<PAGE>
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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
___________________________________
THE PRUDENTIAL INSTITUTIONAL FUND
ACTIVE BALANCED FUND
___________________________________
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $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.
1) Title of each class of securities to which transaction
applies:
_______________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
_______________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________
5) Total fee paid:
_______________________________________
<PAGE>
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
________________________
2) Form, Schedule or Registration Statement No.:
________________________
3) Filing Party:
________________________
4) Date Filed:
________________________
<PAGE>
QUESTIONS AND ANSWERS
Q: WHAT IS THE PURPOSE OF THIS PROXY SOLICITATION?
A: The purpose of this proxy is to ask you to vote on three
proposals consisting of four primary issues:
. to elect twelve Board members to The Prudential
Institutional Fund (PIF);
. to approve a new management agreement;
. to approve new subadvisory agreements; and
. to ratify the selection of PIF's independent public
accountants for the current year.
Q: WHY ARE YOU RECOMMENDING A NEW BOARD FOR THE FUND?
A: The nomination of a new Board of Trustees (Board) for PIF is part
of an overall plan to coordinate and enhance the efficiency of
the governance of PIF and of certain other investment companies
that are part of the Prudential Mutual Fund Family. This plan
was developed by an advisory group (Advisory Group) of current
Board Members of the Prudential Mutual Funds who are not
"interested persons" of the Prudential Mutual Fund Family
(Independent Board Members), as defined in the Investment Company
Act, with the assistance of representatives of Prudential Mutual
Fund Management, Inc., who formed a corporate governance task
force. The Advisory Group considered various matters related to
the management and governance of the Prudential Mutual Fund
Family and made recommendations to the boards, including
proposals concerning the number of mutual fund boards, the size
and composition of such boards, retirement policies and related
matters. The nominees for independent Board memberships were
selected by the Independent Board Members. With the exception of
the nominations for Board membership, which are the subject of
Proposal No. 1, no shareholder action is required with respect to
the Advisory Group recommendations. If all nominees are elected,
the Fund will have more Board Members than it currently has.
Nine of the individual Board nominees are independent of
Prudential. Said differently, if the shareholders approve the
proposal and the nominees are elected, more of the Prudential
Mutual Funds would have identical board compositions than
presently is the case. The Board of PIF believes that
coordinated governance through this board restructuring will
benefit the Active Balanced Fund.
Q: WILL THE PROPOSED CHANGES RESULT IN HIGHER MANAGEMENT FEES?
A: No. The management fees charged to the Fund will be lower than
under the current management agreement.
<PAGE>
Q: WILL THE PROPOSED CHANGES RESULT IN HIGHER TRUSTEES' FEES?
A: It is anticipated that Trustees' fees in the aggregate will not
be higher than they are currently.
Q: WHAT ARE MY BOARD'S RECOMMENDATIONS?
A: The Board of PIF recommends that you vote "FOR" the nominees for
Board Member and "FOR" each proposal.
THE ATTACHED PROXY STATEMENT CONTAINS MORE DETAILED
INFORMATION ABOUT EACH OF THE PROPOSALS. PLEASE READ IT
CAREFULLY.
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy
card, date and sign it, and return it in the envelope provided.
If you sign, date and return the proxy card but give no voting
instructions, your shares will be voted "FOR" the nominees for
trustee named in the attached proxy statement and "FOR" all other
proposals indicated on the card. In order to avoid the
additional expense to the Fund of further solicitation, we ask
your cooperation in mailing in your proxy cards promptly. Unless
your proxy card is signed by the appropriate persons as indicated
in the instructions below, it will not be voted.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and help avoid the time and expense to the Fund involved
in validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it
appears in the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of
the party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual
signing the proxy card should be indicated unless it is reflected in the
form of registration. For example:
<TABLE>
<CAPTION>
Registration Valid Signature
------------ ---------------
<S> <C>
Corporate Accounts
(1) XYZ Corp. . . . . . . . . . . . . . . . . . XYZ Corp.
Jane L. Doe, Treasurer
(2) XYZ Corp. . . . . . . . . . . . . . . . . . Jane L. Doe, Treasurer
(3) XYZ Corp. c/o Jane L. Doe, Treasurer . . . . Jane L. Doe
(4) XYZ Corp. Profit Sharing Plan . . . . . . . Jane L. Doe, Trustee
<PAGE>
Registration Valid Signature
------------ ---------------
Partnership Accounts
(1) The ABC Partnership . . . . . . . . . . . . Robert Fogg, Partner
(2) Fogg and Hale, Limited Partnership . . . . . Robert Fogg, General Partner
Trust Accounts
(1) ABC Trust Account . . . . . . . . . . . . . William X. Smith, Trustee
(2) Ron F. Anderson, Trustee u/t/d 12/28/78 . . Ron F. Anderson
Custodial or Estate Accounts
(1) Katherine T. John, Cust. f/b/o Albert T. Katherine T. John
John, Jr. UGMA/UTMA . . . . . . . . . . . .
(2) Estate of Katherine T. John . . . . . . . . Albert T. John, Jr., Executor
</TABLE>
<PAGE>
THE PRUDENTIAL INSTITUTIONAL FUND
ACTIVE BALANCED FUND
_______
21 Prudential Plaza
751 Broad Street
Newark, New Jersey 07102-3777
(800) 225-1852
_______
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
OCTOBER 30, 1996
_______
TO THE SHAREHOLDERS:
A Special Meeting of the holders of shares of beneficial interest
of The Prudential Institutional Fund (PIF) will be held on October 30,
1996, at 9:00 a.m., eastern time, at One Seaport Plaza, New York, New York
10292, for the purpose of considering the following proposals:
(1) To elect twelve members to the PIF Board of
Trustees;
(2) To approve a New Management Agreement and New
Subadvisory Agreements;
(3) To ratify the selection of Deloitte & Touche LLP
as PIF's independent public accountants for the
current fiscal year; and
(4) To transact such other business as may properly
come before the meeting and any adjournments
thereof.
This proxy statement is being distributed to shareholders of
Active Balanced Fund (the Fund), a series of PIF. Shareholders of PIF's
other series, Stock Index Fund, will receive a separate proxy statement
relating to proposals (1), (3) and (4) above. Shareholders of Stock Index
Fund also will be asked to approve the New Management Agreement and a
separate new subadvisory agreement. You are entitled to vote at the
meeting, and at any adjournments thereof, if you owned shares of the Fund
at the close of business on August 9, 1996. If you attend the meeting,
<PAGE>
you may vote your shares in person. IF YOU DO NOT EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Board of Trustees,
S. Jane Rose
Secretary
September , 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE
ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
THE PRUDENTIAL INSTITUTIONAL FUND
ACTIVE BALANCED FUND
_______
21 Prudential Plaza
751 Broad Street
Newark, New Jersey 07102-3777
(800) 225-1852
_______
PROXY STATEMENT
Special Meeting of Shareholders
To Be Held on October 30, 1996
_______
This proxy statement is being furnished by the Board of Trustees
(the Board) of The Prudential Institutional Fund (PIF) to holders of
shares of beneficial interest (Shares) of Active Balanced Fund (the Fund)
in connection with its solicitation of proxies to be used at a Special
Meeting of PIF Shareholders (Meeting) to be held on October 30, 1996, at
9:00 a.m., eastern time, or any adjournment(s) thereof, at the offices of
Prudential Mutual Fund Management, Inc. (PMF), One Seaport Plaza, New
York, New York 10292. This proxy statement first is being mailed to
shareholders on or about September __, 1996.
A quorum of forty percent of the Shares entitled to vote at the
close of business on August 9, 1996 (Record Date), represented in person
or by proxy, must be present for the transaction of business at the
Meeting. In the absence of a quorum or in the event that a quorum is
present at the Meeting but sufficient votes to approve any of the
proposals are not received, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of
proxies. Any adjournment will require the affirmative vote of a majority
of those Shares and shares of beneficial interest of Stock Index Fund,
PIF's other remaining series, represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote
those proxies that they are entitled to vote FOR any proposal in favor of
such an adjournment and will vote those proxies required to be voted
AGAINST any proposal against such adjournment. A shareholder vote may be
taken on one or more of the proposals in this proxy statement prior to any
such adjournment if sufficient votes have been received and it is
otherwise appropriate.
If a proxy that is properly executed and returned is accompanied
by instructions to withhold authority to vote (an abstention), the Shares
represented thereby, with respect to matters to be determined by a
majority of the votes cast on such matters, will be considered present for
purposes of determining the existence of a quorum for the transaction of
business, but, not being cast, will have no effect on the outcome of such
matters. With respect to matters requiring the affirmative vote of a
specified percentage of the total shares outstanding, an abstention will
be considered present for purposes of determining a quorum but will have
the effect of a vote against such matters. Accordingly, abstentions will
have no effect on Proposal No. 1, for which the required vote is a
<PAGE>
plurality number of the votes cast, but effectively will be a vote against
adjournment and against each item in Proposal No. 2 and Proposal No. 3,
each of which requires approval of a majority of the outstanding voting
securities under the Investment Company Act of 1940 (Investment Company
Act).
The individuals named as proxies on the enclosed proxy cards will
vote in accordance with your direction as indicated thereon, if your proxy
card is received properly executed by you or by your duly appointed agent
or attorney-in-fact. If your card is properly executed and you give no
voting instructions, your Shares will be voted FOR the nominees named
herein for the Board and FOR the remaining proposals described in this
proxy statement and referenced on the proxy card. If any nominee for the
Board should withdraw or otherwise become unavailable for election, your
Shares will be voted in favor of such other nominee or nominees as
management may recommend. You may revoke any proxy card by giving another
proxy or by letter or telegram revoking the initial proxy. To be
effective, your revocation must be received by the Fund prior to the
Meeting and must indicate your name and plan number or social security
number. In addition, if you attend the Meeting in person you may, if you
wish, vote by ballot at that Meeting, thereby canceling any proxy
previously given.
As of the Record Date, the Fund had ___________ Shares issued and
______________ Shares outstanding. The Record Date determines which
shareholders are entitled to notice of, and to vote at, the Meeting. The
following shareholders owned beneficially 5% or more of the Shares of the
Fund as of August 9, 1996: PAMCO VCA OA Account, 30 Scranton Office Park,
Moosic, PA 18507-1774, owned approximately ____ % (_____ shares); Dobson
Park Industries Inc. and Affiliates Savings Plan and Dobson Park
Industries Inc. and Affiliates Cash Balance Pension Plan and Dobson
Technologies, Inc., c/o IRD Mechanalysis, 6150 Huntley Road, Columbus, OH
43229, owned approximately ____% (______ shares); Rite Aid Employee
Investment Opportunity Plan, Rite Aid Corporation, 30 Hunter Lane, Camp
Hill, PA 17011, owned approximately ____% (________ shares); and Thompson
& Knight Savings Plan and Thompson Knight Retirement Plan, 300 First City
Center, 1700 Pacific Ave., Dallas, TX 75201, owned approximately ____%
(________ shares). To the knowledge of management, the executive officers
and Board, as a group, owned less than 1% of the outstanding Shares of the
Fund as of August 9, 1996.
COPIES OF PIF'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS,
INCLUDING FINANCIAL STATEMENTS, PREVIOUSLY HAVE BEEN DELIVERED TO
SHAREHOLDERS. SHAREHOLDERS OF PIF MAY OBTAIN WITHOUT CHARGE ADDITIONAL
COPIES OF PIF'S ANNUAL AND SEMI-ANNUAL REPORTS BY WRITING PIF AT 21
PRUDENTIAL PLAZA, 751 BROAD STREET, NEWARK, NEW JERSEY 07102-3777, OR BY
CALLING (800) 225-1852 (TOLL FREE).
Each full Share of the Fund outstanding is entitled to one vote,
and each fractional Share of the Fund outstanding is entitled to a
proportionate share of one vote, with respect to each matter to be voted
upon by the shareholders of the Fund. Information about the vote
- 2 -
<PAGE>
necessary with respect to each proposal is discussed below in connection
with the proposal.
