As filed with the Securities and Exchange Commission
on April 15, 1994
Registration No. 33-
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. [ ]
(Check appropriate box or boxes)
PRUDENTIAL EUROPE GROWTH FUND, INC.
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 214-1250
S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as practicable
after the effective date of the Registration Statement.
* Registrant hereby elects, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of shares by this
Registration Statement. In accordance with Rule 24f-2, a registration fee,
in the amount of $500, is being paid herewith.
Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1A Item No. Location
Part A
<S> <C> <C>
Item 1. Cover Page . . . . . . . . . . . . . . . . . .Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . .Fund Expenses; Fund
Highlights
Item 3. Condensed Financial Information. . . . . . . .Fund Expenses; Financial
Highlights; How the Fund
Calculates Performance
Item 4. General Description of Registrant. . . . . . .Cover Page; Fund
Highlights; How the Fund
Invests; General
Information
Item 5. Management of the Fund . . . . . . . . . . . .Financial Highlights; How
the Fund is Managed
Item 5A. Management's Discussion of Fund Performance. .Not Applicable
Item 6. Capital Stock and Other Securities . . . . . .Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being Offered . . . . .Shareholder Guide; How the
Fund Values its Shares
Item 8. Redemption or Repurchase. . . . . . . . . . . Shareholder Guide; How the
Fund Values itsShares
Item 9. Pending Legal Proceedings. . . . . . . . . . .Not Applicable
Part B
Item 10. Cover Page . . . . . . . . . . . . . . . . . .Cover Page
Item 11. Table of Contents. . . . . . . . . . . . . . .Table of Contents
Item 12. General Information and History. . . . . . . .General Information
Item 13. Investment Objectives and Policies . . . . . .Investment Objective and
Policies; Investment
Restrictions
Item 14. Management of the Fund . . . . . . . . . . . .Directors and Officers;
Manager; Distributor
Item 15. Control Persons and Principal Holders
of Securities. . . . . . . . . . . . . . . . .Not Applicable
Item 16. Investment Advisory and Other Services . . . .Manager; Distributor;
Custodian, Transfer and
Dividend Disbursing Agent
and Independent
Accountants
Item 17. Brokerage Allocation and Other Practices . . .Portfolio Transactions
Item 18. Capital Stock and Other Securities . . . . . .Not Applicable
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . .Purchase and Redemption
of Fund Shares;
Shareholder
Investment Account; Net
Asset Value
Item 20. Tax Status . . . . . . . . . . . . . . . . . .Taxes
Item 21. Underwriters . . . . . . . . . . . . . . . . .Distributor
Item 22. Calculation of Performance Data. . . . . . . .Performance Information
Item 23. Financial Statements . . . . . . . . . . . . .Financial Statements
<PAGE>
Part C
Information required to be included in Part C is set forth under the appropriate Item,
so numbered, in Part C to this Registration Statement.
<PAGE>
Subject to Completion, dated _______, 1994
PRUDENTIAL EUROPE GROWTH FUND, INC.
Prospectus dated , 1994
Prudential Europe Growth Fund, Inc. (the Fund) is an open-end,
diversified management investment company whose investment
objective is long-term growth of capital. The Fund seeks to
achieve this objective by investing primarily in equity securities
(common stock and securities convertible into common stock,
securities convertible into common stock and
preferred stock) of companies domiciled in Europe. Under normal
circumstances, the Fund intends to invest at least 65% of its total
assets in such securities. The Fund may also invest in equity
securities of other companies and in non-convertible debt
securities, options on stocks, stock indices, foreign currencies,
futures contracts on foreign currencies and foreign currency
exchange contracts and may purchase and sell futures contracts on
foreign currencies and groups of currencies and on financial or
stock indices to hedge its portfolio and to attempt to enhance
income. There can be no assurance that the Fund's investment
objective will be achieved. See "How the Fund Invests - Investment
Objective and Policies." The Fund's address is One Seaport Plaza,
New York, New York 10292, and its telephone number is (800)
225-1852.
The Fund is not intended to constitute a complete investment
program. Because of its investment objective and policies,
including its European orientation, the Fund is subject to greater
<PAGE>
investment risks than certain other mutual funds. See "How the Fund
Invests - Special Considerations and Risks of Investing in Foreign
Securities."
