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 PACIFIC GROWTH FUND, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PRUDENTIAL PACIFIC GROWTH FUND, INC.
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(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 PACIFIC GROWTH FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------
To our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of Prudential
Pacific Growth Fund, Inc. (the Fund), will be held at 3:00 P.M. on June 23,
1994, at 199 Water Street, New York, N.Y. 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 ratify the selection by the Board of Directors of Deloitte & Touche as
independent accountants for the fiscal year ending October 31, 1994.
6. To transact such other business as may properly come before the Meeting
or any adjournments 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
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 OR
FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY
PROMPTLY.
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
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PROXY STATEMENT
------------------
This statement is furnished by the Board of Directors of Prudential Pacific
Growth Fund, Inc. (the Fund), in connection with its solicitation of proxies for
use at a Special Meeting of Shareholders to be held at 3:00 P.M. 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
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 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 and broker
"non-votes" do not constitute a vote "for" or "against" the matter, but have the
effect of a negative vote on 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
1
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date, the Fund had 30,941,001 shares of Common Stock outstanding and entitled to
vote, consisting of 5,784,886 Class A shares and 25,156,115 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.
As of March 31, 1994, The Prudential Insurance Company of America, P.O. Box
1084, Newark NJ 07101-1084 owned 508,851 Class A shares (8.8% of the outstanding
Class A shares).
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 $34,000 and will be borne by the
Fund. In addition, solicitation may include, without cost to the Fund,
telephone, 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, ten 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 Stephen C. Eyre, Delayne D. Gold, Don G. Hoff, Harry A. Jacobs, Jr.,
Sidney R. Knafel, Robert E. LaBlanc, Lawrence C. McQuade, Thomas A. Owens, Jr.,
Richard A. Redeker, and Clay T. Whitehead, all of whom are currently members of
the Board of Directors. Each of the nominees has consented to be named in this
Proxy Statement and to serve as a Director if elected. All of the Directors have
served as Directors since July, 1992 except for Mr. Redeker, who has served as a
Director since December, 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.
2
<PAGE>
INFORMATION REGARDING DIRECTORS
<TABLE><CAPTION>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS OWNED AT
EXPERIENCE DURING THE PAST POSITION MARCH 31,
FIVE YEARS AND DIRECTORSHIPS WITH FUND 1994
- ----------------------------------------------------- --------- ------------
<S> <C> <C>
Stephen C. Eyre (71), Executive Director, The John A. Director -0-
Hartford Foundation, Inc. (charitable foundation)
(since May 1985); Director of Faircom, Inc.,
Prudential Global Fund, Inc., Prudential Pacific
Growth Fund, Inc. and Prudential Short-Term Global
Income Fund, Inc.; Trustee emeritus of Pace
University and Trustee of Prudential U.S.
Government Fund.
Delayne D. Gold (55), Marketing and Management Director -0-
Consultant; Director of 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, 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, Prudential California
Municipal Fund, Prudential Government Securities
Trust, Prudential Municipal Series Fund and
Prudential U.S. Government Fund.
Don G. Hoff (58), Chairman and Chief Executive Director -0-
Officer of Intertec, Inc. (investments) since 1980;
formerly Chairman and Chief Executive Officer of
AT&E Corporation (telecommunications) (1984-1990);
Director of Innovative Capital Management Inc.,
Prudential Global Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., The Asia Pacific Fund, Inc. and
The Greater China Fund, Inc.; Trustee of Prudential
U.S. Government Fund.
*Harry A. Jacobs, Jr. (72), Senior Director (since Director -0-
January 1986) of Prudential Securities; formerly
Interim Chairman and Chief Executive Officer of
Prudential Mutual Fund Management, Inc. (PMF)
</TABLE>
3
<PAGE>
<TABLE><CAPTION>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS OWNED AT
EXPERIENCE DURING THE PAST POSITION MARCH 31,
FIVE YEARS AND DIRECTORSHIPS WITH FUND 1994
- ----------------------------------------------------- --------- ------------
<S> <C> <C>
(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, Prudential
Tax-Free Money Fund, Prudential Utility Fund, The
First Australia 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 Municipal
Series Fund and Prudential U.S. Government Fund.