GENERAL OVERVIEW
In November 1995 as part of a major corporate restructuring
initiated by Arthur Ryan, Chairman and Chief Executive Officer of
Prudential, the Money Management Group was formed. At that time, it was
decided that all of Prudential's money management businesses would be part
of this group, including products offered in the defined contribution plan
marketplace, such as PIF. The Money Management Group will develop
products and manage assets for all of Prudential's fee-based, marketable
securities businesses, including mutual funds, annuities, defined
contribution and benefit plans, guaranteed products and retirement
administration.
One goal of the Money Management Group is to present one group of
mutual funds to the marketplace, i.e., brand identity. Another goal is to
achieve cost savings. In light of these goals, the Money Management Group
undertook a broad review of the Prudential Mutual Fund Family to see if
any changes were advisable. The consolidation of certain mutual funds
into the Prudential Mutual Fund Family appeared consistent with attaining
the above-stated goals, as well as beneficial to the funds and
shareholders involved.
As part of this consolidation, Prudential Institutional Fund
Management, Inc. (PIFM) and the Board have determined that it is in the
best interests of PIF and its shareholders to consolidate its operations
into the Prudential Mutual Fund Family structure. In order to accomplish
such consolidation, PIFM and the Board believe that certain changes in the
management and administration of the Fund are necessary. These changes
include restructuring the composition of the Board, replacing PIFM as the
manager with PMF through a new management agreement and implementing new
subadvisory agreements on behalf of the Fund between PMF and the Fund's
subadvisers. The new management agreement would incorporate services
provided under the Fund's current administration agreement, allowing it to
be terminated, but would require the Fund to enter into a new transfer
agency and service agreement with Prudential Mutual Fund Services, Inc.
(PMFS).
In addition, PIFM has recommended, and the Board has approved,
changing the Fund's distributor from Prudential Retirement Services, Inc.
(PRSI) to Prudential Securities Incorporated (PSI), and establishing a
multiple-class structure (Multiple-Class Structure) for Shares of the Fund
that would be sold to both institutional and retail investors. Under a
Multiple-Class Structure, the Fund will offer Class A shares, Class B
shares and Class C shares to retail investors, and Class Z shares to
institutional investors, like the Fund's current shareholders. The Fund's
current Shares would be classified as Class Z shares. These changes will
not only integrate the Fund into the Prudential Mutual Fund Family, but
they also will result in a wider distribution of Fund Shares.
- 3 -
<PAGE>
Finally, PIFM has recommended, and the Board has approved, that
PIF change its name to Prudential Dryden Fund. PIFM and the Board both
agree that it no longer is suitable for PIF to maintain "Institutional" in
its name once retail investors may invest in the Fund. Accordingly, PIF's
name will be changed to Prudential Dryden Fund and the Fund and the other
remaining series of PIF will be known as Prudential Active Balanced Fund
and Prudential Stock Index Fund, respectively.
SHAREHOLDERS WILL BE ASKED TO APPROVE ONLY THOSE CHANGES THAT ARE
DESCRIBED BELOW IN PROPOSALS NOS. 1 AND 2.
------------------------
ELECTION OF TRUSTEES
PROPOSAL NO. 1
The Board nominated the twelve individuals identified below for
election to the Board. Under Proposal No. 1, shareholders are being asked
to vote on those nominees. Pertinent information about each nominee is
set forth in the listing below. Each nominee has indicated a willingness
to serve if elected. If elected, each nominee will hold office until the
next meeting of shareholders at which Board Members are elected and until
their successors are elected and qualified. The Fund does not intend to
hold annual meetings of shareholders unless the election of Trustees is
required under the Investment Company Act.
The nomination of these Board Members for PIF is part of an
overall plan to coordinate and enhance the efficiency of the governance of
PIF and of certain other investment companies that are part of the
Prudential Mutual Fund Family. This plan was developed by an advisory
group (Advisory Group) of current Board Members of the Prudential Mutual
Funds who are not "interested persons" of the Prudential Mutual Fund
Family (Independent Board Members), as defined in the Investment Company
Act, with the assistance of representatives of PMF, who formed a corporate
governance task force. The Advisory Group considered various matters
related to the management and governance of the Prudential Mutual Fund
Family and made recommendations to the boards, including proposals
concerning the number of mutual fund boards, the size and composition of
such boards, retirement policies and related matters. The nominees for
independent Board memberships were selected by the Independent Board
Members. With the exception of the nominations for Board membership,
which are the subject of Proposal No. 1, no shareholder action is required
with respect to the Advisory Group recommendations. If all nominees are
elected, the Fund will have more Board Members than it currently has.
Trustees' fees in the aggregate will not be higher than they currently
are.
The Board believes that coordinated governance through a board
restructuring will benefit PIF in light of PIF's integration into the
Prudential Mutual Fund Family. Despite some recent consolidations, the
Prudential Mutual Fund Family has grown substantially in size in the years
- 4 -
<PAGE>
since many of the Prudential Mutual Fund Family boards were created. This
growth has been due to the creation of new Prudential Mutual Funds
intended to serve a wide variety of investment needs. The Advisory Group
concluded that the Prudential Mutual Fund Family would operate more
efficiently and economically with fewer boards. The Prudential Mutual
Fund Family currently includes over 70 portfolios of open-end and
closed-end funds having a wide variety of investment objectives and
policies with over 12 different boards (clusters). The Advisory Group
recommended that the number of clusters be reduced from the present level
to four. The proposed cluster, which includes this Fund, would focus on
domestic equity and global debt funds and includes 15 funds not covered by
this proxy statement. The other clusters would focus on other types of
investments. The Board believes that PIF will benefit from having Board
Members focus on the issues relating to this type of fund and to investing
in these types of securities. The Board believes that greater efficiency
would result through the holding of joint Board and shareholder meetings.
Coordinated governance within the Prudential Mutual Fund Family also will
reduce the possibility that separate boards might arrive at conflicting
decisions regarding the operation and management of the Prudential Mutual
Funds.
PIF also will benefit from the diversity and experience of the
nominees that would comprise the proposed restructured board. These
nominees have had distinguished careers in business, finance, government
and other areas and will bring a wide range of expertise to the Board.
Nine of the twelve nominees have no affiliation with PMF, Prudential
Securities Incorporated (PSI) or The Prudential Insurance Company of
America (Prudential) and would not be "interested persons" of PIF
(Independent Trustees), as defined in the Investment Company Act.
Independent Trustees are charged with special responsibilities, among
other things, to approve advisory, distribution and similar agreements
between PIF and management. In the course of their duties, Board Members
must review and understand large amounts of financial and technical
material and must be willing to devote substantial amounts of time to
their duties. Due to the demands of service on the boards, independent
nominees may need to reject other attractive opportunities. Each of the
independent nominees already serves as an Independent Board Member for one
or more funds within the Prudential Mutual Fund Family and understands the
operations of the complex.
The Advisory Group has recommended that the compensation paid to
Independent Trustees change. Currently, Independent Trustees receive an
annual Board meeting fee of $15,000, an additional fee of $1,000 for each
Board meeting attended and a $500 fee for each committee meeting attended.
The Board meets four times a year. The Advisory Group has recommended
that, initially under the new structure, each Independent Trustee be paid
annual fees in the aggregate of $45,000 for this cluster and that no
additional compensation for serving on committees or for attending
meetings be paid to Independent Trustees. If this fee structure is
approved by the Board, the Advisory Group anticipates that the amount of
Trustees' fees allocated to each of PIF's series will not be higher than
they are currently. Interested Trustees would continue to receive no
- 5 -
<PAGE>
compensation from PIF. Board Members would continue to be reimbursed for
any expenses incurred in attending meetings and for other incidental
expenses. PIF's annual Board fees are subject to the approval of the new
Board upon its election; shareholders are not being asked to vote on these
fees. Thereafter, Board fees may be reviewed periodically and changed by
the Board.
The following table shows (i) the compensation paid by PIF to
each Independent Trustee for the most recent fiscal year and (ii) the
compensation paid by the Prudential Mutual Fund Complex to each
Independent Trustee for the calendar year ended December 31, 1995.
"Interested" Trustees do not receive any compensation from PIF.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation Paid
Compensation to Board Members from
Independent Trustees (1) from PIF PIF and Fund Complex (2)
------------------------ ----------- ------------------------
<S> <C> <C>
Finley, David A.* . . . . . . . . . . . . . . . $17,500 $17,500(1/7)~
Fruhan, Jr., William E.*. . . . . . . . . . . . 17,700 17,500(1/7)~
Olsen, August G.*# . . . . . . . . . . . . . . 17,500 17,500(1/7)~
Stolzer, Herbert G.*# . . . . . . . . . . . . . 17,500 17,500(1/7)~
</TABLE>
________________
~ Indicates number of funds/portfolios in Prudential Mutual Fund
Family (including PIF) to which aggregate compensation relates.
* Indicates Board Member who is not standing for reelection.
# All of the compensation from PIF for the fiscal year ended
September 30, 1995 represents deferred compensation. Aggregate
compensation for PIF and the Prudential Mutual Fund Family for
the fiscal year ended September 30, 1995, including accrued
income and appreciation, amounted to approximately $18,339 for
Mr. Olsen and approximately $21,792 for Mr. Stolzer.
(1) Mark R. Fetting, who is an "interested" Trustee, does not receive
compensation from PIF or any fund in the Prudential Mutual Fund
Family.
(2) PIF and each fund in the Prudential Mutual Fund Family do not
have a bonus, pension, profit sharing or retirement plan.
Board Members may elect to receive their Trustees' fees pursuant
to a deferred fee agreement with PIF. Under the terms of the agreement,
PIF accrues daily the amount of such Board Member's fee in installments
that accrue interest at a rate equivalent to the prevailing rate
applicable to 90-day U.S. Treasury Bills at the beginning of each calendar
quarter or, pursuant to an exemptive order of the Securities and Exchange
Commission (SEC), at the daily rate of return of the applicable Fund.
Payment of the interest so accrued also is deferred and accruals become
payable at the option of the Board Member. PIF's obligation to make
- 6 -
<PAGE>
payments of deferred Trustees' fees, together with interest thereon, is a
general obligation of PIF.
Currently, each fund in the Prudential Mutual Fund Family has
adopted a retirement policy that requires Trustees to retire on December
31 of the year in which they reach the age of 72. This policy is phased
in for Board Members who were 68 or older as of December 31, 1993 --
including Edward D. Beach and Donald D. Lennox, who are nominees for
election to the PIF Board. This policy will be considered for adoption by
the PIF Board at its next scheduled Board meeting. If adopted, Trustees
will serve for a term of unlimited duration until their terms expire in
accordance with the Fund's retirement policy or until the next meeting of
shareholders, whichever is earlier.
The nominees for election as Board Members, their ages and a
description of their principal occupations are listed below. No nominee
currently owns shares of either series of PIF.
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND OTHER
DIRECTORSHIPS
EDWARD D. BEACH (71), President and Director of BMC Fund, Inc.,
a closed-end investment company; prior thereto, Vice Chairman of Broyhill
Furniture Industries, Inc.; Certified Public Accountant; Secretary and
Treasurer of Broyhill Family Foundation, Inc.; Member of the Board of
Trustees of Mars Hill College; President and Director of First Financial
Fund, Inc. and The High Yield Plus Fund, Inc.; President and Director of
Global Utility Fund, Inc.; Director of The Global Government Plus
Fund, Inc., The Global Total Return Fund, Inc., Prudential Equity
Fund, Inc., Prudential Global Genesis Fund, Inc., Prudential Government
Income Fund, Inc., Prudential Mortgage Income Fund, Inc., Prudential
Multi-Sector Fund, Inc., Prudential Natural Resources Fund, Inc. and
Prudential Special Money Market Fund, Inc.; Trustee of The BlackRock
Government Income Trust, Command Government Fund, Command Money Fund,
Command Tax-Free Fund, Prudential Allocation Fund, Prudential California
Municipal Fund, Prudential Equity Income Fund, Prudential Municipal Bond
Fund and Prudential Municipal Series Fund.
DELAYNE DEDRICK GOLD (58), Marketing and Management Consultant;
Director of Prudential Distressed Securities Fund, Inc., Prudential Equity
Fund, Inc., Prudential Global Limited Maturity Fund, Inc., Prudential
Government Income Fund, Inc., Prudential High Yield Fund, Inc., Prudential
MoneyMart Assets, Inc., Prudential Mortgage Income Fund, Inc., Prudential
National Municipals Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Small Companies Fund, Inc., Prudential Special Money Market
Fund, Inc., Prudential Structured Maturity Fund, Inc., Prudential Tax-Free
Money Fund, Inc., Prudential Utility Fund, Inc. and Prudential World
Fund, Inc.; 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 and
Prudential Municipal Series Fund.
