<PAGE>
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PRUDENTIAL-BACHE STRUCTURED MATURITY FUND, INC.
- - --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PRUDENTIAL-BACHE STRUCTURED MATURITY FUND, INC.
- - --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
<PAGE>
PRUDENTIAL MUTUAL FUNDS
ONE SEAPORT PLAZA
NEW YORK, NY 10292
APRIL 18, 1994
RE: IMPORTANT PROXY MATERIAL--IMMEDIATE ACTION REQUIRED
Dear Shareholder:
We are pleased to enclose a notice and proxy statement for a special meeting
of shareholders of the Prudential Mutual Funds to be held on June 23, 1994. You
are being asked to approve, among other things, a proposal to permit the
automatic conversion of Class B shares to Class A shares after a specified
number of years. Thereafter, converted shares will be subject to the lower
annual distribution-related fees applicable to Class A shares.
The proxy statement also includes proposals to revise the current
distribution and service plans for Class A and Class B shares and other
proposals recommended by the Fund's Manager and Subadviser.
Please read the enclosed materials carefully. The proxy statement discusses
each proposal in detail and the reasons why the Board of Directors/Trustees
recommend that you vote in favor of those proposals.
The Fund is using Shareholder Communications Corporation (SCC), a
professional proxy solicitation firm, to assist shareholders in the voting
process. If we have not yet received your proxy card as the date of the meeting
approaches, you may receive a telephone call from SCC reminding you to exercise
your right to vote.
Your vote is critical in allowing your Fund to hold the meeting as scheduled.
Please take a moment now to sign and return the proxy card in the enclosed
postage-paid envelope. If less than a majority of the eligible shares are
represented, the Fund, at shareholders' expense, will have to continue to
solicit votes until a quorum is obtained. Your prompt attention in this matter
benefits all shareholders. Thank you.
Sincerely,
Lawrence C. McQuade
President
SPECIAL NOTE: If you hold shares in more than one Prudential fund, you will
receive a separate proxy package for each Fund you hold. Please be sure to
sign and return each proxy card regardless of how many you receive.
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
ONE SEAPORT PLAZA
NEW YORK, NY 10292
-----------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of Prudential-
Bache Structured Maturity Fund, Inc., doing business as Prudential Structured
Maturity Fund (the Fund), will be held at 3:00 P.M. on June 23, 1994 at 199
Water Street, New York, NY 10292, for the following purposes:
1. To elect Directors.
2. To approve an amendment of the Fund's Articles of Incorporation to
permit a conversion feature for Class B shares.
3. To approve an amended and restated Class A Distribution and Service
Plan.
4. To approve an amended and restated Class B Distribution and Service
Plan.
5. To approve the elimination of the Fund's investment restriction
regarding restricted and illiquid securities.
6. To approve an amendment of the Fund's investment restriction relating
to the borrowing of money, the pledging of assets and the issuance of
senior securities.
7. To approve an amendment of the Fund's Articles of Incorporation to
change the name of the Fund to "Prudential Structured Maturity Fund, Inc."
8. To ratify the selection by the Board of Directors of Deloitte & Touche
as independent accountants for the year ending December 31, 1994.
9. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Only shares of Common Stock of the Fund of record at the close of business on
March 31, 1994 are entitled to notice of and to vote at this Meeting or any
adjournment thereof.
S. Jane Rose
Secretary
Dated: April 18, 1994
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. IN
ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER
SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
ONE SEAPORT PLAZA
NEW YORK, NY 10292
-----------------------
PROXY STATEMENT
-----------------------
This statement is furnished by the Board of Directors of Prudential-Bache
Structured Maturity Fund, Inc., doing business as Prudential Structured
Maturity Fund (Income Portfolio) (the Fund), in connection with its
solicitation of proxies for use at a Special Meeting of Shareholders to be held
at 3:00 PM on June 23, 1994 at 199 Water Street, New York, New York 10292, the
Fund's principal executive office. The purpose of the Meeting and the matters
to be acted upon are set forth in the accompanying Notice of Special Meeting.
If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted for the election of Directors and for each of the other
proposals. A Proxy may be revoked at any time prior to the time it is voted by
written notice to the Secretary of the Fund or by attendance at the Meeting. If
sufficient votes to approve one or more of the proposed items are not received,
the persons named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares present at the
Meeting or represented by proxy. When voting on a proposed adjournment, the
persons named as proxies will vote for the proposed adjournment all shares that
they are entitled to vote with respect to each item, unless directed to
disapprove the item, in which case such shares will be voted against the
proposed adjournment.
If a Proxy that is properly executed and returned accompanied by instructions
to withhold authority to vote represents a broker "non-vote" (that is, a Proxy
from a broker or nominee indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote shares
on a particular matter with respect to which the broker or nominee does not
have discretionary power), the shares represented thereby will be considered
not to be present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business and be deemed not cast with respect to
such proposal. If no instructions are received by the broker or nominee from
the shareholder with reference to routine
1
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matters, the shares represented thereby may be considered for purposes of
determining the existence of a quorum for the transaction of business and will
be deemed cast with respect to such proposal. Also, a properly executed and
returned Proxy marked with an abstention will be considered present at the
Meeting for purposes of determining the existence of a quorum for the
transaction of business. However, abstentions do not constitute a vote "for" or
"against" the matter, but have the effect of a negative vote on the matters
which require approval by a requisite percentage of the outstanding shares.
The close of business on March 31, 1994 has been fixed as the record date for
the determination of shareholders entitled to notice of, and to vote at, the
Meeting. On that date, the Fund had 21,171,912 shares of Common Stock
outstanding and entitled to vote, consisting of 9,676,319 Class A shares and
11,495,592 Class B shares. Each share will be entitled to one vote at the
Meeting. It is expected that the Notice of Special Meeting, Proxy Statement and
form of Proxy will first be mailed to shareholders on or about April 22, 1994.
Management does not know of any person or group who owned beneficially 5% or
more of the outstanding shares of either class of Common Stock of the Fund as
of March 31, 1994.
The expense of solicitation will be borne by the Fund and will include
reimbursement of brokerage firms and others for expenses in forwarding proxy
solicitation material to beneficial owners. The solicitation of proxies will be
largely by mail. The Board of Directors of the Fund has authorized management
to retain Shareholder Communications Corporation, a proxy solicitation firm, to
assist in the solicitation of proxies for this Meeting. This cost, including
specified expenses, is not expected to exceed $8,500 and will be borne by the
Fund. In addition, solicitation may include, without cost to the Fund,
telephonic, telegraphic or oral communication by regular employees of
Prudential Securities Incorporated (Prudential Securities) and its affiliates.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
At the Meeting, eight Directors will be elected to hold office for a term of
unlimited duration until their successors are elected and qualify. It is the
intention of the persons named in the accompanying form of Proxy to vote for
the election of Robert R. Fortune, Delayne Dedrick Gold, Harry A. Jacobs, Jr.,
Lawrence C. McQuade, Thomas A. Owens, Jr., Richard A. Redeker, Robert J.
Schultz and Merle T. Welshans, all of whom are currently
2
<PAGE>
members of the Board of Directors. Each of the nominees has consented to be
named in the Proxy Statement and to serve as a Director if elected. All of the
current members of the Board of Directors, except for Mr. Redeker, were elected
by shareholders in April 1990. Mr. McQuade has served as a Director since June
1988 and Messrs. Fortune, Jacobs, Owens, Schultz and Welshans and Ms. Gold have
served as Directors since May 1989. Mr. Redeker has served as a Director since
December 14, 1993.
The Board of Directors has no reason to believe that any of the nominees
named above will become unavailable for election as a Director, but if that
should occur before the Meeting, proxies will be voted for such persons as the
Board of Directors may recommend.
The Fund's By-laws provide that the Fund will not be required to hold annual
meetings of shareholders if the election of Directors is not required under the
Investment Company Act of 1940, as amended (the Investment Company Act). It is
the present intention of the Board of Directors of the Fund not to hold annual
meetings of shareholders unless such shareholder action is required.
INFORMATION REGARDING DIRECTORS
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE DURING POSITION OWNED AT
THE PAST FIVE YEARS AND DIRECTORSHIPS WITH FUND MARCH 31, 1994
---------------------------------------- ----------- --------------
Robert R. Fortune (77), Financial Consul- Director 131
tant; previously Chairman, President and
Chief Executive Officer of Associated
Electric & Gas Insurance Services Limited
and Aegis Insurance Services, Inc.; Direc-
tor of Independence Square Income Securi-
ties, Inc., Temporary Investment Fund,
Inc., Portfolios for Diversified Invest-
ment, Inc., Prudential IncomeVertible(R)
Fund, Inc. Prudential Structured Maturity
Fund, Inc. and Prudential Utility Fund;
Trustee of Trust for Short-Term Federal
Securities, Municipal Fund for Temporary
Investment and The PNC Fund; Managing Gen-
eral Partner of Chestnut Street Exchange
Fund.
Delayne Dedrick Gold (55), Marketing and Director -0-
Management Consultant; Director of Pruden-
tial Adjustable Rate Securities Fund,
Inc., Prudential Equity Fund Inc., Pru-
3
<PAGE>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE DURING POSITION OWNED AT
THE PAST FIVE YEARS AND DIRECTORSHIPS WITH FUND MARCH 31, 1994
------------------------------------------ ----------- --------------
dential Global Fund, Inc., Prudential GNMA
Fund, Prudential Government Plus Fund,
Prudential Growth Opportunity Fund, Pru-
dential High Yield Fund, Prudential
IncomeVertible(R) Fund, Inc., Prudential
MoneyMart Assets, Prudential National
Municipals Fund, Prudential Pacific Growth
Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Special
Money Market Fund, Prudential Structured
Maturity Fund, Inc. Prudential Tax-Free
Money Fund and Prudential Utility Fund;
Trustee of The BlackRock Government Income
Trust, Command Government Fund, Command
Money Fund, Command Tax-Free Fund, Pruden-
tial California Municipal Fund, Prudential
Government Securities Trust, Prudential
Municipal Series Fund and Prudential U.S.
Government Fund.
*Harry A. Jacobs, Jr. (72), Senior Director Director -0-
(since January 1986) of Prudential Securi-
ties; formerly Interim Chairman and Chief
Executive Officer of Prudential Mutual
Fund Management, Inc. (PMF) (June-
September 1993); Chairman of the Board of
Prudential Securities (1982-1985) and
Chairman of the Board and Chief Executive
Officer of Bache Group Inc. (1977-1982);
Director of the Center for National
Policy, Prudential Adjustable Rate
Securities Fund, Inc., Prudential Equity
Fund, Inc., Prudential Global Fund,
Inc., Prudential GNMA Fund, Prudential
Government Plus Fund, Prudential Growth
Opportunity Fund, Prudential High Yield
Fund, Prudential IncomeVertible(R) Fund,
Inc., Prudential MoneyMart Assets,
Prudential National Municipals Fund,
Prudential Pacific Growth Fund, Inc.,
Prudential Short-Term Global Income Fund,
Inc., Prudential Special Money Market
Fund, Prudential Structured Maturity Fund,
Inc. Prudential Tax-Free Money Fund,
4
<PAGE>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE DURING POSITION OWNED AT
THE PAST FIVE YEARS AND DIRECTORSHIPS WITH FUND MARCH 31, 1994
- - --------------------------------------------- ----------- --------------
Prudential Utility Fund,The First Austra-
lia Fund, Inc., The First Australia Prime
Income Fund, Inc., The Global Government
Plus Fund, Inc. and The Global Yield Fund,
Inc.; Trustee of the Trudeau Institute,
The BlackRock Government Income Trust,
Command Money Fund, Command Government
Fund, Command Tax-Free Fund, Prudential
California Municipal Fund, Prudential Mu-
nicipal Series Fund and Prudential U.S.