Sidney R. Knafel (63), Managing Partner of SRK Director -0-
Management Company (investments) since 1981;
Chairman of Insight Communications Company, L.P.
and Microbiological Associates, Inc.; Director of
Cellular Communications, Inc., Cellular
Communications International, Inc., Cellular
Communications of Puerto Rico, Inc., IGENE
Biotechnology, Inc., International CableTel
Incorporated, Medical Imaging Centers of America,
Inc., and a number of private companies; Director
of Prudential Global Fund, Inc., Prudential Pacific
Growth Fund, Inc. and Prudential Short-Term Global
Income Fund, Inc.; Trustee of Prudential U.S.
Government Fund.
Robert E. LaBlanc (59), President of Robert E. Director 1,524
LaBlanc Associates, Inc. (telecommunications) since
1981; Director of Contel Cellular, Inc., M/A-COM,
Inc., Storage Technology Corporation,
TIE/communications, Inc., Tribune Company,
</TABLE>
4
<PAGE>
<TABLE><CAPTION>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS OWNED AT
EXPERIENCE DURING THE PAST POSITION MARCH 31,
FIVE YEARS AND DIRECTORSHIPS WITH FUND 1994
- ----------------------------------------------------- --------- ------------
<S> <C> <C>
Prudential Global Fund, Inc., Prudential Pacific
Growth Fund, Inc. and Prudential Short-Term Global
Income Fund, Inc.; Trustee of Manhattan College and
Prudential U.S. Government Fund.
*Lawrence C. McQuade (66), Vice Chairman of PMF President 1,325
(since 1988); Managing Director, Investment and
Banking, Prudential Securities (1988-1991); Director
Director of Quixote Corporation (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 Chemical Corp.
(March 1987-November 1988); formerly Executive Vice
President and Director of WR Grace & Company;
President and Director of Prudential Adjustable
Rate Securities 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, Prudential
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, Prudential
Tax-Free Money Fund, Prudential Utility Fund, The
Global Government Plus Fund, Inc., The Global Yield
Fund, Inc. and The High Yield Income Fund, Inc.;
President and Trustee of The BlackRock Government
Income Trust, Command Government Fund, Command
Money Fund, Command Tax-Free Fund, Prudential
California Municipal 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; Director of Director 1,000
Prudential Adjustable Rate Securities Fund, Inc.,
Prudential Global Fund, Inc., Prudential Government
</TABLE>
5
<PAGE>
<TABLE><CAPTION>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS OWNED AT
EXPERIENCE DURING THE PAST POSITION MARCH 31,
FIVE YEARS AND DIRECTORSHIPS WITH FUND 1994
- ----------------------------------------------------- --------- ------------
<S> <C> <C>
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., Prudential Structured Maturity Fund and
Prudential Utility Fund; Trustee of Prudential U.S.
Government Fund.
*Richard A. Redeker (50), President, Chief Executive Director -0-
Officer and Director (since October 1993), PMF;
Executive Vice President, 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
Securities 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 IncomeVertible(R) Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential
MoneyMart Assets, Prudential Multi-Sector Fund,
Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Short-Term Global Income Fund, Inc.,
Prudential Special Money Market Fund, Prudential
Structured Maturity Fund, 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 Government Income
Trust, Command Government Fund, Command Money Fund,
Command Tax-Free Fund, Prudential California
Municipal Fund, Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Municipal Bond
Fund, Prudential Municipal Series Fund, Prudential
U.S. Government Fund and The Target Portfolio
Trust.