- 7 -
<PAGE>
*ROBERT F. GUNIA (49), Director, Chief Administrative Officer,
Executive Vice President, Treasurer and Chief Financial Officer of PMF;
Comptroller of the Money Management Group of Prudential (since 1996);
Senior Vice President of PSI; Vice President and Director of
Nicholas-Applegate Fund, Inc. and The Asia Pacific Fund, Inc.
DONALD D. LENNOX (77), Chairman (since February 1990) and
Director (since April 1989) of International Imaging Materials, Inc.
(thermal transfer ribbon manufacturer); Retired Chairman, Chief Executive
Officer and Director of Schlegel Corporation (industrial manufacturing)
(March 1987 - February 1989); Director of Gleason Corporation, Personal
Sound Technologies, Inc., The Global Government Plus Fund, Inc. and The
High Yield Income Fund, Inc., Prudential Global Genesis Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential
Multi-Sector Fund, Inc. and Prudential Natural Resources Fund, Inc.;
Trustee of Prudential Allocation Fund, Prudential Equity Income Fund,
Prudential Municipal Bond Fund and The Target Portfolio Trust.
DOUGLAS H. MCCORKINDALE (57), Vice Chairman, Gannett Co. Inc.
(publishing and media) (since March 1984); Director of Gannett Co. Inc.,
Frontier Corporation, Continental Airlines, Inc., The Global Government
Plus Fund, Inc., Prudential Distressed Securities Fund, Inc., Prudential
Global Genesis Fund, Inc., Prudential Multi-Sector Fund, Inc., and
Prudential Natural Resources Fund, Inc.; Trustee of Prudential Allocation
Fund, Prudential Equity Income Fund and Prudential Municipal Bond Fund.
*MENDEL A. MELZER (35), Chief Financial Officer (since
November 1995) of the Money Management Group of Prudential; formerly
Senior Vice President and Chief Financial Officer of Prudential Preferred
Financial Services (April 1993 - November 1995); Managing Director of
Prudential Investment Advisors (April 1991 - April 1993); Senior Vice
President of Prudential Capital Corporation (July 1989 - April 1991);
Chairman and Director of Prudential Series Fund, Inc.
THOMAS T. MOONEY (54), President of the Greater Rochester Metro
Chamber of Commerce; former Rochester City Manager; Trustee of Center for
Governmental Research, Inc.; Director of Blue Cross of Rochester, Monroe
County Water Authority, Rochester Jobs, Inc., Executive Service Corps of
Rochester, Monroe County Industrial Development Corporation, Northeast
Midwest Institute, The Business Council of New York State, First Financial
Fund, Inc., The Global Government Plus Fund, Inc., The Global Total Return
Fund, Inc., Global Utility Fund, Inc., Prudential Distressed Securities
Fund, Inc., Prudential Equity Fund, Inc., Prudential Global Genesis
Fund, Inc., The High Yield Plus Fund, Inc., Prudential Government Income
Fund, Inc., Prudential Mortgage Income Fund, Inc., Prudential Multi-Sector
Fund, Inc. and Prudential Natural Resources Fund, Inc.; Trustee of
Prudential Allocation Fund, Prudential California Municipal Fund,
Prudential Equity Income Fund, Prudential Municipal Bond Fund and
Prudential Municipal Series Fund.
STEPHEN P. MUNN (54), Chairman (since January 1994), Director
and President (since 1988) and Chief Executive Officer (1988 -
- 8 -
<PAGE>
December 1993) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Prudential Distressed Securities
Fund, Inc., Prudential Government Securities Trust, Prudential High Yield
Fund, Inc., Prudential National Municipals Fund, Inc., Prudential Small
Companies Fund, Inc. and Prudential Tax-Free Money Fund, Inc.
*RICHARD A. REDEKER (53), President, Chief Executive Officer and
Director (since October 1993), PMF; Executive Vice President, Director and
Member of the Operating Committee (since October 1993), PSI; Director
(since October 1993) of Prudential Securities Group, Inc.; formerly Senior
Executive Vice President and Director of Kemper Financial Services, Inc.
(September 1978 - September 1993); Director of The Global Government Plus
Fund, Inc., The Global Total Return Fund, Inc., Global Utility Fund, Inc.,
The High Yield Income Fund, Inc., Prudential Distressed Securities
Fund, Inc., Prudential Diversified Bond Fund, Inc., Prudential Equity
Fund, Inc., Prudential Europe Growth Fund, Inc., Prudential Global Genesis
Fund, Inc., Prudential Global Limited Maturity Fund, Inc., Prudential
Government Income Fund, Inc., Prudential High Yield Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc., Prudential Intermediate Global
Income Fund, Inc., Prudential Jennison Fund, Inc., Prudential MoneyMart
Assets, Inc., Prudential Mortgage Income Fund, Inc., Prudential
Multi-Sector Fund, Inc., Prudential National Municipals Fund, Inc.,
Prudential Natural Resources Fund, Inc., Prudential Pacific Growth
Fund, Inc., Prudential Small Companies Fund, Inc., Prudential Special
Money Market Fund, Inc., Prudential Structured Maturity Fund, Inc.,
Prudential Tax-Free Money Fund, Inc., Prudential Utility Fund, Inc. and
Prudential World Fund, Inc.; Trustee of Command Government Fund, Command
Money Fund, Command Tax-Free Fund, Prudential Allocation Fund, Prudential
California Municipal Fund, Prudential Equity Income Fund, Prudential
Government Securities Trust, Prudential Municipal Bond Fund, Prudential
Municipal Series Fund and The Target Portfolio Trust.**
ROBIN B. SMITH (57), Chairman (since August 1996) and Chief
Executive Officer (since August 1996), former President (September 1981 -
August 1996) of Publishers Clearing House; Director of BellSouth
Corporation, The Omnicom Group, Inc., Texaco Inc., Spring Industries Inc.,
First Financial Fund, Inc., The Global Total Return Fund Inc., The High
Yield Income Fund, Inc., The High Yield Plus Fund, Inc., Global Utility
Fund, Inc., Prudential Distressed Securities Fund, Inc., Prudential
Diversified Bond Fund, Inc., Prudential Europe Growth Fund, Inc.,
Prudential Jennison Fund, Inc. and Prudential Institutional Liquidity
Portfolio, Inc.; Trustee of The Target Portfolio Trust.
LOUIS A. WEIL, III (55), President and Chief Executive Officer
(since January 1996) and Director (since September 1991) of Central
Newspapers, Inc.; Chairman of the Board (since January 1996), Publisher
and Chief Executive Officer (August 1991 - December 1995) of Phoenix
Newspapers, Inc.; formerly Publisher of Time Magazine (May 1989 -
March 1991); formerly President, Publisher & CEO of The Detroit News
(February 1986 - August 1989); formerly member of the Advisory Board,
Chase Manhattan Bank-Westchester; Director of The Global Government Plus
Fund, Inc., Prudential Global Genesis Fund, Inc., Prudential High Yield
- 9 -
<PAGE>
Fund, Inc., Prudential Multi-Sector Fund, Inc., Prudential National
Municipals Fund, Inc., Prudential Natural Resources Fund, Inc., Prudential
Small Companies Fund, Inc., Prudential Distressed Securities Fund, Inc.
and Prudential Tax-Free Money Fund, Inc.; Trustee of Prudential Allocation
Fund, Prudential Equity Income Fund, Prudential Government Securities
Trust and Prudential Municipal Bond Fund.
CLAY T. WHITEHEAD (57), President, National Exchange Inc. (new
business development firm) (since May 1983); Director of Prudential
Distressed Securities Fund, Inc., Prudential Global Limited Maturity
Fund, Inc., Prudential Pacific Growth Fund, Inc. and Prudential World
Fund, Inc.
_____________
* Indicates Interested Trustee, as defined by the Investment
Company Act, by reason of his affiliation with PMF, PSI or
Prudential.
** Mr. Redeker has resigned as President and Chief Executive Officer
and Director of PMF effective on or before December 31, 1996.
Although he will no longer oversee the operations of PMF on a
day-to-day basis, it is anticipated that Mr. Redeker will remain
associated with PMF and Prudential.
PIF has an Audit Committee, the members of which are the
Independent Trustees. The Audit Committee makes recommendations to the
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 Audit Committee meets twice a year. Information
concerning Fund officers is set forth in Exhibit A.
Required Vote
For the election of the Board, the nominees receiving the
affirmative vote of a plurality of the votes cast by shareholders of the
Fund and of the Stock Index Fund, PIF's other series, for the election of
Board Members will be elected, provided a quorum is present.
THE BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL NO. 1.
---------------------
APPROVAL OR DISAPPROVAL OF NEW MANAGEMENT AGREEMENT
AND NEW SUBADVISORY AGREEMENTS
PROPOSAL NO. 2
The Board has determined that it is in the best interests of PIF
and its shareholders to consolidate its operations into the Prudential
Mutual Fund Family structure. On May 17, 1996, a majority of the Board,
- 10 -
<PAGE>
including a majority of the Independent Trustees, approved a new
management agreement between PIF and PMF (the New Management Agreement),
subject to shareholder approval. In approving the New Management
Agreement, the Board considered a number of factors, including the lower
management and administration fees that the Fund would pay, the
availability of new distribution channels and the economies of scale that
might occur as a result of the potential increase in assets as a result of
the new distribution channels.
In order to accomplish the consolidation of PIF into the
Prudential Mutual Fund Family, PIFM and the Board believe that certain
changes in the management and administration of the Fund are necessary,
including replacing PIFM as the manager with PMF through the New
Management Agreement, terminating the Fund's current administration
agreement, entering into a new transfer agency and service agreement and
implementing new subadvisory agreements on behalf of the Fund between PMF
and the Fund's subadvisers. The terms of the New Management Agreement are
substantially similar to the terms of the management agreement currently
in effect between PIF and PIFM dated October 30, 1992 (the Current
Management Agreement). Pursuant to the New Management Agreement, however,
PMF will replace PIFM as Manager of the Fund, the management fee charged
by PMF to the Fund has been lowered, and the New Management Agreement
incorporates the administrative responsibilities previously included in a
separate administration agreement between PIFM and PIF. These proposed
changes are discussed further below.
THE MANAGER AND THE TERMS OF THE CURRENT MANAGEMENT AGREEMENT
PIFM serves as Manager to PIF pursuant to the Current Management
Agreement. PIFM is a Pennsylvania corporation organized in May 1992 and
registered as an investment adviser under the Investment Advisers Act of
1940. The Current Management Agreement was last approved by the Board,
including a majority of the Independent Trustees, on November 16, 1995 and
was approved by the Fund's initial shareholder on November __, 1992. The
principal address of PIFM and PIFM's directors and principal executive
officers is 30 Scranton Office Park, Moosic, Pennsylvania 18507-1789. The
directors and principal executive officers of PIFM are: Mark R. Fetting,
Chairman of the Board and President; Thomas A. Early, Vice President and
Secretary; Nancy L. Lindgren, Director, Vice President and Comptroller; C.
Edward Chaplin, Treasurer; and Walter E. Watkins, Jr., Vice President.
The Current Management Agreement provides that PIFM, subject to
the supervision of the Board and in conformity with the stated policies of
the Fund, is responsible for managing the investment operations of the
Fund and the composition of the Fund's portfolio, including the purchase,
retention and disposition thereof. Under the Current Management
Agreement, PIFM is authorized, subject to its supervision, to delegate
certain of these responsibilities to a third party. Pursuant to this
authority, PIFM has delegated day-to-day investment management of the Fund
to Jennison Associates Capital Corporation (Jennison or Subadviser), an
indirect, wholly owned subsidiary of Prudential, and, with respect to
short-term assets and cash of the Fund, to The Prudential Investment
- 11 -
<PAGE>
Corporation (PIC or Subadviser), a wholly owned subsidiary of Prudential.