Government Fund.
*Lawrence C. McQuade (66), Vice Chairman of President and -0-
PMF (since 1988); Managing Director, In- Director
vestment Banking, Prudential Securities
(1988-1991); Director of Quixote Corpora-
tion (since February 1992) and BUNZL, PLC
(since June 1991); formerly Director of
Crazy Eddie Inc. (1987-1990) and Kaiser
Tech, Ltd., and Kaiser Aluminum and Chemi-
cal Corp. (March 1987-November 1988); for-
merly Executive Vice President and Direc-
tor of W.R. Grace & Company; President and
Director of Prudential Adjustable Rate Se-
curities Fund, Inc., Prudential Equity
Fund, Inc., Prudential Global Fund, Inc.,
Prudential Global Genesis Fund, Prudential
Global Natural Resources Fund, Prudential
GNMA Fund, Prudential Government Plus
Fund, Prudential Growth Fund, Inc.,
Prudential Growth Opportunity Fund,
Prudential High Yield Fund, Prudential
IncomeVertible(R) Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc.,
Prudential Intermediate Global Income
Fund, Inc., Prudential MoneyMart Assets,
Pru- dential Multi-Sector Fund, Inc.,
Prudential National Municipals Fund,
Prudential Pacific Growth Fund, Inc.,
Prudential Short-Term Global Income Fund,
Inc., Prudential Special Money Market
Fund, Prudential Structured Maturity Fund,
Inc., Prudential Tax-Free Money Fund,
Prudential Utility Fund, The Global
Government Plus
5
<PAGE>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE DURING POSITION OWNED AT
THE PAST FIVE YEARS AND DIRECTORSHIPS WITH FUND MARCH 31, 1994
- - --------------------------------------------- ----------- --------------
Fund, Inc., The Global Yield Fund, Inc.
and The High Yield Income Fund, Inc.;
President and Trustee of The BlackRock
Government Income Trust, Command Govern-
ment Fund, Command Money Fund, Command
Tax-Free Fund, Prudential California Mu-
nicipal Fund, Prudential Equity Income
Fund, Prudential FlexiFund, Prudential
Government Securities Trust, Prudential
Municipal Bond Fund, Prudential Municipal
Series Fund, Prudential U.S. Government
Fund and The Target Portfolio Trust.
Thomas A. Owens, Jr. (71), Consultant; Di- Director 1,766
rector of Prudential Adjustable Rate Secu-
rities Fund, Inc., Prudential Global Fund,
Inc., Prudential Government Plus Fund,
Prudential Growth Fund, Inc., Prudential
IncomeVertible(R) Fund, Inc., Prudential
Intermediate Global Income Fund, Inc.,
Prudential MoneyMart Assets, Prudential
Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Inc., Pru-
dential Structured Maturity Fund, Inc. and
Prudential Utility Fund; Trustee of Pru-
dential U.S. Government Fund.
*Richard A. Redeker (50), President, Chief Director 3,949
Executive Officer and Director (since Oc-
tober 1993), PMF; Executive Vice Presi-
dent, Director and Member of the Operating
Committee (since October 1993), Prudential
Securities; Director (since October 1993)
of Prudential Securities Group, Inc.
(PSG); formerly Senior Executive Vice
President and Director of Kemper Financial
Services, Inc. (September 1978-September
1993); Director of Global Utility Fund,
Inc., Prudential Adjustable Rate Securi-
ties Fund, Inc., Prudential Equity Fund,
Inc., Prudential Global Fund, Inc., Pru-
dential Global Genesis Fund, Prudential
Global Natural Resources Fund, Prudential
GNMA Fund, Prudential Government Plus
Fund, Prudential Growth Fund, Inc., Pru-
dential
6
<PAGE>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE DURING POSITION OWNED AT
THE PAST FIVE YEARS AND DIRECTORSHIPS WITH FUND MARCH 31, 1994
- - --------------------------------------------- ----------- --------------
IncomeVertible(R) Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc.,
Prudential Intermediate Global Income
Fund, Inc., Prudential MoneyMart Assets,
Prudential Multi-Sector Fund, Inc., Pru-
dential Pacific Growth Fund, Inc., Pruden-
tial Short-Term Global Income Fund, Inc.,
Prudential Special Money Market Fund, Pru-
dential Structured Maturity Fund, Inc.,
Prudential Utility Fund, The Global Yield
Fund, Inc., The Global Government Plus
Fund, Inc., and The High Yield Income
Fund, Inc.; Trustee of The BlackRock Gov-
ernment Income Trust, Command Government
Fund, Command Money Fund, Command Tax-Free
Fund, Prudential California Municipal
Fund, Prudential Equity Income Fund, Pru-
dential FlexiFund, Prudential Municipal
Bond Fund, Prudential Municipal Series
Fund, Prudential U.S. Government Fund and
The Target Portfolio Trust.
Robert J. Schultz (69), Retired (since Janu- Director -0-
ary 1987); formerly Financial Vice Presi-
dent of Commonwealth Edison Company (elec-
tric power company); Director of Pruden-
tial Growth Fund, Inc., Prudential
IncomeVertible(R) Fund, Inc., Prudential
Intermediate Global Income Fund, Inc.,
Prudential MoneyMart Assets, Prudential
Structured Maturity Fund and Prudential
Utility Fund.
Merle T. Welshans (75), Adjunct Professor of Director -0-
Finance, Washington University (since July
1983); prior thereto, Vice President, Fi-
nance of Union Electric Company; Director
of Prudential IncomeVertible(R) Fund,
Inc., Prudential Structured Maturity Fund
and Prudential Utility Fund; Trustee of
the Olympic Trust Funds of Los Angeles.
- - -----------
*Indicates "interested" Director, as defined in the Investment Company Act, by
reason of his affiliation with PMF or Prudential Securities.
7
<PAGE>
The Directors and officers of the Fund as a group owned beneficially 5,846
shares of the Fund as of March 31, 1994, representing less than 1% of the
outstanding shares of the Fund.
The Fund pays annual compensation of $6,000, plus travel and incidental
expenses, to each of the five Directors not affiliated with PMF or Prudential
Securities. The Directors have the option to receive the Director's fee
pursuant to a deferred fee agreement with the Fund. Under the terms of the
agreement, the Fund accrues daily the amount of such Director's fees which
accrues interest at a rate equivalent to the prevailing rate applicable to 90-
day U.S. Treasury Bills at the beginning of each calendar quarter or, pursuant
to an exemptive order of the Securities and Exchange Commission (SEC), at the
rate of return of the Fund (the Fund Rate). 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. Mr. Fortune has elected
to receive his directors' fees at the Fund Rate under the deferred compensation
plan. During the fiscal year ended December 31, 1993, the Fund paid Directors'
fees of approximately $36,000 and travel and incidental expenses of
approximately $4,100.
There were four regular meetings and two special meetings of the Fund's Board
of Directors held during the fiscal year ended December 31, 1993. The Board of
Directors presently has an Audit Committee, the members of which are Ms. Gold
and Messrs. Fortune, Owens, Schultz and Welshans, the Fund's non-interested
Directors. The Audit Committee met twice during the fiscal year ended December
31, 1993. The Audit Committee makes recommendations to the full Board with
respect to the engagement of independent accountants and reviews with the
independent accountants the plan and results of the audit engagement and
matters having a material effect upon the Fund's financial operations. The
Board also has a Nominating Committee, comprised of the Fund's non-interested
Directors, which selects and proposes candidates for election to the Board of
Directors. The Nominating Committee met twice during the fiscal year ended
December 31, 1993. The Nominating Committee does not consider nominees
recommended by shareholders to fill vacancies on the Board.
During the fiscal year ended December 31, 1993, Harry A. Jacobs, Jr. attended
fewer than 75% of the aggregate of the total number of meetings of the Board of
Directors and any committees thereof of which he was a member.
The executive officers of the Fund, other than as shown above, are: Robert F.
Gunia, Vice President, Susan C. Cote, Treasurer and Principal
8
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Financial and Accounting Officer, and S. Jane Rose, Secretary, each having held
office since June 8, 1988; and Marguerite E.H. Morrison, Assistant Secretary,
having held office since June 5, 1991. Mr. Gunia is 47 years old and is
currently Chief Administrative Officer (since July 1990), Director (since
January 1989), Executive Vice President, Treasurer and Chief Financial Officer
(since June 1987) of PMF and a Senior Vice President of Prudential Securities.
He is also Vice President and Director (since May 1989) of The Asia Pacific
Fund, Inc. Ms. Cote is 39 years old and is a Senior Vice President (since
January 1989) of PMF and a Senior Vice President of Prudential Securities
(since January 1992). Prior thereto, she was a Vice President (January 1986--
December 1991) of Prudential Securities. Ms. Rose is 48 years old and is a
Senior Vice President (since January 1991) and Senior Counsel of PMF and a
Senior Vice President and Senior Counsel of Prudential Securities (since July
1992). Prior thereto, she was a First Vice President (June 1987--December 1990)
of PMF and a Vice President and Associate General Counsel of Prudential
Securities. Ms. Morrison is 38 years old and is a Vice President and Associate
General Counsel (since June 1991) of PMF and a Vice President and Associate
General Counsel of Prudential Securities. The executive officers of the Fund
are elected annually by the Board of Directors.
REQUIRED VOTE
Directors must be elected by a vote of a plurality of the shares present at
the meeting in person or by proxy and entitled to vote thereupon, provided that
a quorum is present.
MANAGEMENT OF THE FUND
THE MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One Seaport
Plaza, New York, New York 10292, serves as the Fund's Manager under a
management agreement dated as of July 25, 1989 (the Management Agreement).
The Management Agreement was last approved by the Board of Directors of the
Fund, including a majority of the Directors who are not parties to such
contract or interested persons of such parties (as defined in the Investment
Company Act) on June 9, 1993 and was approved by shareholders on April 25,
1990.
TERMS OF THE MANAGEMENT AGREEMENT
Pursuant to the Management Agreement, PMF, subject to the supervision of the
Fund's Board of Directors and in conformity with the
9
<PAGE>
stated policies of the Fund, is responsible for managing or providing for the
management of the investment of the Fund's assets. In this regard PMF provides
supervision of the Fund's investments, furnishes a continuous investment
program for the Fund's portfolio and places purchase and sale orders for
portfolio securities of the Fund and other investments. The Prudential
Investment Company (PIC), a wholly-owned subsidiary of The Prudential Insurance
Company of America (Prudential), provides such services pursuant to a
subadvisory agreement (the Subadvisory Agreement) with PMF. PMF also
administers the Fund's corporate affairs, subject to the supervision of the
Fund's Board of Directors, and, in connection therewith, furnishes the Fund
with office facilities, together with those ordinary clerical and bookkeeping
services which are not being furnished by the Fund's Transfer and Dividend
Disbursing Agent and Custodian.