Clay T. Whitehead (55), President, National Exchange Director -0-
Inc. (since May 1983); Director of Prudential
Global Fund Inc., Prudential Pacific Growth Fund,
Inc. and
</TABLE>
6
<PAGE>
<TABLE><CAPTION>
SHARES OF
COMMON STOCK
NAME, AGE, BUSINESS OWNED AT
EXPERIENCE DURING THE PAST POSITION MARCH 31,
FIVE YEARS AND DIRECTORSHIPS WITH FUND 1994
- ----------------------------------------------------- --------- ------------
<S> <C> <C>
Prudential Short-Term Global Income Fund, Inc.;
Trustee of Prudential U.S. Government Fund.
</TABLE>
- ---------------
*Indicates "interested" Director, as defined in the Investment Company Act, by
reason of his affiliation with PMF or Prudential Securities.
The Directors and officers of the Fund as a group owned beneficially 4,147
shares of the Fund at 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 seven 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 fee 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.
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. During the fiscal year ended October 31, 1993, the Fund
paid Directors' fees of $42,000 and travel and incidental expenses of $1,910.
There were four regular meetings of the Fund's Board of Directors held
during the fiscal year ended October 31, 1993. The Board of Directors presently
has an Audit Committee, the members of which are Ms. Gold and Messrs. Eyre,
Hoff, Knafel, LaBlanc, Owens and Whitehead, the Fund's non-interested Directors.
The Audit Committee met four times during the fiscal year ended October 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 once during the fiscal year ended October 31, 1993. The
Nominating Committee does not consider nominees recommended by shareholders to
fill vacancies on the Board.
During the fiscal year ended October 31, 1993, Mr. LaBlanc 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: S. Jane
Rose, Secretary, having held office since June, 1992; Robert F. Gunia, Vice
President, and Susan C. Cote, Treasurer and Principal Financial and Accounting
Officer, both having held office since June, 1992; and Domenick Pugliese,
Assistant Secretary, having held office since June, 1992. Mr. Gunia is 47 years
old and is currently Chief Administrative Officer (since July 1990), Director,
Executive Vice President, Treasurer and Chief
7
<PAGE>
Financial Officer of PMF and 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 Senior Vice President (since January 1989)
of PMF, and a Senior Vice President of Prudential Securities (since January
1992). Prior thereto, she was 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 First Vice President (June 1987-December 1990) of PMF and Vice President and
Associate General Counsel of Prudential Securities. Mr. Pugliese is 32 years old
and is a Vice President and Associate General Counsel (since June 1992) of PMF
and Vice President and Associate General Counsel (since July 1992) of Prudential
Securities. Prior thereto, he was associated with the law firm of Battle Fowler.
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 16, 1992 (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 3, 1993 and was approved by the initial shareholder of the Fund on June
25, 1992.
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 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.
8
<PAGE>
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 .75 of 1% of the Fund's average daily net assets.
This fee is computed daily and paid monthly. For the fiscal year ended October
31, 1993, PMF received a management fee of $756,412.
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 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 October 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 share certificates
representing shares of the Fund, (i) the cost of fidelity and liability
insurance, (j) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the SEC and registering the Fund
and qualifying its shares under state
9
<PAGE>
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 prospectuses and reports to shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (m) distribution fees.
The Management Agreement provides that PMF will not be liable 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 Investment Company Act)
or by the Manager, upon not more than 60 days' nor less than 30 days' written
notice.
INFORMATION ABOUT PMF
PMF, a subsidiary of Prudential Securities and an indirect, wholly-owned
subsidiary of Prudential, 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 Global Genesis Fund, Inc.
(d/b/a Prudential Global Genesis Fund), Prudential-Bache Global Natural
Resources Fund, Inc. (d/b/a Prudential Global Natural Resources Fund),
Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund),
Prudential-Bache Government Plus Fund, Inc. (d/b/a Prudential Government
Plus Fund), Prudential 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, Inc., 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.
10
<PAGE>
Closed-End Management Investment Companies: The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Income Fund, Inc.
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.