Jennison provides such services to the Fund pursuant to a subadvisory
agreement with PIFM dated October 30, 1992 (Current Jennison Subadvisory
Agreement). PIC provides such services to the Fund pursuant to a
subadvisory agreement with PIFM dated October 30, 1992 (Current PIC
Subadvisory Agreement) (collectively with the Current Jennison Subadvisory
Agreement, the Current Subadvisory Agreements).
PIFM also supervises all matters relating to PIF's business
affairs not specifically assumed by PMF, PIF's administrator. In
connection with the administration of the business affairs of PIF, PIFM
bears the following expenses related to: (1) the salaries and expenses of
all personnel of PIF and PIFM except the fees and expenses of Trustees who
are not affiliated persons of PIFM or PIF's investment adviser; (2) all
expenses incurred by PIFM or by PIF in connection with managing the
ordinary course of PIF's business other than those assumed by PIF, as
described below; and (3) the costs and expenses payable pursuant to any
subadvisory agreements.
Under the Current Management Agreement, PIF pays PIFM for the
services performed and the expenses assumed pursuant to the Current
Management Agreement a fee at an annual rate of .70 of 1% of the Fund's
average daily net assets. These fees are computed daily and paid monthly.
For the fiscal year ended September 30, 1995, the Fund paid PIFM $733,748
in management fees. For the same period, PIFM subsidized $48,317 in
operating expenses of the Fund.
The Current Management Agreement provides that PIFM will not be
liable for any error of judgment or for any loss suffered by PIF in
connection with the matters to which the Current Management Agreement
relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations and
duties under the Current Management Agreement. The Current Management
Agreement also provides that PIF shall indemnify PIFM and hold it harmless
from and against all damages, liabilities, costs and expenses (including
reasonable attorneys' fees and amounts reasonably paid in settlement)
incurred by PIFM in or by reason of any pending, threatened or completed
action, suit, investigation or other proceeding (including an action or
suit by or in the right of PIF or its shareholders) arising out of or
otherwise based upon any action actually or allegedly taken or omitted to
be taken by PIFM in connection with the performance of any of its duties
or obligations under the Current Management Agreement; provided, however,
that nothing contained in the Current Management Agreement protects or
deems to protect PIFM against or entitle or deem to entitle PIFM to
indemnification in respect of any liability to PIF or its shareholders to
which PIFM would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of its reckless disregard of its duties and obligations under the
Current Management Agreement.
- 12 -
<PAGE>
The Current Management Agreement also provides that it will
terminate automatically if assigned and that it may be terminated by PIF
at any time, without the payment of penalties, by the Board or by vote of
a majority of outstanding voting securities (as defined in the Investment
Company Act) or by the PIFM at any time, without payment of any penalty,
on not more than 60 days' nor less than 30 days' written notice to the
other party. Under the Investment Company Act, a majority of the
outstanding voting securities of the Fund is defined as the lesser of (1)
67% of the Fund's outstanding shares represented at a meeting at which
more than 50% of the outstanding shares are present in person or
represented by proxy, or (2) more than 50% of the Fund's outstanding
shares.
TERMS OF THE CURRENT ADMINISTRATION AGREEMENT
Under an Administration, Transfer Agency and Service Agreement
dated October 30, 1992, between PIF and PMF (Current Administration
Agreement), PMF provides certain administrative services to PIF and, in
connection therewith, furnishes PIF with office facilities, together with
those ordinary clerical and bookkeeping services that are not being
furnished by PIFM or PIF's custodian. In addition, PMF, through its
wholly owned subsidiary, Prudential Mutual Fund Services, Inc. (PMFS),
acts as PIF's transfer agent, dividend disbursing agent and shareholder
servicing agent in connection with the administration of PIF. The
principal address for PMFS is P.O. Box 15005, New Brunswick, New Jersey
08906. Pursuant to the Current Administration Agreement, PIF pays PMF a
monthly fee at an annual rate of .17 of 1% of PIF's average daily net
assets up to $250 million and .15 of 1% of PIF's average daily net assets
in excess of $250 million. PMF will reimburse PMFS for certain out-of-
pocket expenses PMFS may incur in providing transfer agency and dividend
disbursing services and PIF, in turn, will reimburse PMF for such
expenses. For the fiscal year ended September 30, 1995, PMF received from
PIF $972,783, of which $165,751 was paid by the Fund, under the Current
Administration Agreement.
THE NEW MANAGEMENT AGREEMENT
The terms of the New Management Agreement are substantially the
same as the Current Management Agreement, except that (1) PMF replaces
PIFM as Manager for the Fund, (2) the management fee charged by PMF is
lower for the Fund than the management fee charged by PIFM, and (3) the
New Management Agreement incorporates the administrative responsibilities
previously included in the Current Administration Agreement. The form of
New Management Agreement is included in this proxy statement as Exhibit B.
The transfer agency and service responsibilities included under the
Current Administration Agreement will be serviced under a new transfer
agency and service agreement between PIF and PMFS.
Pursuant to the New Management Agreement and subject to the
supervision of the Board, PMF will act as Manager of PIF and will
administer PIF's corporate affairs. In connection therewith, PMF will
furnish PIF with office facilities and with clerical, bookkeeping and
- 13 -
<PAGE>
recordkeeping services at such office facilities, as well as manage the
investment operations of PIF, including the purchase, retention and
disposition thereof, in conformity with the stated policies of the Fund.
For services performed pursuant to the New Management Agreement, PMF will
receive a fee at an annual rate of .65 of 1% of the average daily net
assets of the Fund. This fee will be computed daily and payable monthly.
INFORMATION ABOUT PMF
PMF was incorporated in May 1987 under the laws of the State of
Delaware to operate as the manager of various Prudential affiliated
investment companies. PMF is owned 85% by PSI, an indirect, wholly owned
subsidiary of Prudential, and 15% by Prudential. PMF currently maintains
its principal place of business at One Seaport Plaza, New York, New York
10292 and expects to relocate to Gateway Center 3, Newark, New Jersey
07102 in October 1996. Prudential's principal place of business is
Prudential Plaza, 751 Broad Street, Newark, New Jersey 07102-3777. PSI's
principal place of business is One Seaport Plaza, New York, New York
10292. As of June 30, 1996, PMF served as the manager or administrator to
60 investment companies, with aggregate assets of approximately $52
billion. PMF is the manager of the investment companies with similar
investment objectives set forth in Exhibit C.
As part of a corporate restructuring, PMF intends to reorganize
as a limited liability company on or before December 31, 1996. This
reorganization will have no impact on the provision of services to PIF.
This reorganization will not result in a change in management or control
within the meaning of the Investment Company Act and does not require
shareholder approval.
Certain information regarding the directors and principal
executive officers of PMF is set forth below. Except as otherwise
indicated, the address of each person is One Seaport Plaza, New York, New
York 10292.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
---------------- ----------------- ---------------------
<S> <C> <C>
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
PSI; Vice President, Prudential Mutual Fund
Distributors, Inc. (PMFD)
Frank W. Giordano Executive Vice President, Executive Vice President, General Counsel,
General Counsel, Secretary and Secretary and Director, PMF and PMFD; Senior Vice
Director President, PSI; Director, PMFS
- 14 -
<PAGE>
Name and Address Position with PMF Principal Occupations
---------------- ----------------- ---------------------
Robert F. Gunia Executive Vice President, Executive Vice President, Chief Financial and
Chief Financial and Administrative Officer, Treasurer and Director,
Administrative Officer, PMF; Senior Vice President, PSI; Executive Vice
Treasurer and Director President, Chief Financial Officer, Treasurer and
Director, PMFD; Director, PMFS
Theresa A. Hamacher Director Director, PMF; Vice President, Prudential; Vice
751 Broad Street President, PIC; President, Prudential Mutual Fund
Newark, NJ 07102 Investment Management (PMFIM)
Timothy J. O'Brien Director President, Chief Executive Officer, Chief
Raritan Plaza One Operating Officer and Director, PMFD; Chief
Edison, NJ 08837 Executive Officer and Director, PMFS; Director,
PMF
Richard A. Redeker President, Chief Executive President, Chief Executive Officer and Director,
Officer and Director PMF; Director and Member of Operating Committee,
PSI; Director, Prudential Securities Group, Inc.;
Executive Vice President, PIC; Director, PMFD;
Director, PMFS
S. Jane Rose Senior Vice President, Senior Senior Vice President, Senior Counsel and
Counsel and Assistant Assistant Secretary, PMF; Senior Vice President
Secretary and Senior Counsel, PSI
Donald Webber Executive Vice President and Executive Vice President and Director, Sales and
Director, Sales and Marketing Marketing, PMF
</TABLE>
THE NEW TRANSFER AGENCY AND SERVICE AGREEMENT
Because the New Management Agreement will incorporate the
administrative responsibilities previously included in the Current
Administration Agreement and the Current Administration Agreement will be
terminated, the Fund must retain PMFS to perform the transfer agency and
service responsibilities previously included under the Current
Administration Agreement. Shareholders are not being asked to approve
this agreement.
PMFS will act as PIF's transfer agent, dividend disbursing agent
and shareholder servicing agent. For performance of such services, PIF
will pay PMFS an annual fee per shareholder account of $9.50, a new set-up
fee for each manually established account of $2.00 and a monthly inactive
zero balance account fee per shareholder account of $0.20. PIF also will
reimburse PMFS for out-of-pocket expenses, including postage, stationery,
printing, allocable communications expenses and other costs. Existing
shareholders of the Fund will not be subject to the $2.00 manual
- 15 -
<PAGE>
establishment fee with respect to any account established in connection
with the new transfer agency and service agreement.
THE SUBADVISERS AND THE TERMS OF THE CURRENT SUBADVISORY AGREEMENTS
Pursuant to the Current Jennison Subadvisory Agreement with PIFM,
Jennison, 466 Lexington Avenue, New York, New York 10017, furnishes
investment advisory services in connection with the management of the Fund
and is compensated by PIFM for its services at an annual rate of .30 of 1%
of the Fund's average daily net assets. The Current Jennison Subadvisory
Agreement was last approved by the initial shareholder on November __,
1992, and was last approved by the Board, including a majority of the
Independent Trustees, on November 16, 1995.
Investment advisory services also are provided to the Fund by
PIFM through PIC, Prudential Plaza, Newark, New Jersey 07102, under the
Current PIC Subadvisory Agreement. Pursuant to the Current PIC
Subadvisory Agreement, PIFM has retained PIC to provide investment
advisory services to the Fund with respect to (1) the management of short-
term assets, including cash, money market instruments and repurchase
agreements and (2) the lending of portfolio securities in connection with
the management of the Fund. For these services, PIFM reimburses PIC for
reasonable costs and expenses incurred by PIC, determined in a manner
acceptable to PIFM. The Current PIC Subadvisory Agreement was approved by
the initial shareholder on November __, 1992 and was last approved by the
Board, including a majority of the Independent Trustees, on November 16,
1995.
On May 17, 1996, the Board, including a majority of the
Independent Trustees, approved a new subadvisory agreement between PMF and
Jennison for the Fund (New Jennison Subadvisory Agreement) and a new
subadvisory agreement between PMF and PIC for the Fund (New PIC
Subadvisory Agreement) (collectively, New Subadvisory Agreements). The
terms of the New Subadvisory Agreements are identical to the terms of the
Current Subadvisory Agreements, except with respect to the fees charged by
Jennison, as discussed below.
Pursuant to the Current Jennison Subadvisory Agreement, Jennison,
subject to the supervision of PIFM and the Board 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 thereof. Jennison provides supervision of the
Fund's investments and determines from time to time what investments and
securities will be purchased, retained, or sold by the Fund, and what
portion of the assets will be invested or held as cash. Jennison also
provides PIC with certain information in connection with PIC's management
of the Fund's short-term assets and lending activities. In addition,
Jennison maintains all books and records with respect to the Fund's
portfolio transactions required to be maintained pursuant to the
Investment Company Act. PIFM continues to have responsibility for all
services provided to PIF pursuant to the Current Management Agreement and
oversees and reviews Jennison's performance of its duties under the
- 16 -
<PAGE>
Current Jennison Subadvisory Agreement. PIFM pays Jennison for services
provided and the expenses assumed pursuant to the Current Jennison
Subadvisory Agreement a fee at an annual rate of .30 of 1% of the average
daily net assets of the Fund. This fee is computed daily and paid
monthly. The investment advisory services of Jennison to the Fund are not
exclusive under the terms of the Current Jennison Subadvisory Agreement
and Jennison is free to, and does, render investment advisory services to
others.
