
A majority of the Board of Directors or Trustees of the Fund, including a
majority of those Directors or Trustees who are not "interested persons" of the
Fund (as defined in the Investment Company Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the Rule 12b-1 Directors or Trustees), have determined by votes
cast in person at a meeting called for the purpose of voting on this Plan that
there is a reasonable
<PAGE>
likelihood that adoption of this Plan will benefit the Fund and its
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of Class
A shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class A shares of the
Fund and to service shareholder accounts using all of the facilities of the
distribution networks of Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), including sales personnel
and branch office and central support systems, and also using such other
qualified broker-dealers and financial institutions as the Distributor may
select. Services provided and activities undertaken to distribute Class A
shares of the Fund are referred to herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
-----------------------
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class A shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class A
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors/Trustees may determine.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2 hereof),
of .30 of 1% per annum of the average daily net assets of the Class A shares of
the Fund for the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors/Trustees may determine. Amounts payable under the Plan shall
be subject to the limitations of Article III, Section 26 of the NASD Rules of
Fair Practice.
Amounts paid to the Distributor by the Class A shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class A shares according to the
ratio of the sales of Class A shares to the total sales of the Fund's shares
3
<PAGE>
over the Fund's fiscal year or such other allocation method approved by the
Board of Directors or Trustees. The allocation of distribution expenses among
classes will be subject to the review of the Board of Directors or Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) amounts paid to Prudential Securities for performing services
under a selected dealer agreement between Prudential
Securities and the Distributor for sale of Class A shares of
the Fund, including sales commissions and trailer commissions
paid to, or on account of, account executives and indirect
and overhead costs associated with Distribution Activities,
including central office and branch expenses;
(b) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor
for sale of Class A shares of the Fund, including sales
commissions and trailer commissions paid to, or on account
of, agents and indirect and overhead costs associated with
Distribution Activities;
(c) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund prospectuses, statements of additional information and
periodic financial reports and sales literature to persons
other than current shareholders of the Fund; and
(d) sales commissions (including trailer commissions) paid to, or
on account of, broker-dealers and financial institutions
(other than Prudential Securities and Prusec) which have
entered into selected dealer agreements with the Distributor
with respect to shares of the Fund.
4
<PAGE>
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Fund will provide to the Board of Directors
or Trustees of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors or Trustees of the Fund such
additional information as the Board or Trustees shall from time to time
reasonably request, including information about Distribution Activities
undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the Fund
of the commissions and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class A shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
5
<PAGE>
majority of the Board of Directors or Trustees of the Fund and a majority of the
Rule 12b-1 Directors or Trustees by votes cast in person at a meeting called for
the purpose of voting on the continuation of the Plan.
6. Termination
-----------
This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class A shares of
the Fund.
7. Amendments
----------
The Plan may not be amended to change the combined service and distribution
fees to be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class A shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors or the Trustees of the Fund and a majority of the Rule 12b-1 Directors
or Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.
8. Rule 12b-1 Directors or Trustees
--------------------------------
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors or Trustees shall be committed to the discretion of the Rule 12b-1
Directors or Trustees.
6
<PAGE>
EXHIBIT 99.15(d)
PRUDENTIAL ________ FUND
Form of
Distribution and Service Plan
(Class B Shares)
---------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential __________ Fund, (the Fund) and by
Prudential Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will continue to employ the Distributor to distribute Class B shares issued
by the Fund (Class B shares). Under the Plan, the Fund wishes to pay to the
Distributor, as compensation for its services, a distribution and service fee
with respect to Class B shares.
A majority of the Board of Directors or Trustees of the Fund including a
majority who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the Rule 12b-1
Directors or Trustees), have determined by votes cast in person at a meeting
called for the purpose of voting on this Plan that there is a reasonable
likelihood that adoption of this Plan will benefit the Fund and its
<PAGE>
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of Class
B shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class B shares of the
Fund and to service shareholder accounts using all of the facilities of the
Prudential Securities distribution network including sales personnel and branch
office and central support systems, and also using such other qualified broker-
dealers and financial institutions as the Distributor may select, including
Pruco Securities Corporation (Prusec). Services provided and activities
undertaken to distribute Class B shares of the Fund are referred to herein as
"Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
-----------------------
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class B shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class B
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors/Trustees may determine.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall pay to the Distributor as compensation for its services a
distribution fee of .75 of 1% per annum of the average daily net assets of the
Class B shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class B shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Directors/Trustees may determine. Amounts payable under the
Plan shall be subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice.
Amounts paid to the Distributor by the Class B shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class B shares according to the
ratio of the sale of Class B shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Directors or Trustees. The allocation of distribution
3
<PAGE>
expenses among classes will be subject to the review of the Board of Directors
or Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of Class
B shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports
and sales literature to persons other than current shareholders of the
Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prusec) which have entered into selected dealer agreements with
the Distributor with respect to shares of the Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Fund will provide to the Board of Directors
or Trustees of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors or Trustees of
4
<PAGE>
the Fund such additional information as they shall from time to time reasonably
request, including information about Distribution Activities undertaken or to be
undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the Fund
of the commissions and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class B shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors or Trustees of the Fund and a majority of the
Rule 12b-1 Directors or Trustees by votes cast in person at a meeting called for
the purpose of voting on the continuation of the Plan.