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ------------------------- ------------------------- -------------------------
Brendan D. Boyle......... Executive Vice President Executive Vice President
and Director of and Director of
Marketing Marketing, PMF
John D. Brookmeyer, Director Senior Vice President,
Jr. ..................... Prudential
Two Gateway Center
Newark, NJ 07102
Susan C. Cote............ Senior Vice President Senior Vice President,
PMF; Senior Vice
President, Prudential
Securities
Fred A. Fiandaca......... Executive Vice President, Executive Vice President,
Raritan Plaza One Chief Operating Officer Chief Operating Officer
Edison, NJ 08847 and Director and Director, PMF;
Chairman, Chief
Operating Officer and
Director, Prudential
Mutual Fund Services,
Inc.
Stephen P. Fisher........ Senior Vice President Senior Vice President,
PMF; Senior Vice
President, Prudential
Securities
Frank W. Giordano........ Executive Vice President, Executive Vice President,
General Counsel and General Counsel and
Secretary Secretary, PMF; Senior
Vice President,
Prudential Securities
Robert F. Gunia.......... Executive Vice President, Executive Vice President,
Chief Financial and Chief Financial and
Administrative Officer, Administrative Officer,
and Director and Director, PMF;
Senior Vice President,
Prudential Securities
11
<PAGE>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ------------------------- ------------------------- -------------------------
Eugene B. Heimberg....... Director Senior Vice President,
Prudential Plaza Prudential; President,
Newark, NJ 07102 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 and Executive Officer and
Director Director, PMF;
Executive Vice
President, Director and
Member of the Operating
Committee, Prudential
Securities; Director,
PSG
S. Jane Rose............. Senior Vice President, Senior Vice President,
Senior Counsel and Senior Counsel and
Assistant Secretary Assistant Secretary,
PMF; Senior Vice
President and Senior
Counsel, Prudential
Securities
Donald G. Southwell...... Director Senior Vice President,
213 Washington Street Prudential; Director,
Newark, NJ 07102 PSG
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. The
Subadvisory Agreement was approved by the initial shareholder of the Fund on
June 25, 1992 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 3, 1993.
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
12
<PAGE>
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 either party 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
set forth below. Except as otherwise indicated, the address of each person is
Prudential Plaza, Newark, NJ 07102.
<TABLE><CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ------------------------- ------------------------- -------------------------
<S> <C> <C>
Martin A. Berkowitz...... Senior Vice President, Senior Vice President,
Chief Financial and Chief Financial and
Compliance Officer Compliance Officer,
PIC; Vice President,
Prudential
William M. Bethke........ Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
John D. Brookmeyer, Senior Vice President Senior Vice President,
Jr. ..................... Prudential; Senior Vice
Two Gateway Center President, PIC
Newark, NJ 07102
Eugene B. Heimberg....... President, Director and Senior Vice President,
Chief Investment Prudential; President,
Officer, PIC 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,
Four Gateway Center Prudential; Vice
Newark, NJ 07102 President, PIC
</TABLE>
13
<PAGE>
<TABLE><CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ------------------------- ------------------------- -------------------------
<S> <C> <C>
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
Newark, NJ 07102 Vice 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, Executive Vice President Vice President,
Jr. ..................... Prudential; Executive
Vice President, PIC
</TABLE>
14
<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.
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 3, 1993. The Plans were approved by the initial holder of Class A shares
and Class B shares on June 25, 1992.
The Plans are proposed to be amended as set forth in Proposal Nos. 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 .30 of 1% of the average daily net assets of the Class A shares. The
Class A Plan provides that (i) up to .25 of 1% of the average daily net assets
of the Class A shares may be used for personal service and/or the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1% of the average daily net
assets of the Class A shares. PMFD has advised the Fund that
distribution-related expenses of the Fund will not exceed .25 of 1% of the
average daily net assets of the Class A shares for the fiscal year ending
October 31, 1994.