Pursuant to the Current PIC Subadvisory Agreement, PIC, subject
to the supervision of PIFM and the Board and in conformity with the stated
policies of the Fund, manages the short-term assets and cash of the Fund,
including the purchase, retention and disposition thereof. PIC is
reimbursed by PIFM for reasonable costs and expenses incurred by it in
furnishing such services. The fees paid by the Fund under the Current
Management Agreement with PIFM are not affected by this arrangement. PIC
keeps certain books and records required to be maintained pursuant to the
Investment Company Act. The investment advisory services of PIC to the
Fund are not exclusive under the terms of the Current PIC Subadvisory
Agreement and PIC is free to, and does, render investment advisory
services to others.
The Current Subadvisory Agreements provide that Jennison and PIC
shall not be liable for any error of judgment or for any loss suffered by
the Fund or PIFM in connection with the matters to which the Current
Subadvisory Agreements relate, except a loss resulting from willful
misfeasance, bad faith or gross negligence on Jennison's part or PIC's
part, respectively, in the performance of its duties or from its reckless
disregard of its obligations and duties under the Current Subadvisory
Agreements. The Current Subadvisory Agreements provide that either
agreement shall terminate automatically if assigned or upon termination of
the Current Management Agreement and that they may be terminated by the
Fund at any time without the payment of any penalty by the Board or by
vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act and set forth above) of the Fund, or by PIFM, or
Jennison or PIC upon not more than 60 days' nor less than 30 days' written
notice to the other party.
THE NEW SUBADVISORY AGREEMENTS
Under the New Subadvisory Agreements, the terms of the New
Subadvisory Agreements are substantially the same as the Current
Subadvisory Agreements, except that the New Jennison Subadvisory Agreement
incorporates an additional breakpoint whereby PMF pays Jennison a
management fee of .30 of 1% of the average daily net assets of the Fund up
to $300 million and .25 of 1% of the average daily net assets in excess of
$300 million. As of June 30, 1996, the Fund's net assets were
$___________ and as such the new breakpoint will not take effect until the
Fund's net assets grow above $300 million. Forms of the New Subadvisory
Agreements are included in this proxy statement as Exhibits D and E.
- 17 -
<PAGE>
INFORMATION ABOUT JENNISON AND PIC
Jennison was incorporated in 1969 under the laws of the State of
New York. Jennison is a wholly owned subsidiary of Prudential. As of
March 29, 1996, Jennison has over $29.7 billion in assets under management
for institutional and mutual fund clients. Certain information regarding
the directors and executive officers of Jennison is set forth below. The
business and other connections of Jennison's directors and executive
officers are as set forth below. Except as otherwise indicated, the
address of each person is 466 Lexington Avenue, New York, New York 10017.
<TABLE>
<CAPTION>
Name Position with Jennison Principal Occupations
---- ---------------------- ---------------------
<S> <C> <C>
Blair A. Boyer Senior Vice President and Director Senior Vice President and Director, Jennison
Robert B. Corman Senior Vice President and Director Senior Vice President and Director, Jennison
Michael A. Del Balso Senior Vice President, Director of Senior Vice President, Director of Internal
Internal Research and Director Research and Director, Jennison
Thomas F. Doyle Executive Vice President and Executive Vice President and Director,
Director Jennison
John H. Feingold Senior Vice President and Director Senior Vice President and Director, Jennison;
Senior Vice President, JACC Services Corp.
Joseph P. Ferrugio Senior Vice President and Director Senior Vice President and Director, Jennison
Bradley L. Goldberg Executive Vice President and Executive Vice President and Director,
Director Jennison; Director, JACC Services Corp.
John H. Hobbs Chairman and Chief Executive Chairman and Chief Executive Officer and
Officer and Director Director, Jennison; President, JACC Services
Corp.
James N. Kannry Senior Vice President, Treasurer Senior Vice President, Treasurer and Director,
and Director Jennison; Senior Vice President, Treasurer
and Director, JACC Services Corp.
Karen E. Kohler Senior Vice President, Chief Senior Vice President, Chief Compliance
Compliance Officer, Assistant Officer, Assistant Treasurer and Secretary,
Treasurer and Secretary Jennison; Senior Vice President, Assistant
Treasurer and Secretary, JACC Services Corp.
- 18 -
<PAGE>
Name Position with Jennison Principal Occupations
---- ---------------------- ---------------------
Jonathan R. Longley Executive Vice President and Executive Vice President and Director, Jennison
Director
Howard H.B. Moss Executive Vice President and Executive Vice President and Director, Jennison
Director
David T. Poiesz Senior Vice President and Director Senior Vice President and Director, Jennison
Michael H. Ponreca Senior Vice President and Director Senior Vice President and Director, Jennison
Spiros Segalas President, Chief Investment Officer President, Chief Investment Officer and Director,
and Director Jennison; Director, JACC Services Corp.
Lulu C. Wang Executive Vice President and Executive Vice President and Director, Jennison
Director
Catherine D. Wood Senior Vice President and Director Senior Vice President and Director, Jennison
</TABLE>
Jennison serves as investment advisor to investment companies
with similar investment objectives as set forth in Exhibit F.
PIC was organized in June 1984 under the laws of the State of New
Jersey. PIC, through its Prudential Mutual Fund Investment Management
(PFMIM) unit, currently serves as the investment adviser to substantially
all of the other Prudential Mutual Funds. PIC is a wholly owned
subsidiary of Prudential with its principal place of business at
Prudential Plaza, 751 Broad Street, Newark, New Jersey 07102-3777.
Certain information regarding the directors and executive officers of PIC
is set forth below. Except as otherwise indicated, the address of each
person is Prudential Plaza, Newark, New Jersey 07102.
<TABLE>
<CAPTION>
- 19 -
<PAGE>
Name Position with PIC Principal Occupation
---- ----------------- ---------------------
<S> <C> <C>
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior
Two Gateway Center Vice President, PIC
Newark, New Jersey 07102
Barry M. Gillman Director Director, PIC
Theresa A. Hamacher Vice President Vice President, Prudential; Vice
President, PIC; Director, PMF; President,
PMFIM
Richard A. Redeker Executive Vice President President, Chief Executive Officer and
One Seaport Plaza Director, PMF; Executive Vice President,
New York, New York 10292 Director and Member of Operating
Committee, PSI; Director, Prudential
Securities Group, Inc.; Executive Vice
President, PIC; Director, PMFD; Director,
PMFS
John L. Reeve Senior Vice President Managing Director, Prudential Asset
Management Group; Senior Vice President,
PIC
Eric A. Simonson Vice President and Director Vice President and Director, PIC;
Executive Vice President, Prudential
</TABLE>
PIC serves as investment advisor to investment companies with
similar investment objectives as set forth in Exhibit C.
BROKERAGE COMMISSIONS
PSI or other affiliated broker-dealers may act as broker on
behalf of the Fund in the purchase and sale of portfolio securities.
During the year ended September 30, 1995, PIF paid $965 in brokerage
commissions to PSI. This represented __._% of aggregate brokerage
commissions paid. The Fund did not pay any amount to any other affiliated
broker-dealer.
RECOMMENDATION OF THE BOARD
If shareholders approve Proposal No. 2, the New Management
Agreement would be executed by PIF and PMF as soon as reasonably
practicable. In addition, PMF would continue to delegate day-to-day
investment management of the Fund to Jennison and PIC, as PIFM currently
- 20 -
<PAGE>
does. Accordingly, the New Subadvisory Agreements would be executed by
PMF and Jennison and by PMF and PIC as soon as reasonably practicable.
Unless terminated sooner, the New Management Agreement and the New
Subadvisory Agreements each would remain in effect for two years following
its execution. Thereafter, each would continue automatically for
successive annual periods, provided that each is specifically approved at
least annually (1) by a vote of a majority of the Independent Trustees and
(2) by the Board or by a vote of the majority of the outstanding Shares of
the Fund.
REQUIRED VOTE
Shareholders must vote separately to approve or disapprove the
New Management Agreement and each New Subadvisory Agreement. If
shareholders approve the New Management Agreement, then they will be asked
to vote separately to approve or disapprove each of the New Subadvisory
Agreements. If shareholders do not approve the New Management Agreement,
the Current Management Agreement, the Current Administration Agreement and
the Current Subadvisory Agreements will remain in effect in accordance
with their terms.
In the event that shareholders of the Fund do not approve the New
Management Agreement or either of the New Subadvisory Agreements, the
Board would seek to obtain for the interim advisory services at the lesser
of cost or the current fee rate either from Jennison and PIC or from
another investment adviser. Thereafter, the Board would either negotiate
a new investment advisory agreement with an investment advisory
organization selected by them or make other appropriate arrangements in
either event subject to approval by the shareholders of the Fund.
If the New Management Agreement and New Subadvisory Agreements
are approved by shareholders of the Fund, they will become effective as
soon as reasonably practicable.
Adoption of each item under Proposal No. 2 will require the
approval of a majority of the outstanding voting securities of the Fund,
as defined in the Investment Company Act. Under the Investment Company
Act, a majority of the outstanding voting securities of the Fund is
defined as the lesser of (i) 67% of the Fund's outstanding shares
represented at a meeting at which more than 50% of the outstanding shares
are present in person or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares.
THE BOARD, INCLUDING ITS INDEPENDENT TRUSTEES,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
-------------------
RATIFICATION OF SELECTION OF ACCOUNTANTS
PROPOSAL NO. 3
- 21 -
<PAGE>
Shareholders of PIF are asked to ratify the Board's selection of
independent public accountants for PIF. The accountants for PIF audit
PIF's financial statements for each fiscal year.
The policy of the Board regarding engaging independent public
accountants' services is that management may engage PIF'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 of the Board reviews and approves all services
provided by the independent public accountants prior to their being
rendered. The Board receives a report from its Audit Committee relating
to all services after they have been performed by PIF's independent public
accountants.
During the last fiscal year, Deloitte & Touche LLP served as
independent public accountants for PIF. The Board has selected Deloitte &
Touche LLP to continue to serve in that capacity for the current fiscal
year ending September 30, 1996, subject to ratification by shareholders of
PIF at the Meeting.
Representatives of the accountants are not expected to be present
at the Meeting but will be available to answer any questions or make any
statements should any matters arise requiring their presence. Deloitte &
Touche LLP has informed PIF that it has no material direct or indirect
financial interest in PIF.
The persons named in the accompanying proxy will vote FOR
ratification of the selection of Deloitte & Touche LLP unless contrary
instructions are given.
REQUIRED VOTE
Approval of Proposal No. 3 requires a vote of a majority of the
outstanding voting securities, as defined above, of both the Fund and
PIF's other series, Stock Index Fund.
THE BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 3.
-------------------------
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by
the Fund, will be made primarily by mail but also may include telephone or
oral communications by regular employees of PSI or PIFM, who will not
receive any compensation therefor from the Fund. Proxies may be recorded
pursuant to (i) electronically transmitted instructions or (ii) telephone
instructions obtained through procedures reasonably designed to verify
that the instructions have been authorized.
- 22 -
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal to be considered
at the Fund's next special meeting of shareholders should send the
proposal to the Fund at One Seaport Plaza, New York, New York 10292, so as
to be received within a reasonable time before the Board makes the
solicitation relating to such meeting, in order to be included in the
proxy statement and form of proxy relating to such meeting. Shareholder
proposals that are submitted in a timely manner will not necessarily be
included in the Fund's proxy materials. Inclusion of such proposals is
subject to limitations under the federal securities laws.
The Fund's By-Laws provide that the Fund will not be required to
hold annual meetings of shareholders if the election of Board Members is
not required under the Investment Company Act. It is the present
intention of the Board of the Fund not to hold annual meetings of
shareholders unless such shareholder action is required.
OTHER BUSINESS
Management knows of no business to be presented at the Meeting
other than the matters set forth in this proxy statement, but should any
other matter requiring a vote of shareholders arise, the proxies will vote
according to their best judgment in the interest of the Fund.
By order of the Board of Trustees,
S. Jane Rose
Secretary
September , 1996
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN ALL OF YOUR PROXIES PROMPTLY.