The Fund offers three classes of shares, which may be purchased at
the next determined net asset value per share plus a sales charge
which, at the election of the investor, may be imposed either (i)
at the time of purchase (the Class A shares) or (ii) on a deferred basis
(the Class B or Class C shares). Class A shares are subject to
an initial sales charge of up to 5% and an annual distribution and
service fee which is currently being charged at the rate of .25% of
1% of the average daily net asset value of the Class A shares.
Class B shares are subject to a contingent deferred sales charge
or CDSC (declining from 5% to zero) which will be imposed on certain
redemptions made within six years of purchase and an annual
distribution and service fee of 1% of the average daily net asset
value of the Class B shares. Class C shares are subject to a CDSC
of 1% on all redemptions made within one year of purchase and an
annual distribution and service fee of 1% of the average daily net
asset value of the Class C shares.
During the Subscription Period, Class A shares will be offered to
investors at a maximum offering price of $______, which is
inclusive of a sales charge of 5% (_____% of the amount invested)
for orders of up to $__________. [Investors who place orders for
Class A shares of $25,000 or more during the Subscription Period
will pay a reduced sales charge.] During the Subscription Period,
Class B and Class C shares will be offered to the public without an
2
<PAGE>
initial sales charge at a maximum offering price of $______. Class
B shares ordered during the Subscription Period will be subject to
a contingent deferred sales charge equal to 5% during the first
year, decreasing by 1% annually to 1% in the fifth and sixth years
and 0% in the seventh year and thereafter. Class C shares are
subject to a contingent deferred sales charge of 1% on redemptions
for one year after purchase. No payments will be accepted during
the Subscription Period. The minimum initial investment is $1,000
per class for Class A and Class B shares and $5,000 for Class C shares.
The Subscription Period is currently expected to end on the earlier
of ________, 1994 or such time as the Fund declares the Subscription
Period to be closed, as described below. The Fund may, at its option,
extend the Subscription Period beyond ________, 1994. Subsequent to the
end of the Subscription Period, the Fund will not offer its shares
for a period of up to [120 days], during which time the Fund will
seek to deploy its assets in accordance with its investment
objective and policies. [If, during the Subscription Period, the
Fund receives orders for the purchase of an aggregate amount of
$75,000,000 of its shares, the Fund may, at its option, declare the
Subscription Period to be closed.]
The Fund will begin a continuous offering of its shares within [120
days] after the end of the Subscription Period. Any shareholder
who subscribed for shares during the Subscription Period may redeem
shares at the end of the Subscription Period on any day that the
Fund calculates its net asset value. The Fund has the right to
withdraw, cancel or modify this offering without notice. See
3
<PAGE>
"Shareholder Guide - How to Buy Shares of the Fund."
- ------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know before investing.
Additional information about the Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional
Information, dated , 1994, which information is
incorporated herein by reference (is legally considered a part of
this Prospectus) and is available without charge upon request to
the Fund at the address or telephone number noted above.
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Investors are advised to read the Prospectus and retain it for
future reference.
- ------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
4
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY STATE.
5
<PAGE>
FUND HIGHLIGHTS
The following summary is intended to highlight certain
information contained in this prospectus and is qualified in its
entirety by the more detailed information appearing elsewhere
herein.
What is Prudential Europe Growth Fund, Inc.?
Prudential Europe Growth Fund, Inc. is a mutual fund. A
mutual fund pools the resources of investors by selling its shares
to the public and investing the proceeds of such sale in a
portfolio of securities designed to achieve its investment
objective. Technically, the Fund is an open-end, diversified
management investment company.
What is the Fund's Investment Objective?
The Fund's investment objective is long-term growth of
capital. It seeks to achieve this objective by investing primarily
in equity securities (common stocks and securities convertible into
common stock) of companies domiciled in Europe. See "How the Fund
Invests - Investment Objective and Policies" at page _.
What are the Fund's Special Characteristics and Risks?