PMF has authorized any of its directors, officers and employees who have been
elected as Directors or officers of the Fund to serve in the capacities in
which they have been elected. All services furnished by PMF under the
Management Agreement may be furnished by any such directors, officers or
employees of PMF. In connection with its administration of the corporate
affairs of the Fund, PMF bears the following expenses:
(a) the salaries and expenses of all personnel of the Fund and PMF,
except the fees and expenses of Directors not affiliated with PMF or the
Fund's investment adviser;
(b) all expenses incurred by PMF or by the Fund in connection with
administering 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.
The Fund pays PMF for the services performed and the facilities furnished by
it a fee at an annual rate of .40 of 1% of the Fund's average daily net assets.
The fee is computed daily and paid monthly. For the fiscal year ended December
31, 1993, PMF received a management fee of $736,171.
The Management Agreement provides that, if 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 shares of the Fund are then qualified for offer and
sale, the compensation due PMF will be reduced by the amount
10
<PAGE>
of such excess, or if such reduction exceeds the compensation payable to PMF,
PMF will pay the Fund the amount of such reduction which exceeds the amount of
such compensation. Any such reductions or payments are subject to readjustment
during the year. No such reductions or payments were required during the fiscal
year ended December 31, 1993. The Fund believes the most restrictive of such
annual limitations 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.
Except as indicated above, the Fund is responsible under the Management
Agreement for the payment of its expenses, including (a) the fees payable to
PMF, (b) the fees and expenses of Directors who are not affiliated with PMF or
the investment adviser, (c) the fees and certain expenses of the Fund's
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records of the Fund and of pricing Fund shares, (d) the charges and
expenses of the Fund's legal counsel and independent accountants, (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
association of which the Fund may be a member, (h) the cost of any stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) certain organization expenses of the Fund and the fees
and expenses involved in registering and maintaining registration of the Fund
and of its shares with the Securities and Exchange Commission and 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 Board of Directors'
meetings and of preparing, printing and mailing reports, proxy statements and
prospectuses to shareholders in the amount necessary for distribution to the
shareholders, (1) 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 to the Fund for
any error of judgment by PMF or for any loss suffered by the Fund in connection
with the matters to which the Management Agreement relates except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or willful misfeasance, bad faith, gross negligence
or reckless disregard of duty. The Management Agreement also provides that it
will terminate automatically if assigned and that it may be terminated without
penalty by the Board of Directors of the Fund, by vote of a majority of the
Fund's outstanding voting securities (as defined in the
11
<PAGE>
Investment Company Act) or by the Manager, upon or not more than 60 days' nor
less than 30 days' written notice.
INFORMATION ABOUT PMF
PMF is an indirect, wholly-owned subsidiary of Prudential, Prudential Plaza,
Newark, New Jersey 07102. PMF was organized in May 1987 under the laws of the
State of Delaware. Prudential's address is Prudential Plaza, Newark, New Jersey
07102. PMF acts as manager for the following investment companies:
Open-End Management Investment Companies: Command Government Fund,
Command Money Fund, Command Tax-Free Fund, Prudential Adjustable Rate
Securities Fund, Inc., Prudential California Municipal Fund, Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Global Fund, Inc., Prudential-Bache Structured Maturity Fund,
Inc. (d/b/a Prudential Structured Maturity 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 Government Securities Trust, 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-Bache MoneyMart Assets Fund, Inc. (d/b/a Prudential
MoneyMart Assets), 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, Inc., Prudential Short-Term Global
Income Fund, Prudential-Bache Special Money Market Fund, Inc. (d/b/a
Prudential Special Money Market Fund), Prudential-Bache Structured
Maturity Fund, Inc. (d/b/a Prudential Structured Maturity Fund),
Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a Prudential Tax-Free
Money Fund), Prudential U.S. Government Fund, Prudential-Bache Utility
Fund, Inc. (d/b/a Prudential Utility Fund), Prudential Institutional
Liquidity Portfolio, Inc., Prudential Intermediate Global Income Fund,
Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. and The
BlackRock Government Income Trust.
Closed-End Management Investment Companies: The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Income Fund,
Inc.
12
<PAGE>
The consolidated statement of financial condition of PMF and subsidiaries as
of December 31, 1993 is set forth as Exhibit A to this Proxy Statement.
Certain information regarding the directors and principal executive officers
of PMF is set forth below. Except as otherwise indicated, the address of each
person is One Seaport Plaza, New York, New York 10292.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATION
---------------- ----------------- --------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice Executive Vice
President and President and
Director of Director of
Marketing Marketing, PMF
John D. Brookmeyer, Director Senior Vice
Jr. President,
Two Gateway Center Prudential; Senior
Newark, NJ 07102 Vice President,
PIC
Susan C. Cote Senior Vice Senior Vice
President President, PMF;
Senior Vice
President,
Prudential
Securities
Fred A. Fiandaca Executive Vice Executive Vice
Raritan Plaza One President, President, Chief
Edison, NJ 08847 Chief Operating Operating Officer
Officer and and Director, PMF;
Director Chairman, Chief
Operating Officer
and Director,
Prudential Mutual
Fund Services,
Inc.
Stephen P. Fisher Senior Vice Senior Vice
President President, PMF;
Senior Vice
President,
Prudential
Securities
Frank W. Giordano Executive Vice Executive Vice
President, General President, General
Counsel and Counsel and
Secretary Secretary, PMF;
Senior Vice
President,
Prudential
Securities
Robert F. Gunia Executive Vice Executive Vice
President, President, Chief
Chief Financial Financial and
and Administrative Administrative
Officer, Treasurer Officer, Treasurer
and Director and Director, PMF;
Senior Vice
President,
Prudential
Securities
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATION
---------------- ----------------- --------------------
<S> <C> <C>
Eugene B. Heimberg Director Senior Vice
Prudential Plaza President,
Newark, NJ 07102 Prudential;
President,
Director and Chief
Investment
Officer, PIC
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice
President and
Director,
Prudential
Securities;
Director, PSG
Richard A. Redeker President, Chief President, Chief
Executive Officer Executive Officer
and Director and Director, PMF;
Executive Vice
President,
Director and
Member of the
Operating
Committee,
Prudential
Securities;
Director, PSG
S. Jane Rose Senior Vice Senior Vice
President, Senior President, Senior
Counsel and Counsel and
Assistant Assistant
Secretary Secretary, PMF;
Senior Vice
President and
Senior Counsel,
Prudential
Securities
Donald G. Southwell Director Senior Vice
213 Washington President,
Street Newark, NJ Prudential;
07102 Director, PSG
</TABLE>
THE SUBADVISER
Investment advisory services are provided to the Fund by PMF through its
affiliate, The Prudential Investment Corporation (PIC or the Subadviser),
Prudential Plaza, Newark, New Jersey 07102, under a Subadvisory Agreement dated
July 25, 1989. The Subadvisory Agreement was approved by shareholders on April
25, 1990 and was last approved by the Board of Directors of the Fund, including
a majority of the Directors who are not parties to such contract or interested
persons of such parties (as defined in the Investment Company Act), on June 9,
1993.
14
<PAGE>
TERMS OF THE SUBADVISORY AGREEMENT
Pursuant to the Subadvisory Agreement, PIC, subject to the supervision of PMF
and the Board of Directors and in conformity with the stated policies of the
Fund, manages the investment operations of the Fund and the composition of the
Fund's portfolio, including the purchase, retention and disposition of
securities and other investments. PIC is reimbursed by PMF for reasonable costs
and expenses incurred by it in furnishing such services. The fees paid by the
Fund to PMF under the Management Agreement with PMF are not affected by this
arrangement. PIC keeps certain books and records required to be maintained
pursuant to the Investment Company Act. The investment advisory services of PIC
to the Fund are not exclusive under the terms of the Subadvisory Agreement and
PIC is free to, and does, render investment advisory services to others.
PIC has authorized any of its directors, officers and employees who may be
elected as Directors or officers of the Fund to serve in the capacities in
which they have been elected. Services furnished by PIC under the Subadvisory
Agreement may be furnished by any such directors, officers or employees of PIC.
The Subadvisory Agreement provides that PIC shall not be liable for any error
of judgment or for any loss suffered by the Fund or PMF in connection with the
matters to which the Subadvisory Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on PIC's part in the
performance of its duties or from its reckless disregard of duty. The
Subadvisory Agreement provides that it shall terminate automatically if
assigned or upon termination of the Management Agreement and that it may be
terminated without penalty by the Fund, PMF or PIC upon not more than 60 days'
nor less than 30 days' written notice.
INFORMATION ABOUT PIC
PIC was organized in June 1984 under the laws of the State of New Jersey. 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, New Jersey 07102.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATION
---------------- ----------------- --------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President and Senior Vice President and
Chief Financial and Chief Financial and
Chief Compliance Compliance Officer,
Officer PIC; Vice President,
Prudential
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATION
---------------- ----------------- --------------------
<S> <C> <C>
William M. Bethke Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Eugene B. Heimberg President, Director and Senior Vice President,
Chief Investment Prudential; President,
Officer Director 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;
Four Gateway Center Vice President, PIC
Newark, NJ 07102
William P. Link Senior Vice President Executive Vice President,
Four Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Robert E. Riley Executive Vice President Executive Vice President,
800 Boylston Avenue Prudential; Executive
Boston, MA 02199 Vice President, PIC;
Director, PSG
James W. Stevens Executive Vice President Executive Vice President,
Four Gateway Center Prudential; Executive Vice
Newark, NJ 07102 President, PIC;
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 President Vice President, Prudential;
Executive Vice
President, PIC
</TABLE>
16
<PAGE>
THE DISTRIBUTORS
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 shares of the Fund. PMFD and Prudential
Securities are indirect, wholly-owned subsidiaries of Prudential.
Under separate Distribution and Service Plans (the Class A Plan and the Class
B 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 and Class B shares,
respectively.
The Plans were last approved by 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),
on June 9, 1993. The Class A Plan was approved by the Class A shareholders on
April 25, 1990. The Class B Plan was approved by the sole holder of Class B
shares on September 30, 1992.
The Plans are proposed to be amended as set forth in Proposals No. 3 and 4
below.
Class A Plan. Under 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 .10 of 1% of the average daily net assets of the Class A shares. The
Class A Plan provides that (i) up to .10 of 1% of the average daily net assets
of the Class A shares may be used for personal service and/or the maintenance
of shareholder accounts (service fee) and (ii) total distribution fees
(including the service fee of .10 of 1%) may not exceed .10 of 1% of the
average daily net assets of the Class A shares.
For the fiscal year ended December 31, 1993, PMFD received payments of
$114,728 under the Class A Plan representing .10 of 1% of the average daily net
assets of the Class A shares as reimbursement of expenses related to the
distribution of Class A shares. This amount was primarily expended on account
servicing fees to Prudential Securities and Pruco Securities Corporation, an
affiliated broker/dealer (Prusec), for payment to financial advisers and other
salespersons who sell Class A shares. For the fiscal year ended December 31,
1993, PMFD also received $669,100 in initial sales charges.