- 23 -
<PAGE>
EXHIBIT A
OFFICER INFORMATION
<TABLE>
<CAPTION>
Name, Age, Principal
Business Occupation Officer
for the Past Five Years Office Since
----------------------- ------ -------
<S> <C> <C>
Mark R. Fetting, (41) President 1992
Chairman of the Board, President and Chief Operating Officer,
Prudential Institutional Fund Management, Inc. (May 1992 to date);
Managing Director, The Prudential Investment Corporation (October
1991 to date); Chairman of the Board, President and Chief
Executive Officer, Prudential Retirement Services, Inc. (January
1993 to date); President of Prudential Defined Contribution
Services (April 1992 to date).
Thomas A. Early, (41) Vice President 1994
Vice President and Secretary of Prudential Institutional Fund
Management, Inc. and Prudential Retirement Services, Inc. (since
July 1994); Vice President and General Counsel, Prudential Defined
Contribution Services (since April 1994); Formerly Associate
General Counsel and Chief Financial Services Counsel for Frank
Russell & Company (April 1988 to April 1994).
Robert F. Gunia, (49) Vice President 1992
Director (since January 1989), Chief Administrative Officer (since
July 1990), and Executive Vice President, Treasurer and Chief
Financial Officer (since June 1987) of PMF; Senior Vice President
(since March 1987) of Prudential Securities Incorporated;
Executive Vice President, Treasurer and Comptroller (since March
1991) of PMFD; Director (since June 1987) of PMFS; Vice President
and Director of the Asia Pacific Fund, Inc. (since May 1989).
Walter E. Watkins, Jr., (43) Vice President 1993
Vice President, Prudential Institutional Fund Management, Inc.
(since April 1993) and Prudential Retirement Services, Inc. (since
March 1994); Director of Mutual Fund Administration, Prudential
Defined Contribution Services (since November 1992); formerly,
financial reporting consultant (August 1991 to September 1992).
Eugene S. Stark, (38) Treasurer 1995
First Vice President, PMF (since January 1990) and Prudential
Securities Incorporated (since January 1992).
<PAGE>
Name, Age, Principal
Business Occupation Officer
for the Past Five Years Office Since
----------------------- ------ -------
S. Jane Rose, (50) Secretary 1992
Senior Vice President and Senior Counsel of PMF; Senior Vice
President and Senior Counsel of Prudential Securities (since July
1992); formerly Vice President and Associate General Counsel of
Prudential Securities.
Marguerite E.H. Morrison, (40) Assistant 1995
Vice President and Associate General Counsel of PMF and Prudential Secretary
Securities Incorporated.
</TABLE>
A-2
<PAGE>
EXHIBIT B
PRUDENTIAL DRYDEN FUND
(formerly The Prudential Institutional Fund)
MANAGEMENT AGREEMENT
Agreement, made this _____ day of ______________, 1996 between
Prudential Dryden Fund, a Delaware business trust (the Trust), and
Prudential Mutual Fund Management, Inc., a Delaware corporation (the
Manager).
W I T N E S S E T H
WHEREAS, the Trust is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended
(the 1940 Act);
WHEREAS, the shares of beneficial interest of the Trust are divided
into separate series or funds (each a Fund), each of which is established
pursuant to a resolution of the Trustees of the Trust, and the Trustees
may from time to time terminate such Funds or establish and terminate
additional Funds; and
WHEREAS, the Trust desires to retain the Manager to render or
contract to obtain as hereinafter provided investment advisory services to
the Trust, and the Manager is willing to render such investment advisory
services;
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Manager to act as manager of
the Trust and administrator of its corporate affairs for the period and on
the terms set forth in this Agreement. The Manager accepts such
appointment and agrees to render the services herein described, for the
compensation herein provided. The Manager is authorized to enter into
subadvisory agreements for investment advisory services in connection with
the management of the Trust and each Fund thereof. Any such agreement may
be entered into by the Manager on such terms and in such manner as may be
permitted by the 1940 Act and the rules thereunder. The Manager will
continue to have responsibility for all investment advisory services
furnished pursuant to any such investment advisory agreements. The
Manager will review the performance of all subadvisers, as well as the
Distributor, Transfer Agent and Custodian and make recommendations to the
Trustees of the Trust with respect to the retention and renewal of
contracts.
2. Subject to the supervision of the Trustees of the Trust, the
Manager shall administer the Fund s corporate affairs and, in connection
therewith, shall furnish the Fund with office facilities and with
clerical, bookkeeping and recordkeeping services at such office facilities
and, subject to Section 1 hereof, the Manager shall manage the investment
<PAGE>
operations of the Trust and each Fund thereof and the composition of each
Fund's portfolio, including the purchase, retention and disposition
thereof, in accordance with the Trust's and the Fund's investment
objectives, policies and restrictions as stated in the Prospectus
(hereinafter defined) and subject to the following understandings:
(a) The Manager shall provide supervision of each Fund's
investments and determine from time to time what investments or
securities will be purchased, retained, sold or loaned by each Fund,
and what portion of the assets will be invested or held uninvested
as cash.
(b) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust, By-Laws and Prospectus (hereinafter defined)
of the Trust and with the instructions and directions of the
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and
state laws and regulations.
(c) The Manager shall determine the securities and futures
contracts to be purchased or sold by each Fund and will place orders
pursuant to its determinations with or through such persons,
brokers, dealers or futures commission merchants (including but not
limited to Prudential Securities Incorporated) in conformity with
the policy with respect to brokerage as set forth in the Trust's
Registration Statement and Prospectus (hereinafter defined) or as
the Trustees may direct from time to time. In providing the Trust
with investment supervision, it is recognized that the Manager will
give primary consideration to securing the most favorable price and
efficient execution. Consistent with this policy, the Manager may
consider the financial responsibility, research and investment
information and other services provided by brokers, dealers or
futures commission merchants who may effect or be a party to any
such transaction or other transactions to which other clients of the
Manager may be a party. It is understood that Prudential Securities
Incorporated may be used as principal broker for securities
transactions but that no formula has been adopted for allocation of
the Trust's investment transaction business. It is also understood
that it is desirable for the Trust that the Manager have access to
supplemental investment and market research and security and
economic analysis provided by brokers or futures commission
merchants and that such brokers may execute brokerage transactions
at a higher cost to the Trust than may result when allocating
brokerage to other brokers or futures commission merchants on the
basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to pay higher brokerage
commissions for the purchase and sale of securities and futures
contracts for the Trust to brokers or futures commission merchants
who provide such research and analysis, subject to review by the
Trustees of the Trust from time to time with respect to the extent
and continuation of this practice. It is understood that the
- 2 -
<PAGE>
services provided by such broker or futures commission merchant may
be useful to the Manager in connection with its services to other
clients.
On occasions when the Manager deems the purchase or sale of a
security or a futures contract to be in the best interest of the
Trust as well as other clients of the Manager or the Subadviser, the
Manager, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities
or futures contracts to be so sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities or
futures contracts so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Manager or the
subadviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund, the Trust and
to such other clients.
(d) The Manager shall maintain all books and records with
respect to each Fund's portfolio transactions and shall render to
the Trustees of the Trust such periodic and special reports as the
Board may reasonably request.
(e) The Manager shall be responsible for the financial and
accounting records to be maintained by the Trust (including those
being maintained by the Trust's Custodian).
(f) The Manager shall provide the Trust's Custodian on each
business day with information relating to all transactions
concerning the Trust's assets.
(g) The investment management services of the Manager to
the Trust under this Agreement are not to be deemed exclusive, and
the Manager shall be free to render similar services to others.
3. The Trust has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements thereto, if any:
(a) Agreement and Declaration of Trust, as filed with the
Secretary of State of Delaware (such Agreement and Declaration of
Trust, as in effect on the date hereof and as amended from time to
time, are herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the
date hereof and as amended from time to time, are herein called the
"By-Laws");
(c) Certified resolutions of the Trustees of the Trust
authorizing the appointment of the Manager and approving the form of
this Agreement;
- 3 -
<PAGE>
(d) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A (the Registration
Statement), as filed with the Securities and Exchange Commission
(the Commission) relating to the Trust and shares of beneficial
interest of the Trust and all amendments thereto;
(e) Notification of Registration of the Trust under the
1940 Act on Form N-8A as filed with the Commission and all
amendments thereto; and
(f) Prospectus of the Trust (such Prospectus and Statement
of Additional Information, each as currently in effect and as
amended or supplemented from time to time, being herein collectively
called the "Prospectus").
4. The Manager shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the
Trust to serve in the capacities in which they are elected. All services
to be furnished by the Manager under this Agreement may be furnished
through the medium of any such directors, officers or employees of the
Manager.
5. The Manager shall keep the Trust's books and records required
to be maintained by it pursuant to paragraph 2 hereof. The Manager agrees
that all records which it maintains for the Trust are the property of the
Trust and it will surrender promptly to the Trust any such records upon
the Trust's request, provided however that the Manager may retain a copy
of such records. The Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records as are
required to be maintained by the Manager pursuant to paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the
following expenses:
(i) the salaries and expenses of all personnel of the Trust
and the Manager except the fees and expenses of Trustees who are not
affiliated persons of the Manager or the Trust's investment adviser,
(ii) all expenses incurred by the Manager or by the Trust in
connection with managing the ordinary course of the Trust's business
other than those assumed by the Trust herein, and
(iii) the costs and expenses payable pursuant to any
subadvisory agreements.
The Trust assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Trust in
connection with the management of the investment and reinvestment of
each Fund's assets,
- 4 -
<PAGE>
(b) the fees and expenses of Trustees who are not
affiliated persons of the Manager or a Fund's investment adviser,
(c) the fees and expenses of the Custodian that relate to
(i) the custodial function and the recordkeeping connected
therewith, (ii) preparing and maintaining the general accounting
records of the Trust and the providing of any such records to the
Manager useful to the Manager in connection with the Manager's
responsibility for the accounting records of the Trust pursuant to
Section 31 of the 1940 Act and the rules promulgated thereunder,
(iii) the pricing of the shares of the Trust, including the cost of
any pricing service or services which may be retained pursuant to
the authorization of the Trustees of the Fund, and (iv) for both
mail and wire orders, the cashiering function in connection with the
issuance and redemption of the Trust's securities,
(d) the fees and expenses of the Trust's Transfer and
Dividend Disbursing Agent, which may be the Custodian, that relate
to the maintenance of each shareholder account,
(e) the charges and expenses of legal counsel and
independent accountants for the Trust,
(f) brokers' commissions and any issue or transfer taxes
chargeable to the Trust in connection with its securities and
futures transactions,
(g) all taxes and corporate fees payable by the Trust to
federal, state or other governmental agencies,
(h) the fees of any trade associations of which the Trust
may be a member,
(i) the cost of share certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of the
Trust,
(j) the cost of fidelity, directors and officers and errors
and omissions insurance,
(k) the fees and expenses involved in registering and
maintaining the registration of the Trust and of its shares with the
Securities and Exchange Commission, registering the Trust as a
broker or dealer and qualifying its shares under state securities
laws, including the preparation and printing of the Trust's
registration statements, prospectuses and statements of additional
information for filing under federal and state securities laws for
such purposes,
(l) allocable communications expenses with respect to
investor services and all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing reports to
- 5 -
<PAGE>
shareholders in the amount necessary for distribution to the
shareholders, and
(m) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the
Trust's business, and
(n) any expenses assumed by the Fund pursuant to a Plan of
Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
7. In the event the expenses of the Trust for any fiscal year
(including the fees payable to the Manager 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 Trust's business) exceed the lowest applicable
annual expense limitation established and enforced pursuant to the statute
or regulations of any jurisdictions in which shares of the Trust are then
qualified for offer and sale, the compensation due the Manager will be
reduced by the amount of such excess, or, if such reduction exceeds the
compensation payable to the Manager, the Manager will pay to the Trust the
amount of such reduction which exceeds the amount of such compensation.
8. For the services provided and the expenses assumed pursuant
to this Agreement, the Trust will pay to the Manager as full compensation
therefor fees as set forth below. These fees will be computed daily and
will be paid to the Manager monthly. Any reduction in the fees payable
and any payments by the Manager to the Trust pursuant to paragraph 7 shall
be made monthly. Any such reductions or payments are subject to
readjustment during the year.