For the fiscal year ended October 31, 1993, PMFD received payments of
$52,529 under the Class A Plan representing .20 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 October 31,
1993, PMFD also received approximately $1,305,500 in initial sales charges with
respect to the Class A shares.
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 under the Class B Plan.
For the fiscal year ended October 31, 1993, Prudential Securities received
$745,906 from the Fund under the Class B Plan and spent approximately
$6,693,000, in distributing the Fund's Class B shares. It is estimated that of
the latter amount approximately
15
<PAGE>
0.7% ($44,400) was spent on printing and mailing of prospectuses to other than
current shareholders; 4.8% ($324,300) 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; 1.1% ($74,000) on interest and/or carrying
charges and 93.4% ($6,250,300), on the aggregate of (i) payments of commissions
to financial advisers (37.5% ($2,511,200)) and (ii) an allocation of overhead
and other branch office distribution-related expenses (55.9% ($3,739,100)). 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 October 31,
1993, Prudential Securities received approximately $168,400 in contingent
deferred sales charges. As of October 31, 1993, the aggregate amounts of
unreimbursed distribution expenses for the Fund's Class B shares were
approximately $6,322,200.
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
16
<PAGE>
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 3, 1993.
PORTFOLIO TRANSACTIONS
The Manager is responsible for decisions to buy and sell securities, futures
and options on securities and futures for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section, the
term "Manager" includes the "Subadviser." On a national securities exchange
brokers/dealers may receive negotiated brokerage commissions on Fund portfolio
transactions, including options, futures and options on futures transactions and
the purchase and sale of underlying securities upon exercise of options. On
foreign securities exchanges, commissions may be fixed. Orders may be directed
to any broker including, to the extent and in the manner permitted by applicable
law, Prudential Securities and its affiliates.
Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from an issuer, in which
case no commissions or discounts are paid. The Fund will not deal with
Prudential Securities (or any affiliate), in any transaction in which Prudential
Securities (or any affiliate) acts as principal. Thus, it will not deal in the
over-the-counter market with Prudential Securities (or any affiliate) acting as
market maker, and it will not execute a negotiated trade with Prudential
Securities (or any affiliate) if execution involves Prudential Securities (or
any affiliate) acting as principal with respect to any part of the Fund's order.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund's, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker in the light
of generally prevailing rates. The Manager's policy is to pay higher
17
<PAGE>
commissions to brokers, other than Prudential Securities, for particular
transactions than might be charged if a different broker had been selected, on
occasions when, in the Manager's opinion, this policy furthers the objective of
obtaining best price and execution. In addition, the Manager is authorized to
pay higher commissions on brokerage transactions for the Fund to brokers other
than Prudential Securities in order to secure research and investment services
described above, subject to review by the Fund's Board of Directors from time to
time as to the extent and continuation of this practice. The allocation or
orders among brokers and the commission rates paid are reviewed periodically by
the Fund's Board of Directors. The Fund will not pay up for research in
principal transactions.
Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities, or an 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.
Subject to the above considerations, Prudential Securities (or any
affiliate) may act as a securities broker or futures commission merchant for the
Fund. In order for Prudential Securities (or any affiliate) to effect any
portfolio transactions for the Fund, the commissions, fees or other remuneration
received by Prudential Securities (or any affiliate) must be reasonable and fair
compared to the commissions, fees or other remuneration paid to other brokers or
futures commission merchant in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow Prudential Securities (or any
affiliate) to receive no more than the remuneration which would be expected to
be received by an unaffiliated broker 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 affiliate) are consistent
with the foregoing standard. In accordance with Section 11(a) of the Securities
Exchange Act of 1934, Prudential Securities may not retain compensation for
effecting transactions on a national securities exchange for the Fund unless the
Fund has expressly authorized the retention of such compensation. Prudential
Securities must furnish to the Fund at least annually a statement setting forth
the total amount of all compensation retained by Prudential Securities from
transactions effected for the Fund during the applicable period. Brokerage
transactions with Prudential Securities (or any affiliate) are also subject to
such fiduciary standards as may be imposed upon Prudential Securities (or such
affiliate) by applicable law. During the fiscal year ended October 31, 1993, the
Fund did not pay any brokerage commissions to Prudential Securities.