17
<PAGE>
Class B Plan. Under the Class B Plan, the Fund reimburses Prudential
Securities for its distribution-related expenses with respect to Class B shares
at an annual rate of up to .75 of 1% of the average daily net assets of the
Class B shares. The Class B Plan also provides for the payment of a service fee
to Prudential Securities at a rate not to exceed .25 of 1% of the average daily
net assets of Class B Shares. The aggregate distribution fee for Class B shares
(asset-based sales charge plus service fee) will not exceed 1% of average daily
net assets of the Class B shares. Prudential Securities has agreed to limit its
distribution-related expenses (including service fees) with respect to the
Class B shares of the Fund to .85 of 1% of the average daily net assets of the
Class B shares for the fiscal year ending December 31, 1994.
For the fiscal year ended December 31, 1993, Prudential Securities received
$589,173 from the Fund under the Class B Plan and spent approximately
$2,786,300 in distributing the Fund's Class B shares. It is estimated that of
the latter amount, approximately 2.7% ($74,000) was spent on printing and
mailing of prospectuses to other than current shareholders; 17.4% ($485,000) on
compensation to Prusec for commissions to its financial advisers and other
expenses, including an allocation of overhead and other branch office
distribution-related expenses incurred by it for distribution of Fund shares;
1.7% ($47,200) on interest and/or carrying charges and 78.2% ($2,180,100) on
the aggregate of (i) payments of commissions to financial advisers (31.6% or
$881,300) and (ii) an allocation of overhead and other branch office
distribution-related expenses (46.6% or $1,298,800). The term "overhead and
other branch office distribution-related expenses" represents (a) the expenses
of operating Prudential Securities branch offices 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 holders of Class B shares upon certain redemptions of Class B
shares. Under the current Class B Plan, the amount of distribution expenses
reimbursable by Class B shares of the Fund is reduced by the amount of such
contingent deferred sales charges. For the fiscal year ended December 31, 1993,
Prudential Securities received approximately $86,000 in contingent deferred
sales charges. As of December 31, 1993, the aggregate amount of unreimbursed
distribution expenses for the Fund's Class B shares was approximately
$2,318,100.
18
<PAGE>
The Class A and Class B 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
Class A and Class B 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. Neither Plan
may be amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class,
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 either the Class A Plan or the Class B Plan if it
is terminated or not continued. In the event of termination or noncontinuation
of the Class B Plan, the Board of Directors may consider the appropriateness of
having the Fund reimburse Prudential Securities for the outstanding carry
forward amounts plus interest thereon.
Pursuant to each Plan, the Board of Directors reviews at least quarterly a
written report of the distribution expenses incurred on behalf of the Class A
and Class B shares of the Fund by PMFD and Prudential Securities, respectively.
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. Each Distribution
Agreement was last approved by the Board of Directors, including a majority of
the Rule 12b-1 Directors, on June 9, 1993.
PORTFOLIO TRANSACTIONS
The Manager is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section, the
term "Manager" includes the Subadviser. The Fund does not normally incur any
brokerage commission expense on such transactions. The instruments purchased by
the Fund are generally traded on a "net" basis, with dealers acting as
principal for their own accounts without a stated
19
<PAGE>
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 may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
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. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds as reasonably attainable under the circumstances. While
the Manager generally seeks reasonably competitive spreads on commissions, the
Fund will not necessarily be paying the lowest spread or commission available.
Within the framework of this policy, the Manager may consider research and
investment services provided by brokers or dealers 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 furnishing such services may be selected for the execution
of transactions of such other accounts, whose aggregate assets are far larger
than the Fund's, and the services furnished by such brokers may be used by the
Manager in providing investment management for the Fund. While such services
are useful and important in supplementing its own research and facilities, the
Manager believes that the value of such services is not determinable and does
not significantly reduce expenses. The Fund does not reduce the advisory fee it
pays to the Manager by any amount that may be attributed to the value of such
services. 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 SEC. 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.
20
<PAGE>
Subject to the above considerations, Prudential Securities or any affiliate
may act as a securities broker 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 in connection with comparable
transactions involving similar securities being purchased or sold 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 in a commensurate arm's-length
transaction. Furthermore, the Board of Directors of the Fund, including a
majority of the Directors who are not "interested" persons, has adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to Prudential Securities or any affiliates 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 transactions with Prudential Securities or any
affiliates are also subject to such fiduciary standards as may be imposed by
applicable law.
For the fiscal year ended December 31, 1993, the Fund paid no brokerage
commissions.
APPROVAL OF A PROPOSAL TO AMEND
THE FUND'S ARTICLES OF INCORPORATION
TO PERMIT THE IMPLEMENTATION OF A CONVERSION FEATURE
(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS VOTING JOINTLY)
(PROPOSAL NO. 2)
The Board of Directors is recommending that shareholders approve an amendment
to the Fund's Articles of Incorporation to permit the implementation of a
conversion feature for Class B shares. The conversion feature is authorized
pursuant to an exemptive order of the SEC (the SEC Order) and would provide for
the automatic conversion of Class B shares to Class A shares at relative net
asset value approximately seven years after
21
<PAGE>
purchase. Class A shares are subject to a lower annual distribution and service
fee than Class B shares and conversions would occur without the imposition of
any additional sales charge. A description of the conversion feature is set
forth in greater detail below. Amendment of the Articles of Incorporation
requires approval by a majority of the Fund's outstanding shares.
THE CLASSES OF SHARES
The Fund currently offers two classes of shares, designated as Class A and
Class B shares pursuant to the Alternative Purchase Plan, in reliance upon the
SEC Order. Class A shares are currently offered with an initial sales charge of
up to 3.25% of the offering price and are subject to an annual distribution and
service fee of up to .10 of 1% of the average daily net assets of the Class A
shares pursuant to a Rule 12b-1 plan. This fee is currently charged at a rate
of .10 of 1% of the average daily net assets of the Class A shares. Class B
shares are currently offered without an initial sales charge but are subject to
a contingent deferred sales charge or CDSC (declining from 3% to zero of the
lesser of the amount invested or the redemption proceeds) on certain
redemptions generally made within four years of purchase and to an annual
distribution and service fee pursuant to a Rule 12b-1 plan of up to 1% of the
average daily net asset value of the Class B shares. This fee is currently
charged at a rate of .85 of 1% of the average daily net assets of the Class B
shares.
In accordance with the SEC Order, the Board of Directors may, among other
things, authorize the creation of additional classes of shares from time to
time. The Board of Directors has approved the offering of a new class of
shares, to be designated Class C shares, which will be offered simultaneously
with the offering of Class B shares with the proposed conversion feature. It is
anticipated that Class C shares will be offered without an initial sales charge
but will be subject to an annual distribution and service fee not to exceed 1%
of the average daily net assets of the Class C shares and, subject to approval
by the Board of Directors, a 1% CDSC on certain redemptions made within one
year of purchase. If the proposed conversion feature for Class B shares is not
approved, Class C shares will not be offered.
THE PROPOSED CONVERSION FEATURE
On March 17, 1993, the Fund's Board of Directors, including a majority of the
Rule 12b-1 Directors, approved an amendment to the Fund's Articles of
Incorporation to permit the implementation of a conversion feature for the
Fund's Class B shares. A copy of the proposed amendment to the Fund's Articles
of Incorporation is attached hereto as Exhibit B.
22
<PAGE>
If this proposal is approved, it is currently contemplated that conversions
of Class B shares to Class A shares will occur on a quarterly basis
approximately five years from purchase. The first conversion is currently
anticipated to occur in or about January 1995. Conversions will be effected
automatically at relative net asset value without the imposition of any
additional sales charge. Class B shareholders will benefit from the conversion
feature because they will thereafter be subject to the lower annual
distribution and service fee applicable to Class A shares.
Since the Fund tracks amounts paid rather than the number of shares bought on
each purchase of Class B shares, it is currently anticipated that 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 five years prior to the conversion date to (b) the total
amount paid for all Class B shares purchased and then held in a shareholder's
account (ii) multiplied by the total number of Class B shares then held in such
shareholder's account. Each time any Eligible Shares in a shareholder's account
convert to Class A shares, all shares or amounts representing Class B shares
then in such 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 a shareholder's 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 five 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 five 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.
If the net asset value per share of Class A is higher than that of Class B at
the time of conversion (which may be the case because of the higher
distribution and service fee applicable to Class B shares), shareholders will
receive fewer Class A shares than Class B shares converted, although the
aggregate dollar value will be the same.
23
<PAGE>
For purposes of calculating the applicable holding period for conversions,
all payments for purchases of 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 a period
of one year will not convert to Class A shares until approximately six 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 after expiration of the conversion period applicable
to the original purchase of such shares. As of the date of the first conversion
(which, as noted above, is currently anticipated to occur in or about January
1995) all amounts representing Class B shares then outstanding beyond the
expiration of the applicable conversion 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 the shareholder's account.
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.
If approved by shareholders, 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
and Class B shares will not constitute "preferential dividends" under the
Internal Revenue Code of 1986, as amended, 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.
REQUIRED VOTE
The proposed amendment to the Fund's Articles of Incorporation to implement
the conversion feature requires the affirmative vote of a majority
24
<PAGE>
of the Fund's outstanding shares. In the event shareholders of the Fund do not
approve the proposed amendment, the conversion feature will not be implemented
for the Fund and Class B shares of the Fund will continue to be subject,
possibly indefinitely, to their higher annual distribution and service fee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 2.
APPROVAL OF
AMENDED AND RESTATED CLASS A DISTRIBUTION
AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS VOTING SEPARATELY)
(PROPOSAL NO. 3)
On June 9, 1993, the Fund's Board of Directors approved an amended and
restated Class A Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act and an amended and restated Distribution Agreement with
PMFD for Class A shares of the Fund (the Proposed Class A Plan and the Proposed
Class A Distribution Agreement, respectively) and recommends submission of the
Proposed Class A Plan to the Fund's Class A shareholders for approval or
disapproval at this Special Meeting of Shareholders. As contemplated by the SEC
Order (previously defined under Proposal No. 2 above), the Proposed Class A
Plan is also being submitted for approval by Class B shareholders because,
subject to approval of Proposal No. 2, Class B shares will automatically
convert to Class A shares approximately five years after purchase. The Proposed
Class A Distribution Agreement does not require and is not being submitted for
shareholder approval.
The purpose of the Proposed Class A Plan is to compensate PMFD, the
distributor of the Fund's Class A shares, for providing distribution assistance
to broker/dealers, including Prudential Securities and Prusec, affiliated
broker/dealers, and other qualified broker/dealers, if any, whose customers
invest in Class A shares of the Fund and to defray the costs and expenses,
including the payment of account servicing fees, of the services provided and
activities undertaken to distribute Class A shares (Distribution Activities).