Rate as a percentage of
Name of Fund average daily net assets
------------ ------------------------
Stock Index Fund .30 of 1%
Active Balanced Fund .65 of 1%
9. The Manager shall not be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which
case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act) or loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
- 6 -
<PAGE>
10. The Trust shall indemnify the Manager and hold it harmless
from and against all damages, liabilities, costs and expenses (including
reasonable attorneys' fees and amounts reasonably paid in settlement)
incurred by the Manager in or by reason of any pending, threatened or
completed action, suit, investigation or other proceeding (including an
action or suit by or in the right of the Trust or its security holders)
arising out of or otherwise based upon any action actually or allegedly
taken or omitted to be taken by the Manager in connection with the
performance of any of its duties or obligations under this Agreement;
provided, however, that nothing contained herein shall protect or be
deemed to protect the Manager against or entitle or be deemed to entitle
the Manager to indemnification in respect of any liability to the Trust or
its security holders to which the Manager would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
duties and obligations under this Agreement.
11. This Agreement shall continue in effect for a period of more
than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may
be terminated by the Trust or any Fund at any time, without the payment of
any penalty, by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of a Fund, or
by the Manager at any time, without the payment of any penalty, on not
more than 60 days' nor less than 30 days' written notice to the other
party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
12. Nothing in this Agreement shall limit or restrict the right
of any director, officer or employee of the Manager who may also be a
Trustee, officer or employee of the Trust to engage in any other business
or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature,
nor limit or restrict the right of the Manager to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
13. Except as otherwise provided herein or authorized by the
Trustees of the Trust from time to time, the Manager shall for all
purposes herein be deemed to be an independent contractor and shall have
no authority to act for or represent the Trust in any way or otherwise be
deemed an agent of the Trust.
14. During the term of this Agreement, the Trust agrees to
furnish the Manager at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Trust or the public,
which refer in any way to the Manager, prior to use thereof and not to use
such material if the Manager reasonably objects in writing within five
business days (or such other time as may be mutually agreed) after receipt
thereof. In the event of termination of this Agreement, the Trust will
- 7 -
<PAGE>
continue to furnish to the Manager copies of any of the above mentioned
materials which refer in any way to the Manager. Sales literature may be
furnished to the Manager hereunder by first class or overnight mail,
facsimile transmission equipment or hand delivery. The Trust shall
furnish or otherwise make available to the Manager such other information
relating to the business affairs of the Trust as the Manager at any time,
or from time to time, reasonably requests in order to discharge its
obligations hereunder.
15. This Agreement may be amended by mutual consent, but the
consent of the Trust must be obtained in conformity with the requirements
of the 1940 Act.
16. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, (1) to the Manager at One
Seaport Plaza, New York, New York 10292-0132, Attention: Secretary; or (2)
to the Trust at Prudential Plaza, 751 Broad Street, Newark, NJ 07102-3777,
Attention: Assistant Secretary.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law principles thereof and in accordance with the 1940 Act. In
the case of any conflict the 1940 Act shall control.
18. The Trust may use the name "Prudential Dryden Fund" or any
name including the word "Prudential" only for so long as this Agreement or
any extension, renewal or amendment hereof remains in effect, including
any similar agreement with any organization which shall have succeeded to
the Manager's business as Manager or any extension, renewal or amendment
thereof remain in effect. At such time as such an agreement shall no
longer be in effect, the Trust will (to the extent that it lawfully can)
cease to use such a name or any other name indicating that it is advised
by, managed by or otherwise connected with the Manager, or any
organization which shall have so succeeded to such businesses. In no
event shall the Trust use the name "Prudential Dryden Fund" or any name
including the word "Prudential" if the Manager's function is transferred
or assigned to a company of which The Prudential Insurance Company of
America does not have control.
19. The Trust is a business trust organized under the Delaware
Business Trust Act pursuant to a certificate of trust dated May 11, 1992.
The Trust is a series trust and all debts, liabilities, obligations and
expenses of a particular Fund shall be enforceable only against the assets
of that Fund and not against the assets of any other Fund or of the Trust
as a whole. Neither the Trustees, officers, agents or shareholders of the
Trust assume any personal liability for obligations entered into on behalf
of the Trust (or a Fund thereof).
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day
and year first above written.
PRUDENTIAL DRYDEN FUND
By _______________________________
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By _______________________________
- 9 -
<PAGE>
EXHIBIT C
FUNDS MANAGED BY PMF THAT ARE SIMILAR TO
ACTIVE BALANCED FUND
Annual Fee (as Assets as of
Name of Fund a percentage of June 30, 1996
------------ average net assets) (in millions)
------------------- -------------
Prudential Allocation Fund:
Balanced Portfolio .65 of 1% $721.5
Strategy Portfolio .65 of 1% $352.6
<PAGE>
EXHIBIT D
PRUDENTIAL DRYDEN FUND
(formerly The Prudential Institutional Fund)
(Active Balanced Series)
SUBADVISORY AGREEMENT
Agreement made as of this ____ day of _____________, 1996, between
Prudential Mutual Fund Management, Inc., a Delaware Corporation, (PMF or
the Manager), and Jennison Associates Capital Corp., a New York
Corporation (the Subadviser).
W I T N E S S E T H
WHEREAS, the Manager has entered into a Management Agreement, dated
_________________, 1996 (the Management Agreement), with Prudential Dryden
Fund (formerly The Prudential Institutional Fund) (the Trust), a Delaware
business trust and a diversified, open-end management investment company
registered under the Investment Company Act of 1940 (the 1940 Act),
pursuant to which PMF will act as Manager of the Trust;
WHEREAS, the shares of beneficial interest of the Trust are divided
into separate series or funds, each of which is established pursuant to a
resolution of the Trustees of the Trust, and the Trustees may from time to
time terminate such series or funds or establish and terminate additional
series or funds;
WHEREAS, the Manager has entered into a separate subadvisory
agreement dated ________________, 1996 with The Prudential Investment
Corporation (PIC), a New Jersey corporation, pursuant to which PIC will
provide investment advisory services to the Trust with respect to (i) the
management of short-term assets, including cash, money market instruments
and repurchase agreements and (ii) the lending of portfolio securities;
WHEREAS, the Manager desires to retain the Subadviser to provide
investment advisory services to the Active Balanced Series (the Fund) in
connection with the management of the Trust and the Subadviser is willing
to render such investment advisory services;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the
Trustees of the Trust, the Subadviser shall manage the investment
operations of each Fund and the composition of each Fund's
portfolio, including the purchase, retention and disposition
thereof, in accordance with each Fund's investment objectives,
policies and restrictions as stated in the Prospectus (such
Prospectus and Statement of Additional Information as currently in
effect and as amended or supplemented from time to time, being
<PAGE>
herein collectively called the "Prospectus") and subject to the
following understandings:
(i) The Subadviser shall provide supervision of the
Fund's investments and determine from time to time what
investments and securities will be purchased, retained, sold
or loaned by the Fund, and what portion of the assets will be
invested or held uninvested as cash.
(ii) In the performance of its duties and obligations
under this Agreement, the Subadviser shall act in conformity
with the Declaration of Trust, By-Laws and Prospectus of the
Fund and the Trust and with the instructions and directions
of the Manager and of the Trustees of the Trust and will
conform to and comply with the requirements of the 1940 Act,
the Internal Revenue Code of 1986 and all other applicable
federal and state laws and regulations.
(iii) The Subadviser shall advise PIC of the dollar
amount of each Fund's assets that shall be invested in
repurchase agreements, money market instruments or held in
cash and advise PIC as to the securities available for
lending and the securities to be recalled from loan. In the
event the agreement with PIC is terminated, the Subadviser
shall provide investment advisory services to the Fund with
respect to the management of short-term assets and the
lending of portfolio securities under this Agreement.
(iv) The Subadviser shall determine the securities and
futures contracts to be purchased or sold by the Fund and
will place orders with or through such persons, brokers,
dealers or futures commission merchants (including but not
limited to Prudential Securities Incorporated) to carry out
the policy with respect to brokerage as set forth in the
Trust's Registration Statement and Prospectus or as the
Trustees may direct from time to time. In providing the Fund
with investment supervision, it is recognized that the
Subadviser will give primary consideration to securing the
most favorable price and efficient execution. Within the
framework of this policy, the Subadviser may consider the
financial responsibility, research and investment information
and other services provided by brokers, dealers or futures
commission merchants who may effect or be a party to any such
transaction or other transactions to which the Subadviser's
other clients may be a party. It is understood that
Prudential Securities Incorporated may be used as principal
broker for securities transactions but that no formula has
been adopted for allocation of the Trust's investment
transaction business. It is also understood that it is
desirable for the Fund that the Subadviser have access to
supplemental investment and market research and security and
economic analysis provided by brokers or futures commission
- 2 -
<PAGE>
merchants who may execute brokerage transactions at a higher
cost to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the most favorable
price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of
securities and futures contracts for the Fund with such
brokers or futures commission merchants, subject to review by
the Trustees of the Trust from time to time with respect to
the extent and continuation of this practice. It is
understood that the services provided by such brokers or
futures commission merchants may be useful to the Subadviser
in connection with the Subadviser's services to other
clients.
On occasions when the Subadviser deems the purchase or
sale of a security or futures contract to be in the best
interest of the Fund as well as other clients of the
Subadviser, the Subadviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities or futures contracts
to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution.
In such event, allocation of the securities or futures
contracts so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Subadviser
in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to
the Fund, the Trust and to such other clients.
(v) The Subadviser shall maintain all books and
records with respect to the Fund's portfolio transactions
required by subparagraphs (b)(5), (6), (7), (9), (10) and
(11) and paragraph (f) of Rule 31a-1 under the 1940 Act and
shall render to the Trustees of the Trust such periodic and
special reports as the Board may reasonably request.
(vi) The Subadviser shall provide the Trust's
Custodian on each business day with information relating to
all transactions concerning the Fund's assets and shall
provide the Manager with such information upon request of the
Manager.
(vii) The investment management services provided by
the Subadviser hereunder are not to be deemed exclusive, and
the Subadviser shall be free to render similar services to
others.
(b) The Subadviser shall authorize and permit any of its
directors, officers and employees who may be elected as Trustees or
officers of the Trust to serve in the capacities in which they are
elected. Services to be furnished by the Subadviser under this
- 3 -
<PAGE>
Agreement may be furnished through the medium of any of such
directors, officers or employees.
(c) The Subadviser shall keep the Trust's books and records
required to be maintained by the Subadviser pursuant to paragraph
1(a)(v) hereof and shall timely furnish to the Manager all
information relating to the Subadviser's services hereunder needed
by the Manager to keep the other books and records of the Trust
required by Rule 31a-1 under the 1940 Act. The Subadviser agrees
that all records which it maintains for the Trust are the property
of the Trust and the Subadviser will surrender promptly to the Trust
any of such records upon the Trust's request, provided however that
the Subadviser may retain a copy of such records. The Subadviser
further agrees to preserve for the periods prescribed by Rule 31a-2
of the Commission under the 1940 Act any such records as are
required to be maintained by it pursuant to paragraph 1(a)(v)
hereof.
2. The Manager shall continue to have responsibility for all
services to be provided to the Trust pursuant to the Management Agreement
and shall oversee and review the Subadviser's performance of its duties
under this Agreement.
3. The Manager shall compensate the Subadviser for the services
provided and the expenses assumed pursuant to this Subadvisory Agreement,
a fee at an annual rate of .30 of 1% of the Fund s average daily net
assets up to $300 million and .25 of 1% of average daily net assets in
excess of $300 million. This fee will be computed daily and paid monthly.
4. The Subadviser shall not be liable for any error of judgment
or for any loss suffered by a Fund or the Manager in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the Subadviser's
part in the performance of its duties or from its reckless disregard of
its obligations and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more
than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may
be terminated by the Fund at any time, without the payment of any penalty,
by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund, or by the
Manager or the Subadviser at any time, without the payment of any penalty,
on not more than 60 days' nor less than 30 days' written notice to the
other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right
of any of the Subadviser's directors, officers, or employees who may also
be a Trustee, officer or employee of the Trust to engage in any other
- 4 -
<PAGE>
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or a
dissimilar nature, nor limit or restrict the Subadviser's right to engage
in any other business or to render services of any kind to any other
corporation, firm, individual or association.