18
<PAGE>
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 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 5.25% of the offering price and are subject to an annual distribution and
service fee of up to .30 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
.25 of 1% of the average daily net assets of the Class A shares and PMFD has
agreed to so limit its fee under the Class A Plan for the fiscal year ending
October 31, 1994. Class B shares are currently offered without an initial sales
charge but are subject to a contingent deferred sales charge or CDSC (declining
from 5% to zero of the lesser of the amount invested or the redemption proceeds)
on certain redemptions generally made within six 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 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.
19
<PAGE>
THE PROPOSED CONVERSION FEATURE
On June 3, 1993, the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act), 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.
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 seven years from the purchase of Class B shares. 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 seven 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 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 seven years
before such conversion date. For example, if 100 shares were initially purchased
at $10 per share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (i.e., $1,000
divided by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.
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.
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
20
<PAGE>
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 eight years from purchase. For purposes of measuring the
time period during which shares are held in a money market fund, exchanges
will be deemed to have been made on the last day of the month. Class B shares
acquired through exchange will convert to Class A shares 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 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.
21
<PAGE>
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 3, 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), the Proposed Class A Plan is
also being submitted for approval by Class B shareholders, subject to approval
of Proposal No. 2, because Class B shares will automatically convert to Class A
shares approximately seven 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 the initial holder of the Class A shares on June 25, 1992,
and last approved by the Board of Directors on June 3, 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. The amendments do not
change the maximum annual fee that may be paid to PMFD under the Existing Class
A Plan, although 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
amendments are 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 .30 of 1% of the
average daily net assets of the Class A shares (up to .25 of 1% of which may
constitute a service fee for the servicing and maintenance of shareholder
accounts). Article III, Section 26 of the NASD
22
<PAGE>
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, the Fund may impose any combination of service fees and asset-based
sales charges under both the Existing Class A Plan and the Proposed Class A
Plan; provided that the total fees do not exceed .30 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.
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 one material
respect. Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
actually incurred for Distribution Activities up to a maximum of .30 of 1% per
annum of the average daily net assets of the Class A shares. The Proposed Class
A Plan authorizes the Fund to pay PMFD the same maximum annual fee as
compensation for its Distribution Activities regardless of the expenses incurred
by PMFD for Distribution Activities. The Distributor may, however, as it
currently does, voluntarily agree to limit its fee to an amount less than the
maximum annual fee. 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.
Since inception of the Existing Class A Plan, the reimbursable expenses
incurred thereunder by PMFD have generally equalled or exceeded the amount
reimbursed by the Fund. For each of the period from May 7, 1992 (commencement of
operations) to October 31, 1992 and the fiscal year ended October 31, 1993, PMFD
received payments of $7,060 and $52,529, respectively, under the Existing Class
A Plan representing .20% of the average daily net assets of the Class A shares
as reimbursement of expenses incurred for Distribution Activities. Although PMFD
agreed to limit its fees under the Existing Class A Plan to .25 of 1% for the
period May 7, 1992 to October 31, 1992 and for the fiscal year ended, October
31, 1993, it in fact further limited its fee to .20 of 1% even though its direct
and indirect reimbursable distribution expenses exceeded such amount. PMFD
believes that it would have similarly limited its fee had the Proposed Class A
Plan
23
<PAGE>
been in effect during the same period, although it could have assessed the
maximum annual fee of .30 of 1%. Regardless of which plan will be in effect, the
Distributor has voluntarily agreed to limit its fees for Distribution Activities
to no more than .25 of 1% of the average daily net assets of the Class A shares
for the fiscal year ending October 31, 1994. Other expenses incurred by PMFD for
Distribution Activities have been and will continue to be paid from the proceeds
of initial sales charges.