Under normal circumstances, the Fund anticipates that at least
65% of its total assets will consist of European equity securities,
primarily common stock and other securities convertible into common
stock. See "How the Fund Invests - Investment Objective and
6
<PAGE>
Policies" at page _. Investing in securities of foreign companies
and countries involves certain risks and considerations not
typically associated with investments in domestic companies. See
"How the Fund Invests - Special Considerations and Risks of
Investing in Foreign Securities" at page _. The Fund is permitted
to invest up to 25% of its total assets in lower quality foreign
convertible debt securities provided that such securities have a
minimum rating of at least B as determined by a nationally
recognized securities rating organization (NRSRO), such as Standard
& Poor's Ratings Group or another NRSRO or, if unrated, are of
equivalent quality. Lower rated securities are subject to a greater
risk of loss of principal and interest. See "How the Fund Invests -
Risk Factors Relating to Investing in Foreign Debt Securities
Rated Below Investment Grade" at page __.
Who Manages the Fund?
Prudential Mutual Fund Management, Inc. (PMF or the Manager),
is the manager of the Fund and is compensated for its services at
an annual rate of .75 of 1% of the Fund's average daily net assets.
As of _________, 1994, PMF served as manager or administrator to
[66] investment companies, including [37] mutual funds, with
aggregate assets of approximately [$51] billion. The Prudential
Investment Corporation (PIC or the Subadviser) furnishes investment
advisory services in connection with the management of the Fund
under a Subadvisory Agreement with PMF. See "How the Fund is
Managed - Manager" at page __.
7
<PAGE>
Who Distributes the Fund's Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the
Distributor of the Fund's Class A shares and is currently paid for
its services at an annual rate of .25 of 1% of the average daily
net assets of the Class A shares.
Prudential Securities Incorporated (Prudential Securities or
PSI), a major securities underwriter and securities and commodities
broker, acts as the Distributor of the Fund's Class B and Class C
shares and is paid for its services at an annual rate of 1% of the
average daily net assets of each of the Class B and Class C shares.
See "How the Fund is Managed - Distributor" at page __.
What is the Minimum Investment?
The minimum initial investment is $1,000 per class for Class
A and Class B shares and $5,000 for Class C shares. The minimum
subsequent investment is $100 for all classes. There is no minimum
investment requirement for certain retirement and employee savings
plans or custodial accounts for the benefit of minors. For
purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. See "Shareholder
Guide - How to Buy Shares of the Fund" at page __ and "Shareholder
Guide - Shareholder Services" at page __.
How Do I Purchase Shares?
You may purchase shares of the Fund through Prudential
8
<PAGE>
Securities, Pruco Securities Corporation (Prusec) or directly from
the Fund, through its transfer agent, Prudential Mutual Fund
Services, Inc. (PMFS or the Transfer Agent), at the net asset value
per share (NAV) next determined after receipt of your purchase
order by the Transfer Agent or Prudential Securities plus a sales
charge which may be imposed either (i) at the time of purchase
(Class A shares) or (ii) on a deferred basis (Class B or Class C
shares). See "How The Fund Values its Shares" at page __ and
"Shareholder Guide - How to Buy Shares of the Fund" at page __.
What Are My Purchase Alternatives?
The Fund offers three classes of shares:
o Class A Shares: Sold with an initial sales charge of up to
5% of the offering price.
o Class B Shares: Sold without an initial sales charge but are
subject to a contingent deferred sales
charge or CDSC (declining from 5% to zero of
the lower of the amount invested or the
redemption proceeds) which will be imposed
on certain redemptions made within six years
of purchase. Although Class B shares are
subject to higher ongoing distribution-
related expenses than Class A shares, Class
B shares will automatically convert to Class
9
<PAGE>
A shares (which are subject to lower ongoing
expenses) approximately seven years after
purchase.
o Class C Shares: Sold without an initial sales charge but,
for one year after purchase, are subject to
a CDSC of 1% on all redemptions. Like Class B
shares, Class C shares are subject to higher
ongoing distribution-related expenses than
Class A shares but do not convert to another
class.
See "Shareholder Guide - Alternative Purchase Plan" at page __.
How Do I Sell My Shares?
You may redeem your shares at any time at the NAV next determined
after Prudential Securities or the Transfer Agent receives your
sell order. However, the proceeds of redemptions of Class B and
Class C shares may be subject to a CDSC. See "Shareholder Guide -
How to Sell Your Shares" at page __.