7. During the term of this Agreement, the Manager agrees to
furnish the Subadviser at its principal office all prospectuses, proxy
statements, reports to stockholders, sales literature or other material
prepared for distribution to shareholders of the Fund or the public, which
refer to the Subadviser in any way, prior to use thereof and not to use
material if the Subadviser reasonably objects in writing five business
days (or such other time as may be mutually agreed) after receipt thereof.
Sales literature may be furnished to the Subadviser hereunder by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
8. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, (1) to the Manager at One
Seaport Plaza, New York, New York 10292-0125, Attention: Secretary; or
(2) to the Subadviser at 466 Lexington Avenue, New York, NY 10017,
Attention: President.
9. This Agreement may be amended by mutual consent, but the
consent of the Fund must be obtained in conformity with the requirements
of the 1940 Act.
10. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law principles thereof and in accordance with the 1940 Act. In
the case of any conflict the 1940 Act shall control.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By ____________________________________
JENNISON ASSOCIATES CAPITAL CORPORATION
By _____________________________________
- 5 -
<PAGE>
EXHIBIT E
PRUDENTIAL DRYDEN FUND
(formerly the Prudential Institutional Fund)
(Active Balanced Fund)
SUBADVISORY AGREEMENT
Agreement made as of this ______day of_____________, 1996 between
Prudential Mutual Fund Management, Inc. (PMF or the Manager), a Delaware
Corporation, and The Prudential Investment Corporation (PIC), a New Jersey
Corporation.
W I T N E S S E T H
WHEREAS, the Manager has entered into a Management Agreement, dated
_____________, 1996 (the Management Agreement), with Prudential Dryden
Fund (the Trust), a Delaware business trust and a diversified, open-end
management investment company registered under the Investment Company Act
of 1940 (the 1940 Act), pursuant to which PMF will act as Manager of the
Trust;
WHEREAS, the shares of beneficial interest of the Trust are divided
into separate series or portfolios, each of which is established pursuant
to a resolution of the Trustees of the Trust, and the Trustees may from
time to time terminate such funds or establish and terminate additional
funds;
WHEREAS, the Manager has entered into a separate subadvisory
agreement for the Active Balanced Fund (the Fund) with Jennison Associates
Capital Corp. (the Subadviser) pursuant to which investment advisory
services will be provided to the Fund except with respect to (i) the
management of short-term assets, including cash, money market instruments
and repurchase agreements and (ii) the lending of portfolio securities;
WHEREAS, the Manager desires to retain PIC to provide investment
advisory services to the Active Balanced Fund with respect to (i) the
management of short-term assets, including cash, money market instruments
and repurchase agreements and (ii) the lending of portfolio securities in
connection with the management of the Trust and PIC is willing to render
such investment advisory services;
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the
Trustees of the Trust, PIC shall manage the short-term assets and
cash of the Fund, including the purchase, retention and disposition
thereof, in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Prospectus (such
Prospectus and Statement of Additional Information as currently in
effect and as amended or supplemented from time to time, being
<PAGE>
herein collectively called the "Prospectus") and subject to the
following understandings:
(i) PIC shall provide supervision of the Fund's
investments and determine from time to time what investments
and securities will be purchased, retained, sold or loaned by
the Fund, and what portion of the assets will be invested or
held uninvested as cash.
(ii) In the performance of its duties and obligations
under this Agreement, PIC shall act in conformity with the
Declaration of Trust, By-Laws and Prospectus of the Fund and
the Trust and with the instructions and directions of the
Manager and of the Trustees of the Trust and will conform to
and comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986 and all other applicable
federal and state laws and regulations.
(iii) The Subadviser shall advise PIC of the dollar
amount of the Fund's assets that shall be invested in
repurchase agreements, money market instruments or held in
cash and advise PIC as to the securities available for
lending and the securities to be recalled from loan.
(iv) Upon receipt of information from the Subadviser
as to the amount of funds available for short-term
investment, as described in paragraph 1(a)(iii) above, PIC
shall determine the securities to be purchased or sold by the
Fund and will place orders with or through such persons,
brokers or dealers (including but not limited to Prudential
Securities Incorporated) to carry out the policy with respect
to brokerage as set forth in the Trust's Registration
Statement and Prospectus or as the Trustees may direct from
time to time. In providing the Fund with investment
supervision, it is recognized that PIC will give primary
consideration to securing the most favorable price and
efficient execution. Within the framework of this policy,
PIC may consider the financial responsibility, research and
investment information and other services provided by brokers
or dealers who may effect or be a party to any such
transaction or other transactions to which PIC's other
clients may be a party. On occasions when PIC deems the
purchase or sale of a security to be in the best interest of
a Fund as well as other clients of PIC, PIC, to the extent
permitted by applicable laws and regulations, may, but shall
be under no obligation to, aggregate the securities to be
sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution. In
such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction,
will be made by PIC in the manner PIC considers to be the
- 2 -
<PAGE>
most equitable and consistent with its fiduciary obligations
to the Fund, the Trust and to such other clients.
(v) PIC shall maintain all books and records with
respect to the Fund's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Trustees of the Trust such periodic and special
reports as the Board may reasonably request.
(vi) PIC shall provide the Trust's Custodian on each
business day with information relating to all transactions
concerning the Fund's assets and shall provide the Manager
with such information upon request of the Manager.
(vii) The investment management services provided by
PIC hereunder are not to be deemed exclusive, and PIC shall
be free to render similar services to others.
(b) PIC shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of
the Trust to serve in the capacities in which they are elected.
Services to be furnished by PIC under this Agreement may be
furnished through the medium of any of such directors, officers or
employees.
(c) PIC shall keep the Trust's books and records required
to be maintained by PIC pursuant to paragraph 1(a)(v) hereof and
shall timely furnish to the Manager all information relating to
PIC's services hereunder needed by the Manager to keep the other
books and records of the Trust required by Rule 31a-1 under the 1940
Act. PIC agrees that all records which it maintains for the Trust
are the property of the Trust and PIC will surrender promptly to the
Trust any of such records upon the Trust's request, provided however
that PIC may retain a copy of such records. PIC further agrees to
preserve for the periods prescribed by Rule 31a-2 of the Commission
under the 1940 Act any such records as are required to be maintained
by it pursuant to paragraph 1(a)(v) hereof.
2. The Manager shall continue to have responsibility for all
services to be provided to the Trust pursuant to the Management Agreement
and shall oversee and review PIC's performance of its duties under this
Agreement.
3. The Manager shall reimburse PIC for reasonable costs and
expenses incurred by PIC determined in a manner acceptable to the Manager
in furnishing the services provided in paragraph 1 hereof.
4. PIC shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to
which this Agreement relates, except a loss resulting from willful
- 3 -
<PAGE>
misfeasance, bad faith or gross negligence on PIC's part in the
performance of its duties or from its reckless disregard of its
obligations and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more
than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may
be terminated by the Fund at any time, without the payment of any penalty,
by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund, or by the
Manager or PIC at any time, without the payment of any penalty, on not
more than 60 days' nor less than 30 days' written notice to the other
party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right
of any of PIC's directors, officers, or employees who may also be a
Trustee, officer or employee of the Trust to engage in any other business
or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or a dissimilar
nature, nor limit or restrict PIC's right to engage in any other business
or to render services of any kind to any other corporation, firm,
individual or association.
7. During the term of this Agreement, the Manager agrees to
furnish PIC at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to PIC
in any way, prior to use thereof and not to use material if PIC reasonably
objects in writing five business days (or such other time as may be
mutually agreed) after receipt thereof. Sales literature may be furnished
to PIC hereunder by first-class or overnight mail, facsimile transmission
equipment or hand delivery.
8. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at One Seaport Plaza,
New York, New York 10292-0125, Attention: Secretary; or (2) to the
Subadviser at 466 Lexington Avenue, New York, New York 10017, Attention:
President.
9. This Agreement may be amended by mutual consent, but the
consent of a Fund must be obtained in conformity with the requirements of
the 1940 Act.
10. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law principles thereof and in accordance with the 1940 Act. In
the case of any conflict the 1940 Act shall control.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By __________________________________
THE PRUDENTIAL INVESTMENT CORPORATION
By __________________________________
- 5 -
<PAGE>
PROXY
THE PRUDENTIAL INSTITUTIONAL FUND
ACTIVE BALANCED FUND
21 PRUDENTIAL PLAZA, 751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints S. Jane Rose, Marguerite E.H. Morrison and
Eugene S. Stark 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 The Prudential Institutional Fund--Active
Balanced Fund, held of record by the undersigned on August 9, 1996 at the
Special Meeting of Shareholders to be held on October 30, 1996, or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMEND A VOTE "FOR" ALL OF THE NOMINEES AND
"FOR" EACH OF THE FOLLOWING PROPOSALS.
1. Election of Directors
Nominees: Edward D. Beach
Delayne D. Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
2(a). To approve a new management agreement between The Prudential
Institutional Fund and Prudential Mutual Fund Management, Inc.
2(b). To approve a new subadvisory agreement between Prudential Mutual
Fund Management, Inc. and Jennison Associates Capital Corp.
2(c). To approve a new subadvisory agreement between Prudential Mutual
Fund Management, Inc. and The Prudential Investment Corporation.
3. To ratify the selection by the Board of Directors of Deloitte &
Touche LLP as independent accountants for the fiscal year ending
September 30, 1996.
4. To transact such other business as may properly come before the
Meeting and any adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER. IF EXECUTED AND NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
<PAGE>
PLACE "X" ONLY IN ONE BOX
1. Election of Nominees
/ / For All / / Withhold All / / For All Except As Listed Below
List Exceptions:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
VOTING INSTRUCTIONS: Mark your vote
(For, Against, Abstain) IN THE BOX
For Against Abstain
2a. / / / / / /
2b. / / / / / /
2c. / / / / / /
3. / / / / / /
4. / / / / / /
[NAME/ADDRESS]
<PAGE>
To ensure the accuracy of the information, we have graphically imaged the
issuer's card. Therefore, please be aware that there may be some
references to "reverse side" which do not pertain.
PROXY CARD INSTRUCTIONS . . .
This Proxy Card is made up of two sections.
The Proposal Section has been designed to present the issuer's proposals
for your consideration. You may wish to retain this section for your
records.
The Voting Section has been designed to accommodate the various proposals
and offer quick and accurate tabulation of your valued vote.
For Election of Nominees:
- Mark "FOR ALL" if you wish to vote for all nominees.
- Mark "WITHHOLD ALL" if you wish to vote against all nominee.
- Mark "FOR ALL EXCEPT AS LISTED BELOW" if you wish to withhold
authority for any individual nominee. Then, write the name of
the nominee for whom you wish to withhold authority in the space
provided. If you wish to withhold authority for more than one
nominee, simply list the names in the spaces provided and on the
back of the voting section of the Proxy card.
Please read the issuer's proposals and make your selection. For
detailed information refer to the additional literature enclosed. In
order to facilitate electronic scanning please:
- Make dark, heavy marks within the appropriate box to indicate
your selection.
- Use a pencil or pen--black or blue ink only--to complete the
form.
- Do not make any stray marks on the form.
- Erase all unwanted marks completely.
<PAGE>
Proper Marks For Against Abstain
[EXAMPLE OF PROPER MARKS APPEARS HERE]
Improper Marks For Against Abstain
[EXAMPLE OF IMPROPER MARKS APPEARS HERE]
- If you wish to attend the meeting and vote your shares, mark the
box for a "Legal Proxy" and one will be mailed to you.
- If you wish to attend the meeting, and have your vote included
with ours, mark the box for an "Admission Pass" and one will be
mailed to you.
- NOTE: Please sign as name appears. Joint owners should each
sign. When signing as attorney, executor, administrator,
trustee or guardian, give full title as such.
- It is very important that you date and sign your card. Failure
to do so may result in your proxy being declared invalid.
- After making your selections, signing and dating the card,
carefully detach the Voting Section and return it to us for
tabulation, using the enclosed postage paid envelope. Please do
not enclose anything else in this envelope, as doing so may
delay the tabulation of your vote.
Proposal Section. Please retain for your records.
Voting Section. Enter your vote, date and sign. Detach and return in the
enclosed envelope, right side up, without additional enclosures.
<PAGE>