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 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
shares is defined as the lesser of (i) 67% of a class' outstanding shares
represented at a meeting at which more than 50% of the outstanding shares of the
class are present in person or represented by proxy, or (ii) more than 50% of a
class' outstanding 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.
24
<PAGE>
APPROVAL OF
AMENDED AND RESTATED CLASS B DISTRIBUTION
AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS B SHAREHOLDERS ONLY)
(PROPOSAL NO. 4)
On June 3, 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 initial shareholder of the Class B shares on June 25,
1992 and last approved by the Board of Directors on June 3, 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.
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 and 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
25
<PAGE>
contingent deferred sales charges received from certain redeeming shareholders,
subject to the limitations of Article III, Section 26 of the NASD Rules of Fair
Practice (the NASD Rules). 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 Prudential
Securities for expenses actually incurred for Distribution Activities up to
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. 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 $8,537,951.
For the period from May 7, 1992 (commencement of operations) to October 31,
1992, and the fiscal year ended October 31, 1993, Prudential Securities received
$43,905 and $745,906, respectively, from the Fund under the Existing Class B
Plan, representing
26
<PAGE>
1% of the average daily net assets of the Class B shares, and spent
approximately $591,600 and $6,693,000, 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 period from May 7, 1992 to October 31, 1992 and
the fiscal year ended October 31, 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 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 ordinarily 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 Securities 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 in Proposal No. 3 above. 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.
27
<PAGE>
RATIFICATION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 5)
The Board of Directors of the Fund, including the Directors who are not
interested persons of the Fund, has selected Deloitte & Touche as independent
accountants for the Fund for the fiscal year ending October 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 independence 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.
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 5.
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.
28
<PAGE>
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.
29
<PAGE>
EXHIBIT A
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
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
------------
------------
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.
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
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
-----------
-----------
A-2
<PAGE>
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."
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:
MINIMUM
YEAR RENTAL
- -------------------------------------------- -------------
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
-------------
-------------
A-3
<PAGE>
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 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-4
<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-5
<PAGE>
EXHIBIT B
AMENDMENT TO ARTICLES OF INCORPORATION
Article V, Section 1 of the Fund's Articles of Incorporation are proposed to
be amended and restated as follows:
Article
COMMON STOCK
SECTION 1. The total number of shares of capital stock which the Corporation
shall have authority to issue is 2,000,000,000 shares of the par value of $.001
per share and of the aggregate par value of $2,000,000 to be divided initially
into three classes, consisting of 666,666,666 2/3 shares of Class A Common
Stock, 666,666,666 2/3 shares of Class B Common Stock and 666,666,666 2/3 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 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 reinvestment of dividends and distributions
with respect to Class B Common Stock (each "Conversion Date"), determined by
the Board of Directors in accordance with applicable laws, rules,
regulations, and interpretations of the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc. and pursuant to
such procedures as may be established from time to time by the Board of
Directors and disclosed in the Corporation's then current prospectus for
such Class A and Class B Common Stock.
B-1
<PAGE>
(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 PACIFIC GROWTH FUND, INC.
DISTRIBUTION AND SERVICE PLAN
(CLASS A SHARES)
INTRODUCTION
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Pacific Growth Fund, Inc. (the Fund)
and by Prudential Mutual Fund Distributors, Inc., the Fund's distributor (the
Distributor).
The Fund has entered into a distribution agreement 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
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
C-1
<PAGE>
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
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.
C-2
<PAGE>
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 of Directors
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 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.
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-3
<PAGE>
EXHIBIT D
PRUDENTIAL PACIFIC GROWTH FUND, INC.