How are Dividends and Distributions Paid?
The Fund expects to pay dividends of net investment income and
net capital gains at least annually. Dividends and distributions
will be automatically reinvested in additional shares of the Fund
at NAV without a sales charge unless you request that they be paid
to you in cash. See "Taxes, Dividends and Distributions" at page
10
<PAGE>
__.
FUND EXPENSES
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
-------- -------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses+
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) 5% None None
Maximum Sales Load or Deferred Sales
Load Imposed on Reinvested Dividends None None None
Deferred Sales Load (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower ) None 5% during the first year, 1% on
decreasing by 1% annually redemp-
to 1% in the fifth and the tions
sixth years and 0% in the made
seventh year* within
one
year
of
pur-
chase
Redemption Fees None None None
Exchange Fees None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(as a percentage of average Class A Class B Class C
net assets) Shares Shares Shares
-------- -------- ---------
<S> <C> <C> <C>
Management Fees .75% .75% .75%
12b-1 Fees .25%++ 1.00% 1.00%
Other Expenses -- -- --
Total Fund Operating Expenses -- -- --
------- -------- --------
------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Example 1 3
Year Years
------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
11
<PAGE>
Class A $-- $--
Class B $-- $--
Class C $-- $--
You would pay the following expenses on the same investment,
assuming no redemption:
Class A $-- $--
Class B $-- $--
Class C $-- $--
</TABLE>
12
<PAGE>
The above example is based on estimated data for the Fund's fiscal year ending
____________________. The example should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than
those shown.
The purpose of this table is to assist an investor in understanding the various
types of costs and expenses that an investor in the Fund will bear, whether
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "How the Fund is Managed." "Other Expenses" include operating
expenses of the Fund, such as Directors' and professional fees, registration
fees, reports to shareholders, transfer agency and custodian (domestic and
foreign) fees (but excludes foreign withholding taxes).
- -----------------
*Class B shares will automatically convert to Class A shares
approximately seven years after purchase. See "Shareholder
Guide - Conversion Feature - Class B Shares."
+Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Fund may not exceed 6.25% of total
gross sales, subject to certain exclusions. This 6.25% limitation is imposed on
the Fund rather than on a per shareholder basis. Therefore long-term Class B
and Class C shareholders of the Fund may pay more in total sales charges than
the economic equivalent of 6.25% of such shareholders' investment in such
shares. See "How the Fund is Managed - Distributor."
++Although the Class A Distribution and Service Plan provides that the Fund
may pay up to an annual rate of .30 of 1% of the average daily net assets of the
Class A shares, the Distributor has agreed to limit its distribution fees with
respect to Class A shares of the Fund so as not to exceed .25 of 1% of the
average daily net assets of the Class A shares for the fiscal year ending
__________. See "How the Fund is Managed - Distributor."
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital.
The Fund seeks to achieve this objective by investing primarily in
equity securities of companies domiciled in Europe, including, but
not limited to, Austria, Belgium, the Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Ireland, Italy,
Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovakia,
Spain, Sweden, Switzerland, Turkey and the United Kingdom. Equity
securities in which the Fund may invest include common stock,
preferred stock and common stock equivalents, such as warrants and
convertible debt securities. Current income from dividends and
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<PAGE>
interest will not be an important consideration in selecting
portfolio securities. The Fund anticipates that, under normal
market conditions, at least 65% of its total assets will consist of
equity securities of European companies. There is no limit on the
percentage of Fund assets that may be invested in any single
country. Under normal circumstances, the Fund may invest the
remainder of its assets in securities of issuers domiciled outside
of Europe, debt obligations, repurchase agreements and may hold
cash, subject to the limitations described above. The Fund
reserves the right as a defensive measure to hold other types of
securities without limit, including commercial paper, bankers'
acceptances, non-convertible debt securities (corporate and
government) or government and high quality money market securities
of United States and non-United States issuers, or cash (foreign
currencies or United States dollars), in such proportions as, in
the opinion of the Fund's investment adviser, prevailing market,
economic or political conditions warrant. The Fund may also
temporarily hold cash and invest in high quality foreign or
domestic money market instruments pending investment of proceeds
from new sales of Fund shares or to meet ordinary daily cash needs.