6. Termination
-----------
This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment
5
<PAGE>
Company Act) of the Class B shares of the Fund.
7. Amendments
----------
The Plan may not be amended to change the combined service and distribution
fees to be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class B shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors or Trustees of the Fund and a majority of the Rule 12b-1 Directors or
Trustees by votes cast in person at a meeting called for the purpose of voting
on the Plan.
8. Rule 12b-1 Directors or Trustees
--------------------------------
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors or Trustees shall be committed to the discretion of the Rule 12b-1
Directors or Trustees.
9. Records
-------
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
*[10. Enforcement of Claims.
---------------------
The name "Prudential ___________ Trust" is the designation of the Trustees
under a Declaration of Trust dated ______, 19__ and all persons dealing with the
Fund must look solely to the property
6
<PAGE>
of the Fund for the enforcement of any claims against the Fund, and neither the
Trustees, officers, agents of shareholders assume any personal liability for
obligations entered into on behalf of the Fund.]
Dated:
7
<PAGE>
EXHIBIT 99.15(e)
PRUDENTIAL ________ FUND
Form of
Distribution and Service Plan
(Class C Shares)
---------------
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential __________ Fund, (the Fund) and by
Prudential Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will continue to employ the Distributor to distribute Class C shares issued
by the Fund (Class C shares). Under the Plan, the Fund wishes to pay to the
Distributor, as compensation for its services, a distribution and service fee
with respect to Class C shares.
A majority of the Board of Directors or Trustees of the Fund including a
majority who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the Rule 12b-1
Directors or Trustees), have determined by votes cast in person at a meeting
called for the purpose of voting on this Plan that there is a reasonable
likelihood that adoption of this Plan will benefit the Fund and its
<PAGE>
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of Class
C shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
-----------------------
The Fund shall engage the Distributor to distribute Class C shares of the
Fund and to service shareholder accounts using all of the facilities of the
Prudential Securities distribution network including sales personnel and branch
office and central support systems, and also using such other qualified broker-
dealers and financial institutions as the Distributor may select, including
Pruco Securities Corporation (Prusec). Services provided and activities
undertaken to distribute Class C shares of the Fund are referred to herein as
"Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
-----------------------
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class C shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class C
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors/Trustees may determine.
3. Payment for Distribution Activities
-----------------------------------
The Fund shall pay to the Distributor as compensation for its services a
distribution fee of .75 of 1% per annum of the average daily net assets of the
Class C shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class C shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Directors/Trustees may determine. Amounts payable under the
Plan shall be subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice.
Amounts paid to the Distributor by the Class C shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class C shares according to the
ratio of the sale of Class C shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Directors or Trustees. The allocation of distribution
3
<PAGE>
expenses among classes will be subject to the review of the Board of Directors
or Trustees.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of Class
C shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports
and sales literature to persons other than current shareholders of the
Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prusec) which have entered into selected dealer agreements with
the Distributor with respect to shares of the Fund.
4. Quarterly Reports; Additional Information
-----------------------------------------
An appropriate officer of the Fund will provide to the Board of Directors
or Trustees of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors or Trustees of
4
<PAGE>
the Fund such additional information as they shall from time to time reasonably
request, including information about Distribution Activities undertaken or to be
undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the Fund
of the commissions and account servicing fees to be paid by the Distributor to
account executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
---------------------------
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class C shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Class C shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors or Trustees of the Fund and a majority of the
Rule 12b-1 Directors or Trustees by votes cast in person at a meeting called for
the purpose of voting on the continuation of the Plan.
6. Termination
-----------
This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment
5
<PAGE>
Company Act) of the Class C shares of the Fund.
7. Amendments
----------
The Plan may not be amended to change the combined service and distribution
fees to be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class C shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors or Trustees of the Fund and a majority of the Rule 12b-1 Directors or
Trustees by votes cast in person at a meeting called for the purpose of voting
on the Plan.
8. Rule 12b-1 Directors or Trustees
--------------------------------
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors or Trustees shall be committed to the discretion of the Rule 12b-1
Directors or Trustees.
9. Records
-------
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
*[10. Enforcement of Claims.
---------------------
The name "Prudential ___________ Trust" is the designation of the Trustees
under a Declaration of Trust dated ______, 19__ and all persons dealing with the
Fund must look solely to the property
6
<PAGE>
of the Fund for the enforcement of any claims against the Fund, and neither the
Trustees, officers, agents of shareholders assume any personal liability for
obligations entered into on behalf of the Fund.]
Dated:
7