The Board of Directors previously adopted a plan of distribution for the
Fund's Class A shares pursuant to Rule 12b-1 under the Investment Company Act
which was approved by shareholders on April 25, 1990 and
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<PAGE>
last approved by the Board of Directors on June 9, 1993 (the Existing Class A
Plan). Shareholders of the Fund's Class A and Class B shares are being asked to
approve amendments to the Existing Class A Plan that change it from a
reimbursement type plan to a compensation type plan. In addition, shareholders
are being asked to approve an increase in the maximum annual fee that may be
paid to PMFD under the Existing Class A Plan from .10 of 1% of the average
daily net assets of the Class A shares to .30 of 1% of such average daily net
assets. Under the proposed compensation type Class A Plan, the possibility
exists that expenses incurred by PMFD and for which it is entitled to be
reimbursed under the Existing Class A Plan may be less than the fee PMFD will
receive under the Proposed Class A Plan. The change from a reimbursement type
plan to a compensation type plan is being proposed to facilitate administration
and accounting. The Board of Directors believes that the Proposed Class A Plan
is in the best interest of the Fund and is reasonably likely to benefit the
Fund's Class A shareholders. A copy of the Proposed Class A Plan is attached
hereto as Exhibit C.
THE EXISTING CLASS A PLAN
Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
incurred for Distribution Activities at an annual rate of up to .10 of 1% of
the average daily net assets of the Class A shares, all of which may constitute
a service fee for the servicing and maintenance of shareholder accounts.
Article III, Section 26 of the NASD Rules of Fair Practice (the NASD Rules)
places an annual limit of .25 of 1% on fees that may be imposed for the
provision of personal service and/or the maintenance of shareholder accounts
(service fees) and an annual limit of .75 of 1% on asset-based sales charges
(as defined in the NASD Rules). Subject to these limits and the limits of the
Existing Class A Plan, the Fund may impose any combination of service fees and
asset-based sales charges under the Existing Class A Plan; provided that the
total fees do not exceed .10 of 1% per annum of the average daily net assets of
the Class A shares.
The Existing Class A Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class A shares of the Fund. In addition, all
material amendments thereof must be approved by vote of a majority of the
Directors, including a majority of the Rule 12b-1 Directors, cast in person at
a meeting called for the purpose of voting on the Plan. So long as the Existing
Class A Plan is in effect, the selection and nomination of Rule 12b-1 Directors
will be committed to the discretion of the Rule 12b-1 Directors.
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The Existing Class A Plan may be terminated at any time without payment of
any penalty by the vote of a majority of the Rule 12b-1 Directors or by the
vote of a majority of the outstanding Class A shares of the Fund (as defined in
the Investment Company Act) on written notice to any other party to such Plan
and will automatically terminate in the event of its assignment (as defined in
the Investment Company Act). For a more detailed description of the Existing
Class A Plan, see "Management of the Fund--The Distributors--Class A Plan."
THE PROPOSED CLASS A PLAN
The Proposed Class A Plan amends the Existing Class A Plan in two material
respects. First, it increases the maximum amount that may be paid to PMFD for
Distribution Activities from .10 of 1% of the average daily net assets of the
Class A shares to .30 of 1% of such average daily net assets (up to .25 of 1%
of which may constitute a service fee for the servicing and maintenance of
shareholder accounts). This change is being proposed to conform to distribution
fees for Class A shares of other Prudential mutual funds. Secondly, under the
Existing Class A Plan, the Fund reimburses PMFD for expenses actually incurred
for Distribution Activities. The Proposed Class A Plan authorizes the Fund to
pay PMFD an annual fee as compensation for its Distribution Activities
regardless of the expenses incurred by PMFD for Distribution Activities. The
Distributor may voluntarily agree to limit its fee to an amount less than the
maximum annual fee. In the event the Proposed Class A Plan is approved by
shareholders, the Distributor has voluntarily agreed to limit its fees for
Distribution Activities to no more than .10 of 1% of the average daily net
assets of the Class A shares for the fiscal year ending December 31, 1994. In
contrast to the Existing Class A Plan, the amounts payable by the Fund under
the Proposed Class A Plan would not be directly related to the expenses
actually incurred by PMFD for its Distribution Activities. Consequently, if
PMFD's expenses for Distribution Activities are less than the distribution and
service fees it receives under the Proposed Class A Plan, it will retain its
full fees and realize a profit.
Among the major perceived benefits of a compensation type plan, such as the
Proposed Class A Plan, over a reimbursement type plan, such as the Existing
Class A Plan, is the facilitation of administration and accounting. Under
reimbursement plans, all expenses must be specifically accounted for by the
Distributor and attributed to the specific class of shares of a fund in order
to qualify for reimbursement. Although the Proposed Class A Plan will continue
to require quarterly reporting to the Board of Directors of the amounts accrued
and paid under the Plan and of the expenses actually borne
27
<PAGE>
by the Distributor, there will be no need to match specific expenses to
reimbursements as under the Existing Class A Plan. Thus, the accounting for the
Proposed Class A Plan would be simplified and the timing of when expenditures
are to be made by the Distributor would not be an issue. These considerations
combined with the reasonable likelihood, although there is no assurance, that
the per annum payment rate under the Proposed Class A Plan will not exceed the
expenses incurred by PMFD for Distribution Activities, suggest that the costs
and efforts associated with a reimbursement plan are unwarranted.
In considering whether to approve the Proposed Class A Plan, the Directors
reviewed, among other things, the nature and scope of the services to be
provided by PMFD, the purchase options available to investors under the
Alternative Purchase Plan, the amount of expenditures under the Existing Class
A Plan, the relationship of such expenditures to the overall cost structure of
the Fund and comparative data with respect to distribution arrangements adopted
by other investment companies. Based upon such review, the Directors, including
a majority of the Rule 12b-1 Directors, determined that there is a reasonable
likelihood that the Proposed Class A Plan will benefit the Fund and its Class A
shareholders.
If approved by shareholders, the Proposed Class A Plan will continue in
effect from year to year, provided such continuance is approved at least
annually by vote of a majority of the Board of Directors including a majority
of the Rule 12b-1 Directors.
REQUIRED VOTE
If Proposal No. 2 is approved by shareholders, the Proposed Class A Plan will
require the approval of a majority of the Fund's outstanding Class A shares and
Class B shares (as defined in the Investment Company Act) voting separately. If
Proposal No. 2 is not approved by shareholders, the Proposed Class A Plan will
only require the approval of a majority of the Fund's outstanding Class A
shares. Under the Investment Company Act, a majority of a class' outstanding
voting shares is defined as the lesser of (i) 67% of a class' outstanding
voting shares represented at a meeting at which more than 50% of the
outstanding voting shares of the class are present in person or represented by
proxy, or (ii) more than 50% of a class' outstanding voting shares. If the
Proposed Class A Plan is not approved as described above, the Existing Class A
Plan will continue in its present form.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 3.
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<PAGE>
APPROVAL OF
AMENDED AND RESTATED CLASS B DISTRIBUTION
AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS B SHAREHOLDERS ONLY)
(PROPOSAL NO. 4)
On June 9, 1993, the Fund's Board of Directors approved an amended and
restated Class B Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act and an amended and restated Class B Distribution
Agreement with Prudential Securities for Class B shares of the Fund (the
Proposed Class B Plan and the Proposed Class B Distribution Agreement,
respectively) and recommends submission of the Proposed Class B Plan to the
Fund's Class B shareholders for approval or disapproval at this Special Meeting
of Shareholders. The Proposed Class B Distribution Agreement does not require
and is not being submitted for shareholder approval.
The purpose of the Proposed Class B Plan is to compensate Prudential
Securities, the distributor of the Fund's Class B shares, for providing
distribution assistance to broker/dealers, including Prusec, an affiliated
broker/dealer, and other qualified broker/dealers, if any, whose customers
invest in Class B shares of the Fund and to defray the costs and expenses,
including the payment of account servicing fees, of the services provided and
activities undertaken to distribute Class B shares (Distribution Activities).
The Board of Directors previously adopted a plan of distribution for the
Fund's Class B shares pursuant to Rule 12b-1 under the Investment Company Act
which was approved by the sole shareholder of Class B shares on September 30,
1992 and last approved by the Board of Directors on June 9, 1993 (the Existing
Class B Plan). Shareholders of the Fund's Class B shares are being asked to
approve amendments to the Existing Class B Plan that change it from a
reimbursement type plan to a compensation type plan. The amendments do not
change the maximum annual fee that may be paid to Prudential Securities under
the Existing Class B Plan, although the possibility exists that expenses
incurred by Prudential Securities and for which it is entitled to be reimbursed
under the Existing Class B Plan may be less than the fee Prudential Securities
will receive under the Proposed Class B Plan. The amendments are being proposed
to facilitate administration and accounting. The Board of Directors believes
that the Proposed Class B Plan is in the best interest of the Fund and is
reasonably likely to benefit the Fund's Class B shareholders. A copy of the
Proposed Class B Plan is attached hereto as Exhibit D.
29
<PAGE>
THE EXISTING CLASS B PLAN
Under the Existing Class B Plan, the Fund reimburses Prudential Securities
for expenses incurred for Distribution Activities at an annual rate of up to 1%
of the average daily net assets of the Class B shares (up to .25 of 1% of which
may constitute a service fee for the servicing and maintenance of shareholder
accounts). Amounts reimbursable under the Plan that are not paid because they
exceed the maximum fee payable thereunder are carried forward may be recovered
in future years by Prudential Securities from asset-based sales charges imposed
on Class B shares, to the extent such charges do not exceed .75% per annum of
the average daily net assets of the Class B shares, and from contingent
deferred sales charges received from certain redeeming shareholders, subject to
the limitations of Article III, Section 26 of the NASD Rules (previously
defined under Proposal No. 3). The NASD Rules place an annual limit of .25 of
1% on fees that may be imposed for the provision of personal service and/or the
maintenance of shareholder accounts (service fees) and an annual limit of .75
of 1% on asset-based sales charges (as defined in the NASD Rules). Pursuant to
the NASD Rules, the aggregate deferred sales charges and asset-based sales
charges on Class B shares of the Fund may not, subject to certain exclusions,
exceed 6.25% of total gross sales of Class B shares.
The Existing Class B Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class B shares of the Fund. In addition, all
material amendments thereof must be approved by vote of a majority of the
Directors, including a majority of the Rule 12b-1 Directors, cast in person at
a meeting called for the purpose of voting on the Plan. So long as the Existing
Class B Plan is in effect, the selection and nomination of Directors who are
not interested persons of the Fund will be committed to the discretion of the
Rule 12b-1 Directors.
The Existing Class B Plan may be terminated at any time without payment of
any penalty by the vote of a majority of the Rule 12b-1 Directors or by the
vote of a majority of the outstanding Class B shares of the Fund (as defined in
the Investment Company Act) on written notice to any other party to such plan
and will automatically terminate in the event of its assignment (as defined in
the Investment Company Act). For a more detailed description of the Existing
Class B Plan, see "Management of the Fund--The Distributors--Class B Plan."