There can be no assurance that the Fund's objective will be
achieved. See "Investment Objective and Policies" in the Statement
of Additional Information.
The Fund intends to invest in developing countries, and in
countries with new or developing capital markets, such as those in
Eastern and Central Europe. These countries may have relatively
14
<PAGE>
unstable governments, economies based on only a few industries and
securities markets that trade a limited number of securities.
Securities of issuers located in these countries tend to have
volatile prices and offer the potential for substantial loss as
well as gain. In addition, these securities may be less liquid
than investments in more established markets as a result of
inadequate trading volume or restrictions on trading imposed by the
governments of such countries. See "Special Considerations and
Risks of Investing in Foreign Securities" below.
Under normal circumstances, the Fund may invest up to 35% of
its total assets in the securities of issuers domiciled outside of
Europe. Such investments may include (i) securities of companies
in countries which are linked by tradition, economic markets,
cultural similarities or geography to Europe and (ii) securities of
companies which have operations in Europe or which stand to benefit
from political and economic events in Europe. For example, the
Fund may invest in a company outside of Europe when the Fund's
investment adviser believes at the time of investment that the
value of the company's securities may be enhanced by conditions or
developments in Europe even though the company's production
facilities are located outside of Europe.
Under normal conditions, the Fund may also invest up to 35% of
its total assets in debt obligations, including obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities, or by foreign governments, obligations issued by
banks and corporations and other debt obligations. These
15
<PAGE>
obligations may be denominated in U.S. dollars or in foreign
currencies. The issuers of such securities may or may not be
domiciled in Europe. The Fund will purchase "investment grade" debt
obligations, i.e., bonds rated within the four highest quality
grades as determined by Moody's Investors Service (Moody's)
(currently Aaa, Aa, A and Baa for bonds, MIG 1, MIG 2, MIG 3 and
MIG 4 for notes and P-1 for commercial paper), or Standard & Poor's
Ratings Group (S&P) (currently AAA, AA, A and BBB for bonds, SP-1
and SP-2 for notes and A-1 for commercial paper), or by another
nationally recognized statistical rating organization (NRSRO) or,
in unrated securities of equivalent quality. See the description
of securities ratings in the Appendix to the Statement of
Additional Information. The Fund is permitted to invest up to 25%
of its total assets in lower quality, convertible debt securities
provided that such securities have a minimum rating of at least B
as determined by one NRSRO or, if unrated, are deemed by the
investment adviser to be of comparable quality. Lower rated
securities are subject to a greater risk of loss of principal and
interest. See "Risk Factors Relating to Investing in Foreign Debt
Securities Rated Below Investment Grade" below.
The Fund may invest in securities not listed on securities
exchanges. These securities will generally have an established
market (such as the over-the-counter market), the depth and
liquidity of which may vary from time to time and from security to
security. See "Other Investments and Policies - Illiquid
Securities" below.
16
<PAGE>
In addition to analyzing the companies in which investments are
made, the investment adviser also considers such factors as
prospects for economic growth for each foreign country; expected
levels of inflation and interest rates; government policies
influencing business conditions; the range of individual investment
opportunities available to international investors; and other
pertinent financial, tax, social, political and national factors -
all in relation to the prevailing prices of securities in each
country.
In addition to purchasing equity securities of European
issuers, the Fund may invest in American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs) or other securities
convertible into securities of corporations domiciled in Europe.
These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted.
Generally, ADRs, in registered form, are designed for use in the
United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
The Fund may invest up to 5% of its net assets in warrants. A
warrant gives the holder thereof the right to subscribe by a
specified date to a stated number of shares of stock of the issuer
at a fixed price. Warrants tend to be more volatile than the
underlying stock, and if at a warrant's expiration date the stock
is trading at a price below the price set in the warrant, the
warrant will expire worthless. Conversely, if at the expiration
date the underlying stock is trading at a price higher than the
17
<PAGE>
price set in the warrant, the Fund can acquire the stock at a price
below its market value.