DISTRIBUTION AND SERVICE PLAN
(CLASS B SHARES)
INTRODUCTION
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Pacific Growth Fund, Inc. (the Fund)
and by Prudential Securities Incorporated (Prudential Securities) the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement 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 intends 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 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 B shares of the Fund within
the meaning of paragraph (a) (2) of Rule 12b-1 promulgated under the Investment
Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
THE PLAN
The material aspects of the Plan are as follows:
1. Distribution Activities The Fund shall engage the Distributor to
distribute Class B shares of the Fund and to service shareholder accounts using
all of the facilities of the Prudential Securities distribution network
including sales personnel and branch office and central support systems, and
also using such other qualified broker-dealers and financial institutions as the
Distributor may select, including Pruco Securities Corporation (Prusec).
Services provided and activities undertaken to distribute Class B shares of the
Fund are referred to herein as "Distribution Activities."
D-1
<PAGE>
2. Payment of Service Fee The Fund shall pay to the Distributor as
compensation for providing personal service and/or maintaining shareholder
accounts a service fee of .25 of 1% per annum of the average daily net assets of
the Class B shares (service fee). The Fund shall calculate and accrue daily
amounts payable by the Class B shares of the Fund hereunder and shall pay such
amounts monthly or at such other intervals as the Board of Directors 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 to the Distributor by the Class B shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class B shares according to the
ratio of the sale of Class B shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Directors. 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) 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 an 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
D-2
<PAGE>
(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.
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-3
<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 A)
PRUDENTIAL PACIFIC GROWTH FUND, Inc.
ONE SEAPORT PLAZA
NEW YORK, New York 10292
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Domenick
Pugliese 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 Pacific Growth Fund, Inc. 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.
Your Account No.: Your voting shares are:
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
1. Election of Directors
[ ] Approve All Nominees [ ] Withhold All Nominees [ ] Withhold Those
Listed On Back
To withhold authority for any individual nominee, please write name on back
of form.
Stephen C. Eyre
Delayne D. Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. LaBlanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
2. To approve an amendment of the Fund's Articles of Incorporation to permit a
conversion feature for Class B shares.
[ ] For [ ] Against [ ] Abstain
3. To approve an amended and restated Class A Distribution and Service Plan.
[ ] For [ ] Against [ ] Abstain
4. NOT APPLICABLE TO CLASS A SHAREHOLDERS
[ ] For [ ] Against [ ] Abstain
5. To ratify the selection by the Board of Directors of Deloitte & Touche as
independent accountants for the fiscal year ending October 31, 1994.
[ ] For [ ] Against [ ] Abstain
6. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
[ ] For [ ] Against [ ] Abstain
<PAGE>
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.
- -----------------------------------------------------
Signature Date
- -----------------------------------------------------
Signature (Joint Ownership)
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, 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)
PRUDENTIAL PACIFIC GROWTH FUND, Inc.
ONE SEAPORT PLAZA
NEW YORK, New York 10292
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Domenick
Pugliese 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 B beneficial interest of Prudential Pacific Growth Fund, Inc. 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.
Your Account No.: Your voting shares are:
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
1. Election of Directors
[ ] Approve All Nominees [ ] Withhold All Nominees [ ] Withhold Those
Listed On Back
To withhold authority for any individual nominee, please write name on back
of form.
Stephen C. Eyre
Delayne D. Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. LaBlanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
2. To approve an amendment of the Fund's Articles of Incorporation to permit a
conversion feature for Class B shares.
[ ] For [ ] Against [ ] Abstain
3. To approve an amended and restated Class A Distribution and Service Plan.
[ ] For [ ] Against [ ] Abstain
4. To approve an amended and restated Class B Distribution and Service Plan.
[ ] For [ ] Against [ ] Abstain
5. To ratify the selection by the Board of Directors of Deloitte & Touche as
independent accountants for the fiscal year ending October 31, 1994.
[ ] For [ ] Against [ ] Abstain
6. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
[ ] For [ ] Against [ ] Abstain
<PAGE>
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.
- -----------------------------------------------------
Signature Date
- -----------------------------------------------------
Signature (Joint Ownership)
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, 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>
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.
1