THE PROPOSED CLASS B PLAN
The Proposed Class B Plan amends the Existing Class B Plan in one material
respect. Under the Existing Class B Plan, the Fund reimburses
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<PAGE>
Prudential Securities for expenses actually incurred for Distribution
Activities up to a maximum of 1% per annum of the average daily net assets of
the Class B shares. The Proposed Class B Plan authorizes the Fund to pay
Prudential Securities the same maximum annual fee as compensation for its
Distribution Activities regardless of the expenses incurred by Prudential
Securities for Distribution Activities. Regardless of which plan is in effect,
the Distributor has voluntarily agreed to limit its fees for Distribution
Activities to no more than .85 of 1% of the average daily net assets of the
Class B shares for the fiscal year ended December 31, 1994. In contrast to the
Existing Class B Plan, the amounts payable by the Fund under the Proposed Class
B Plan would not be directly related to the expenses actually incurred by
Prudential Securities for its Distribution Activities. Consequently, if
Prudential Securities' expenses are less than its distribution and service
fees, it will retain its full fees and realize a profit. However, if Prudential
Securities' expenses exceed the distribution and service fees received under
the Proposed Class B Plan, it will no longer carry forward such amounts for
reimbursement in future years.
Since inception of the Existing Class B Plan, the cumulative reimbursable
expenses incurred thereunder by Prudential Securities have exceeded the amounts
reimbursed by the Fund. As of December 31, 1993, the aggregate amount of
distribution expenses incurred and not yet reimbursed by the Fund or recovered
through contingent deferred sales charges was approximately $2,318,100.
For the fiscal years ended December 31, 1992 and 1993, Prudential Securities
received $2,797 and $589,173, respectively, from the Fund under the Existing
Class B Plan, representing .85 of 1% of the average daily net assets of the
Class B shares, and spent approximately $160,900 and $2,786,300, respectively,
for Distribution Activities. Since the maximum annual fee under the Existing
Class B Plan is the same as under the Proposed Class B Plan, Prudential
Securities would have received the same annual fee under the Proposed Class B
Plan as it did under the Existing Class B Plan for the fiscal years ended
February 28, 1992, and 1993.
Among the major perceived benefits of a compensation type plan, such as the
Proposed Class B Plan, over a reimbursement type plan, such as the Existing
Class B Plan, is the facilitation of administration and accounting. Under
reimbursement plans, all expenses must be specifically accounted for by the
Distributor and attributed to the specific class of shares of a fund in order
to qualify for reimbursement. Although the Proposed Class B Plan will continue
to require quarterly reporting to the Board of Directors of the amounts accrued
and paid under the Plan and of the expenses actually borne
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<PAGE>
by the Distributor, there will be no need to match specific expenses to
reimbursements and no carrying forward of such amounts, as under the Existing
Class B Plan. Thus, the accounting for the Proposed Class B Plan would be
simplified and the timing of when expenditures are to be made by the
Distributor would not be an issue. Currently, because the Existing Class B Plan
is a reimbursement plan, the Distributor retains an independent expert to
perform a study of its methodology for determining and substantiating which of
its expenses should properly be allocated to the Fund's Class B shares for
reimbursement, the cost of which is borne by the Fund and other funds for which
Prudential Securities serves as Distributor. These considerations, combined
with the fact that the cumulative expenses incurred by Prudential Services for
Distribution Activities have exceeded the amounts reimbursed by the Fund under
the Existing Class B Plan, suggest that the costs and efforts associated with a
reimbursement plan are unwarranted.
In considering whether to approve the Proposed Class B Plan, the Directors
reviewed, among other things, the nature and scope of the services to be
provided by Prudential Securities, the purchase options available to investors
under the Alternative Purchase Plan, the amount of expenditures under the
Existing Class B Plan, the relationship of such expenditures to the overall
cost structure of the Fund and comparative data with respect to distribution
arrangements adopted by other investment companies. Based upon such review, the
Directors, including a majority of the Rule 12b-1 Directors, determined that
there is a reasonable likelihood that the Proposed Class B Plan will benefit
the Fund and its Class B shareholders.
If approved by Class B shareholders, the Proposed Class B Plan will continue
in effect from year to year, provided such continuance is approved at least
annually by vote of a majority of the Board of Directors, including a majority
of the Rule 12b-1 Directors.
REQUIRED VOTE
The Proposed Class B Plan requires the approval of a majority of the Fund's
outstanding Class B shares as defined in the Investment Company Act and
described under Proposal No. 3. If the Proposed Class B Plan is not approved,
the Existing Class B Plan will continue in its present form.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.
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<PAGE>
APPROVAL OF THE ELIMINATION OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING RESTRICTED
AND ILLIQUID SECURITIES
(PROPOSAL NO. 5)
On June 9, 1993, at the request of the Fund's Manager and Subadviser, the
Board of Directors considered and recommends for shareholder approval revision
of the Fund's fundamental investment restriction regarding illiquid and
restricted securities. The current restriction is overly confining in light of
the development of an active market in those securities that, although subject
to restrictions on resale, have a readily available market, such as securities
that are transferable under SEC Rule 144A. The Board of Directors recommends
elimination of the Fund's Investment Restriction No. 9, which limits the
purchase of any security for which there are legal or contractual restrictions
on resale or for which there is no readily available market, including
repurchase agreements with maturities longer than 7 days.
The Board recommends replacement of such fundamental investment restriction
with a non-fundamental investment policy that could be modified by the vote of
the Board of Directors in response to regulatory or market developments without
further approval by shareholders. The change would expand the Fund's ability to
invest in securities which have restrictions on resale but have a readily
available institutional market, such as commercial paper and securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the
Securities Act). The proposed non-fundamental policy would provide as follows:
The Fund may invest up to 15% 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), and certain commercial paper 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.
An open-end investment company may not hold a significant amount of
restricted securities or illiquid securities because such securities may
present
33
<PAGE>
problems of accurate valuation and because it is possible that the investment
company would have difficulty satisfying redemptions within seven days. The
proposed investment policy is not expected by the investment adviser or the
Board of Directors to affect the Fund's liquidity because it excludes from
illiquid securities only those securities for which there is a readily
available market.
Historically, illiquid securities have been defined to include securities
subject to contractual or legal restrictions on resale, securities for which
there is no readily available market and repurchase agreements having a
maturity of longer than seven days. In recent years, however, the securities
markets have evolved significantly, with the result that new types of
instruments have developed which make the Fund's present restriction on
illiquid investments overly broad and unnecessarily restrictive in the view of
the Fund's Manager. In particular, the SEC adopted Rule 144A in April 1990,
which allows for a broader institutional trading market for securities
otherwise subject to restrictions on resale to the general public. SEC
interpretations give directors of registered investment companies the
discretion to designate restricted securities as liquid if the presence of a
readily available market can be demonstrated and if a current market value can
be ascertained. In adopting Rule 144A, the SEC recognized the increased size
and liquidity of the institutional markets for unregistered securities and the
importance of institutional investors in the capital formation process. In
1992, the SEC staff issued amended guidelines to the effect that up to 15% (as
opposed to 10%) of an open-end fund's net assets may be invested in illiquid
securities, including repurchase agreements with a maturity of longer than
seven days. The guidelines were amended in connection with the SEC's efforts to
remove unnecessary barriers to capital formation and to facilitate access to
the capital markets by small businesses.
The staff of the SEC has also 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 its option 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."
The proposed change would expand the Fund's ability to invest in securities
for which there is a readily available market and which have traditionally been
considered illiquid. The proposed change would permit the
34
<PAGE>
Fund to invest up to 15% of its net assets in illiquid assets. The markets for
certain corporate bonds and notes are almost exclusively institutional. These
institutional investors depend on an efficient institutional market in which
the unregistered security can be readily resold. In the opinion of the Fund's
Manager, the fact that there are restrictions on resale to the general public
is therefore not necessarily indicative of the liquidity of such investments.
If designated as liquid (under the supervision of the Board of Directors),
these securities would be exempt from the 15% limitation.
In order to take advantage of the increasingly liquid institutional trading
markets, the Manager recommends that the Fund eliminate its fundamental
policies regarding illiquid and restricted securities so that securities that
are nonetheless liquid may be purchased without regard to the current
limitations. By making the Fund's policy on illiquid securities non-
fundamental, the Fund will be able to respond more quickly to regulatory and
market developments because a shareholder vote will not be required to define
what types of securities should be deemed illiquid or to change the applicable
permissible percentage limitation. If this proposal is approved by
shareholders, the Manager and the Subadviser, under the supervision of the
Board of Directors, will monitor the liquidity of specific types of securities
and, based on their recommendations, the Board of Directors will from time to
time determine whether such securities should be deemed to be liquid with
reference to legal, regulatory and market developments.
In reaching liquidity decisions, the Manager and the Subadviser will
consider, inter alia, the following factors:
1. the frequency of trades and quotes for the security;
2. the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers;
3. dealer undertakings to make a market in the security; and
4. the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
Investment Restriction No. 9 currently provides that the Fund may not:
9. Purchase securities for which there are legal or contractual
restrictions on resale or invest in securities for which there is no
readily available market, including repurchase agreements having
maturities of more than seven days, if more than 10% of the Portfolio's
net assets would be invested in such securities.
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<PAGE>
The Board of Directors believes that the adoption of Proposal No. 5 is in the
best interests of the Fund and its shareholders.
REQUIRED VOTE
Adoption of Proposal No. 5 requires the affirmative vote of the holders of a
majority of the outstanding voting securities of the Fund. Under the Investment
Company Act, a majority of the Fund's outstanding voting securities is defined
as the lesser of (i) 67% of the Fund's outstanding voting shares represented at
a meeting at which more than 50% of the Fund's outstanding voting shares are
present in person or represented by proxy, or (ii) more than 50% of the Fund's
outstanding voting shares. If the elimination of the investment restriction is
not approved, the current limitation would remain a fundamental policy which
could not be changed without the approval of a majority of the outstanding
voting securities of the Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 5.
APPROVAL OF A CHANGE IN
INVESTMENT RESTRICTIONS TO PERMIT AN INCREASE
IN THE BORROWING CAPABILITIES OF THE FUND AND APPROVAL OF A MODIFICATION IN THE
FUND'S INVESTMENT RESTRICTIONS TO CLARIFY THAT COLLATERAL ARRANGEMENTS WITH
RESPECT TO INTEREST RATE SWAP TRANSACTIONS, REVERSE REPURCHASE AGREEMENTS AND
COVERED DOLLAR ROLL TRANSACTIONS ARE NOT DEEMED TO BE THE ISSUANCE OF A SENIOR
SECURITY OR THE PLEDGE OF ASSETS
(PROPOSAL NO. 6)
On June 9, 1993, at the request of the Fund's Manager, the Board of Directors
considered and approved, subject to shareholder ratification, an amendment to
the Fund's investment restrictions which would increase the Fund's borrowing
capabilities for temporary or emergency purposes from 15% to 20% of the Fund's
total assets and would authorize the Fund to borrow up to 20% of its total
assets for extraordinary purposes or for the clearance of transactions. In
addition, the Fund would be able to pledge up to 20% (as opposed to 15%) of its
total assets to secure such borrowings. The Board of Directors approved an
amendment to the Fund's investment restrictions, which, if approved by
shareholders, would clarify that collateral
36
<PAGE>
arrangements with respect to interest rate swap transactions, reverse
repurchase agreements and covered dollar roll transactions are not considered
to be the issuance of a senior security or the pledge of assets. The Board of
Directors recommends that shareholders of the Fund approve the amendments which
would change Investment Restriction No. 3.
The Fund currently may borrow money for temporary or emergency purposes in an
amount not exceeding 15% of the value of the Fund's total assets (not including
the amount borrowed). Such borrowings shall be made only from banks unless the
Fund receives an order from the SEC permitting borrowings from entities other
than banks. The Fund must occasionally borrow money to fund substantial
shareholder redemptions or exchange requests or for the clearance of
transactions when available cash is not sufficient for these needs. To date,
the Fund has not experienced operating difficulty under its present borrowing
authority.
Although increased borrowing would involve additional interest expenses, the
Board of Directors believes that the proposed change is prudent. The change
would enhance the investment flexibility of the investment adviser by affording
the Fund a greater capacity to satisfy net redemptions of its shares on a
temporary basis, without having to resort to forced sales of portfolio
securities at possibly disadvantageous prices, and to borrow money on a
temporary basis for the clearance of transactions.
In addition, because certain transactions by the Fund could be construed as
the issuance of a senior security or a pledge of assets, Investment Restriction
No. 3 would also be amended to clarify which transactions would not be deemed
by the Fund to constitute the issuance of a senior security or a pledge of
assets for the purpose of such investment restriction.
The Fund currently may enter into interest rate swap transactions and covered
dollar rolls. With respect to interest rate swaps, the Fund enters into such
transactions primarily to preserve a return or spread on a particular
investment or to protect against an increase in price of a security the Fund
anticipates purchasing at a later date. The Fund may enter into interest rate
swaps as a hedge and not as a speculative investment. The Fund enters into
swaps on a net basis whereby the two payment streams are netted out and the
Fund pays or receives only the net amount of the two payments. The net amount
of the Fund's obligations over its entitlements with respect to each swap
transaction is accrued on a daily basis and an amount of cash, U.S. government
securities or liquid high grade debt securities having an aggregate value at
least equal to the accrued excess is maintained in a segregated
37
<PAGE>
account by the Fund's custodian in a manner that satisfies the requirements of
the Investment Company Act.
The Fund may also enter into covered dollar rolls in which the Fund sells
securities for delivery in the current month and simultaneously contracts to
repurchase similar securities at a specified date in the future from the same
party. The Fund establishes a segregated account with its custodian, in a
manner that satisfies the requirements of the Investment Company Act, in which
it maintains cash, U.S. government securities or other liquid high grade debt
obligations equal to the value of its obligations with respect to the dollar
roll.
Insomuch as segregated accounts are established for these hedging
transactions, the Fund believes that such obligations do not constitute senior
securities.
In today's market, swaps and covered dollar rolls often contain collateral
arrangements whereby each counterparty will agree to pledge assets to the other
to secure the amount of that party's obligations. The Fund's Board of Directors
believes that the ability to establish collateral arrangements with respect to
swap transactions and covered dollar rolls will expand the Fund's ability to
enter into such transactions and therefore recommends that the Fund's
investment restrictions be clarified to ensure that the Fund may establish such
collateral arrangements. In addition, while the Fund currently does not have
the ability to enter into reverse repurchase agreements, it may seek Board
approval to engage in such transactions in the future and may wish to establish
collateral arrangements.
PROPOSED AMENDMENT TO THE FUND'S INVESTMENT RESTRICTIONS
To increase the borrowing capabilities of the Fund and to clarify that
collateral arrangements with respect to interest rate swap transactions,
reverse repurchase agreements and covered dollar roll transactions are not
considered to be the issuance of a senior security or the pledge of assets,
Investment Restriction No. 3 is proposed to be amended as follows (added
language is underlined) [deletions in brackets]:
The Fund may not:
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow up to 20[15]% of the value of its total
assets (calculated when the loan is made) from banks for temporary,
38
<PAGE>
extraordinary or emergency purposes or for the clearance of
transactions and may pledge up to 20[15]% of the value of its total
assets to secure such borrowings. The purchase or sale of securities
on a "when-issued" or delayed delivery basis, and the purchase and
sale of financial futures contracts and collateral arrangements with
respect thereto and with respect to interest rate swap transactions,
covered dollar rolls and reverse repurchase agreements, are not deemed
to be a pledge of assets and such arrangements are not deemed to be
the issuance of a senior security. The Fund will not purchase
portfolio securities if its borrowings exceed 5% of its net assets.
The Board of Directors believes that adoption of Proposal No. 6 is in the
best interest of the Fund and its shareholders.
REQUIRED VOTE
Amendment of the Fund's investment restriction as described above requires
the approval of a majority of the Fund's outstanding voting securities, as
defined in the Investment Company Act and described under Proposal No. 5 above.
If the proposed change in investment policy is not approved, the current
investment restriction would remain a fundamental policy which could not be
changed without the approval of a majority of the outstanding voting securities
of the Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 6.
APPROVAL OF AN AMENDMENT OF ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE
FUND
(PROPOSAL NO. 7)
The Board of Directors proposes that the Fund's name be changed from
Prudential-Bache Structured Maturity Fund, Inc. to Prudential Structured
Maturity Fund, Inc. and that the Articles of Incorporation of the Fund be
amended to effect the name change. The Fund is currently doing business under
the name Prudential Structured Maturity Fund.
The Board of Directors considered the proposed name change from "Prudential-
Bache" to "Prudential" in connection with the change in the name of Prudential-
Bache Securities Inc. to Prudential Securities
39
<PAGE>
Incorporated (Prudential Securities), Distributor of the Fund's Class B shares.
Management of the Fund expressed its opinion that the proposed name,
"Prudential Structured Maturity Fund, Inc.," more accurately reflects the
Fund's affiliation with PMF, Prudential Securities and The Prudential Insurance
Company of America, their parent company.
The Board of Directors believes that adoption of Proposal No. 7 is in the
best interest of the Fund and its shareholders.
REQUIRED VOTE
The name change must be approved by the holders of a majority of the Fund's
shares of common stock in accordance with the Fund's Articles of Incorporation.
The name change will be effected as soon as is practicable after shareholder
approval. If this proposal is not approved, the Board of Directors will
consider whether it is appropriate for the Fund to continue to do business
under the name Prudential Structured Maturity Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 7.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 8)
The Board of Directors of the Fund, including Directors who are not
interested persons of the Fund, has selected Deloitte & Touche as independent
accountants for the Fund for the fiscal year ending December 31, 1994. The
ratification of the selection of independent public accountants is to be voted
upon at the Meeting and it is intended that the persons named in the
accompanying Proxy will vote for Deloitte & Touche. No representative of
Deloitte & Touche is expected to be present at the Meeting of Shareholders.
The policy of the Board of Directors regarding engaging independent
accountants' services is that management may engage the Fund's principal
independent public accountants to perform any service(s) normally provided by
independent accounting firms, provided that such service(s) meet(s) any and all
of the independent requirements of the American Institute of Certified Public
Accountants and the SEC. In accordance with this policy, the Audit Committee
reviews and approves all services provided by the independent public
accountants prior to their being rendered. The Board of Directors of the Fund
receives a report from its Audit Committee relating to all services after they
have been performed by the Fund's independent accountants.
40
<PAGE>
REQUIRED VOTE
The affirmative vote of a majority of the shares present, in person or by
proxy, at the Meeting is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 8
OTHER MATTERS
No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of shareholders arise,
including any question as to an adjournment of the Meeting, the persons named
in the enclosed proxy will vote thereon according to their best judgment in the
interests of the Fund.
SHAREHOLDER PROPOSALS
The Fund is not required to hold annual meetings of shareholders and the
Board of Directors currently does not intend to hold such meetings unless
shareholder action is required in accordance with the Investment Company Act or
the Fund's By-laws. A shareholder proposal intended to be presented at any
meeting of shareholders of the Fund hereinafter called must be received by the
Fund a reasonable time before the Board of Directors' solicitation relating
thereto is made in order to be included in the Fund's proxy statement and form
of proxy relating to that meeting and presented at the meeting. The mere
submission of a proposal by a shareholder does not guarantee that such proposal
will be included in the proxy statement because certain rules under the federal
securities laws must be complied with before inclusion of the proposal is
required.
S. Jane Rose
Secretary
Dated: April 18, 1994
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
41
<PAGE>
EXHIBIT A
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
<TABLE>
<S> <C>
ASSETS
Cash and short-term investments................................... $ 42,667,507
Loan to affiliate................................................. 85,000,000
Management, administration and other fees receivable.............. 17,897,292
Transfer agency and fiduciary fees receivable..................... 3,744,874
Furniture, equipment and leasehold improvements, net.............. 10,495,702
Other assets...................................................... 4,676,430
------------
$164,481,805
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to affiliates................................................ $ 48,794,366
Accounts payable and accrued expenses............................ 11,208,209
Income taxes payable to affiliate--net........................... 2,937,828
------------
62,940,403
------------
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Class A common stock, $1 par value (1,000
shares authorized, 850 shares outstanding)..................... 850
Class B common stock, $1 par value (1,000
shares authorized, 150 shares outstanding)..................... 150
Additional paid-in capital....................................... 24,999,000
Retained earnings................................................ 76,541,402
------------
101,541,402
------------
$164,481,805
============
</TABLE>
See notes to consolidated statement of financial condition.
A-1
<PAGE>
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prudential Mutual Fund Management, Inc. ("PMF") and subsidiaries (the
"Company"), an indirect wholly-owned subsidiary of The Prudential Insurance
Company of America (the "Prudential"), were created to operate as the manager,
distributor and/or transfer agent for investment companies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statement includes the accounts of PMF and its
wholly-owned subsidiaries, Prudential Mutual Fund Services, Inc. ("PMFS") and
Prudential Mutual Fund Distributors, Inc. ("PMFD"). All intercompany profits,
transactions and balances have been eliminated.
INCOME TAXES
The Company is a member of a group of affiliated companies which join in
filing a consolidated Federal income tax return. Pursuant to a tax allocation
agreement, tax expense is determined for individual profitable companies on a
separate return basis. Profit members pay this amount to an affiliated company
which in turn apportions the payment among the loss members in proportion to
their losses. In January 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
adoption of SFAS 109 did not have a material effect on the Company's financial
position.
2.SHORT-TERM INVESTMENTS
At December 31, 1993, the Company had invested $35,411,571 in several money
market funds which PMF manages.
A-2
<PAGE>
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<S> <C>
Furniture.......................................................... $ 6,481,799
Equipment.......................................................... 9,181,984
Leasehold improvements............................................. 3,407,213
-----------
19,070,996
Less accumulated depreciation and amortization..................... 8,575,294
-----------
$10,495,702
===========
</TABLE>
4.RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company participates in a variety of
financial and administrative transactions with affiliates.
The loan to affiliate bears interest at 3.45 percent at December 31, 1993 and
is due on demand.
The caption "Due to affiliates" includes $18,241,795 at December 31, 1993 for
reimbursement of employee compensation and benefits, and other administrative
and operating expenses. This amount is noninterest-bearing and payable on
demand.
The Company has entered into subadvisory agreements with The Prudential
Investment Corporation ("PIC"), a wholly-owned subsidiary of Prudential. Under
these agreements, PIC furnishes investment advisory services to substantially
all the funds for which the Company acts as Manager. At December 31, 1993 there
were unpaid fees due to PIC of $23,926,277, included in the caption "Due to
affiliates."
Distribution expenses include commissions and account servicing fees paid to,
or on account of, financial advisors of Prudential Securities Incorporated
("Prudential Securities") and Pruco Securities Corporation ("PruSec"),
affiliated broker-dealers and indirect wholly-owned subsidiaries of Prudential,
advertising expenses, the cost of printing and mailing prospectuses to
potential investors, and indirect and overhead costs of Prudential Securities
and PruSec, including lease, utility, communications and sales promotion
expenses. At December 31, 1993 there were unpaid distribution expenses of
approximately $6,626,000, included in the caption "Due to affiliates."
A-3
<PAGE>
5.CAPITAL
PMFD is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which
requires the maintenance of minimum net capital and requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not exceed 15 to
1. At December 31, 1993, PMFD had net capital of $2,308,981, which was
$1,859,405 in excess of its required net capital of $449,576. PMFD had a ratio
of aggregate indebtedness to net capital of 2.9 to 1.
6.COMMITMENTS
The Company leases office space under operating leases expiring in 2003. The
leases are subject to escalation based upon certain costs incurred by the
lessor. Future minimum rentals, as of December 31, 1993, under the leases, are
as follows:
<TABLE>
<CAPTION>
YEAR MINIMUM RENTAL
---- --------------
<S> <C>
1994...................................................... $ 2,738,000
1995...................................................... 2,865,000
1996...................................................... 3,375,000
1997...................................................... 3,385,000
1998...................................................... 3,230,000
Thereafter................................................. 13,800,000
-----------
$29,393,000
===========
</TABLE>
7.PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has two defined benefit pension plans (the "Plans") sponsored by
the Prudential and Prudential Securities. The Plans cover substantially all of
the Company's employees. The funding policy is to contribute annually the
amount necessary to satisfy the Internal Revenue Service funding standards. In
addition, the Company has two defined benefit plans for key executives, the
Supplemental Retirement Plan (SRP) for which estimated pension costs are
currently accrued but not funded.
The Company provides certain health care and life insurance benefits for
eligible retired employees. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"). SFAS 106 changed the
practice of accounting for postretirement benefits on a cash basis to an
accrual basis, whereby employers record the projected future cost of providing
such postretirement benefits as employees render services
A-4
<PAGE>
instead of when benefits are paid. This new accounting method has no effect on
the Company's cash outlays for these retirement benefits. The adoption of SFAS
106 did not materially impact the Company's financial position.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," ("SFAS 112") which is effective for fiscal years beginning after
December 15, 1993. Although several benefits are fully insured which result in
no SFAS 112 obligation, the Company currently has an obligation and resulting
expense under SFAS 112 for medical benefits provided under long-term
disability. The Company will adopt SFAS 112 on January 1, 1994. Management
believes that implementation will have no material effect on the Company's
financial position.
8.CONTINGENCY
On October 12, 1993, a purported class action lawsuit was instituted against
PMF, et al and certain current and former directors of a fund managed by PMF.
The plaintiffs seek damages in an unspecified amount for excessive management
and distribution fees they allege were incurred by them. Although the outcome
of this litigation cannot be predicted at this time, the defendants believe
they have meritorious defenses to the claims asserted in the complaint and
intend to defend this action vigorously. In any case, management does not
believe that the outcome of this action is likely to have a material adverse
effect on the Company's financial position.
* * * * * *
A-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Prudential Mutual Fund
Management, Inc.:
We have audited the accompanying consolidated statement of financial
condition of Prudential Mutual Fund Management, Inc. and subsidiaries as of
December 31, 1993. This consolidated financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this consolidated financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated statement
of financial condition. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such consolidated statement of financial condition presents
fairly, in all material respects, the financial position of Prudential Mutual
Fund Management, Inc. and subsidiaries at December 31, 1993 in conformity with
generally accepted accounting principles.
Deloitte & Touche
New York, New York
January 26, 1994
A-6
<PAGE>
EXHIBIT B
FORM OF AMENDMENT TO ARTICLES OF INCORPORATION
Article V, Section 1 of the Fund's Articles of Incorporation is proposed to
be amended and restated as follows:
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, Class B 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 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 charge 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
B-1
<PAGE>
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 purchased through the automatic reimbursement
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 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.
B-2
<PAGE>
EXHIBIT C
PRUDENTIAL STRUCTURED MATURITY FUND
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 Structured Maturity 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 of the Fund, including a majority of
those 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 this Plan or any agreements related to it (the Rule 12b-1
Directors), 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
C-1
<PAGE>
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. 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 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 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
C-2
<PAGE>
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. The allocation of distribution expenses among classes will
be subject to the review of the Board of Directors.
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 Class A shares of the
Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of Directors 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 of the Fund such additional information as
the Board shall from time to time reasonably request, including information
about Distribution Activities undertaken or to be undertaken by the
Distributor.
C-3
<PAGE>
The Distributor will inform the Board of Directors 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
majority of the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors 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 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
expenses 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 of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the purpose of voting
on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
C-4
<PAGE>
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:
C-5
<PAGE>
EXHIBIT D
PRUDENTIAL STRUCTURED MATURITY FUND
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 Structured Maturity 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 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 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), 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.
D-1
<PAGE>
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. 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 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 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 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. The allocation of distribution expenses among classes will be
subject to the review of the Board of Directors.
D-2
<PAGE>
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 Class B shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of Directors 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 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 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.
D-3
<PAGE>
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 of the Fund and a majority of the Rule 12b-1
Directors 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 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 combined service and distribution
expenses 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 of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the purpose of voting
on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
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:
D-4
<PAGE>
[_]
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSEDENVELOPE.
PROXY (CLASS A) YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM
PORTION ONLY.
PRUDENTIAL STRUCTURED MATURITY THIS PROXY IS SOLICITED ON BEHALF OF THE
FUND, INC. BOARD OF DIRECTORS.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292 The undersigned hereby appoints Susan C.
Cote, S. Jane Rose and Marguerite E.H.
Morrison, as Proxies each with the power
of substitution, and hereby authorizes
each of them to represent and to vote, as
designated below, all the shares of
Class A common stock of Prudential
Structured Maturity Fund held of record by
the undersigned on March 31, 1994 at the
Special Meeting of Shareholders to be held
on June 23, 1994, or any adjournment
thereof.
THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S).
IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL
THE PROPOSALS LISTED BELOW.
- - -------------------------------------
1--Election of Directors
- - -------------------------------------
[X] [X] [X]
Approve Withhold Withhold
All All Those Listed
Nominees Nominees On Back
- - -------------------------------------
TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL
NOMINEE, PLEASE WRITE NAME ON BACK OF
FORM.
Robert R. Fortune
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Robert J. Schultz
Merle T. Welshans
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
For Against Abstain
2. To approve an amendment of the Fund's Articles [X] [X] [X]
of Incorporation to permit a conversion feature
for Class B Shares.
3. To approve an amended and restated Class A [X] [X] [X]
Distribution and Service Plan.
4. NOT APPLICABLE FOR CLASS A SHAREHOLDERS. [X] [X] [X]
5. To approve the elimination of the Fund's investment [X] [X] [X]
restriction regarding restricted and illiquid
securities.
6. To approve an amendment of the Fund's investment [X] [X] [X]
restriction relating to the borrowing of money,
the pledging of assets and the issuance of senior
securities.
7. To approve an amendment of the Fund's Articles of [X] [X] [X]
Incorporation to change the name of the Fund to
"Prudential Structured Maturity Fund, Inc."
8. To ratify the selection by the Board of Directors [X] [X] [X]
of Deloitte & Touche as independent accountants
for the fiscal year ending December 31, 1994.
9. To transact such other business as may properly [X] [X] [X]
come before the Meeting or any adjournment
thereof.
Only shares of Class A common stock of the Fund of record at the close of
business on March 31, 1994 are entitled to notice of and to vote at this
Meeting or any adjournment thereof.
- - --------------------------------- PLEASE SIGN EXACTLY AS NAME APPEARS
Signature Date AT LEFT. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
- - --------------------------------- ADMINISTRATOR, TRUSTEE OR GUARDIAN,
Signature (Joint Ownership) PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
<PAGE>
[_]
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM
PORTION ONLY.
PROXY (CLASS B) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
PRUDENTIAL STRUCTURED The undersigned hereby appoints Susan C. Cote,
MATURITY FUND, INC. S. Jane Rose and Marguerite E.H. Morrison, as
ONE SEAPORT PLAZA Proxies each with the power of substitution, and
NEW YORK, NEW YORK 10292 hereby authorizes each of them to represent
and to vote, as designated below, all the shares
of Class B common stock of Prudential Structured
Maturity Fund held of record by the undersigned
on March 31, 1994 at the Special Meeting of
Shareholders to be held on June 23, 1994 or any
adjournment thereof.
THIS PROXY WHEN PROP-
ERLY EXECUTED WILL BE
VOTED IN THE MANNER DI-
RECTED HEREIN BY THE
UNDERSIGNED SHAREHOLD-
ER(S). IF NO DIRECTION
IS MADE, THIS PROXY
WILL BE VOTED FOR ALL
THE PROPOSALS LISTED
BELOW.
- - ------------------------------------------
1--Election of Directors
- - ------------------------------------------
[X] [X] [X]
Approve Withhold Withhold
All All Those Listed
Nominees Nominees On Back
- - ------------------------------------------
TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL
NOMINEE, PLEASE WRITE NAME ON BACK OF
FORM.
Robert R. Fortune
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Robert J. Schultz
Merle T. Welshans
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
For Against Abstain
2. To approve an amendment of the Fund's Articles [X] [X] [X]
of Incorporation to permit a conversion feature
for Class B shares.
3. To approve an amended and restated Class A [X] [X] [X]
Distribution and Service Plan.
4. To approve an amended and restated Class B [X] [X] [X]
Distribution and Service Plan.
5. To approve the elimination of the Fund's investment [X] [X] [X]
restriction regarding restricted and illiquid
securities.
6. To approve an amendment of the Fund's investment [X] [X] [X]
restriction relating to the borrowing of money,
the pledging of assets and the issuance of senior
securities.
7. To approve an amendment of the Fund's Articles of [X] [X] [X]
Incorporation to change the name of the Fund to
"Prudential Structured Maturity Fund, Inc."
8. To ratify the selection by the Board of Directors [X] [X] [X]
of Deloitte & Touche as independent accountants for
the fiscal year ending December 31, 1994.
9. To transact such other business as may properly [X] [X] [X]
come before the Meeting of any adjournment
thereof.
Only shares of Class B common stock of the Fund of record at the close of
business on March 31, 1994 are entitled to notice of and to vote at this
Meeting or any adjournment thereof.
- - --------------------------------- PLEASE SIGN EXACTLY AS NAME APPEARS
Signature Date AT LEFT. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
- - --------------------------------- ADMINISTRATOR, TRUSTEE OR GUARDIAN,
Signature (Joint Ownership) PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