As indicated above, when conditions dictate a defensive
strategy, the Fund may invest, without limit, in high quality money
market instruments of United States and non-United States issuers
(including, with respect to United States issuers, repurchase
agreements maturing in seven days or less). The Fund will only
invest in money market instruments that have short term ratings in
at least the second highest category by at least one NRSRO or are
issued by companies that have outstanding debt securities rated at
least investment grade by an NRSRO or in unrated securities of
issuers that the Fund's investment adviser has determined to be of
comparable quality. Subsequent to its purchase by the Fund, a
security may be assigned a lower rating or cease to be rated. Such
an event would not require the elimination of the issue from the
portfolio, but the investment adviser will consider such an event
in determining whether the Fund should continue to hold the
security in its portfolio. Securities rated Baa by Moody's or BBB
by S&P, for example, although considered to be investment grade,
lack outstanding investment characteristics and, in fact, have
speculative characteristics. See "Description of Security Ratings"
in the Statement of Additional Information.
The Fund's investment objective is a fundamental policy and may
not be changed without the approval of the holders of a majority of
the Fund's outstanding voting securities, as defined in the
Investment Company Act. Investment policies that are not
18
<PAGE>
fundamental may be modified by the Board of Directors.
SPECIAL CONSIDERATIONS AND RISKS OF INVESTING IN FOREIGN SECURITIES
Foreign securities involve certain risks, which should be
considered carefully by an investor in the Fund. These risks
include political or economic instability in the country of the
issuer, the difficulty of predicting international trade patterns,
the possibility of imposition of exchange controls and the risk of
currency fluctuations. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations
or issued or guaranteed by the U.S. Government, its
instrumentalities or agencies. In addition, there may be less
publicly available information about a foreign company than about
a domestic company. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is
generally less government regulation of securities exchanges,
brokers and listed companies abroad than in the United States and
there is a possibility of expropriation, confiscatory taxation or
diplomatic developments which could affect investment.
Although the Fund intends to invest primarily in equity
securities, it may invest in debt securities of foreign issuers.
In many instances, foreign debt securities may provide higher
yields than securities of domestic issuers which have similar
maturities and quality. These investments, however, may be less
liquid than the securities of U.S. corporations. In the event of
19
<PAGE>
default of any such foreign debt obligations, it may be more
difficult for the Fund to obtain or enforce a judgment against the
issuers of such securities.
Additional costs could be incurred in connection with the
Fund's international investment activities. Foreign brokerage
commissions are generally higher than United States brokerage
commissions. Increased custodian costs as well as administrative
difficulties (such as the applicability of foreign laws to foreign
custodians in various circumstances) may be associated with the
maintenance of assets in foreign jurisdictions.
If the security is denominated in a foreign currency, it will
be affected by changes in currency exchange rates and in exchange
control regulations, and costs will be incurred in connection with
conversions between currencies. A change in the value of any such
currency against the U.S. dollar will result in a corresponding
change in the U.S. dollar value of the Fund's securities
denominated in that currency. Such changes also will affect the
Fund's income and distributions to shareholders. In addition,
although the Fund will receive income in such currencies, the Fund
will be required to compute and distribute its income in U.S.
dollars. Therefore, if the exchange rate for any such currency
declines after the Fund's income has been accrued and translated
into U.S. dollars, the Fund could be required to liquidate
portfolio securities to make such distributions, particularly in
instances in which the amount of income the Fund is required to
distribute is not immediately reduced by the decline in such
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<PAGE>
currency. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. dollars and the time such expenses
are paid, the amount of such currency required to be converted into
U.S. dollars in order to pay such expenses in U.S. dollars will be
greater than the equivalent amount in any such currency of such
expenses at the time they were incurred. The Fund may, but need
not, enter into forward foreign currency exchange contracts,
options on foreign currencies and futures contracts on foreign
currencies and related options, for hedging purposes, including:
locking-in the U.S. dollar price of the purchase or sale of
securities denominated in a foreign currency; locking-in the U.S.
dollar equivalent of interest or dividends to be paid on such
securities which are held by the Fund; and protecting the U.S.
dollar value of such securities which are held by the Fund.
Shareholders should be aware that investing in the equity and
fixed-income markets of developing countries (i.e., Eastern Europe)
involves exposure to economies that are generally less diverse and
mature, and to political systems which can be expected to have less
stability than those of developed countries. Historical experience
indicates that the markets of developing countries have been more
volatile than the markets of developed countries. The risks
associated with investments in foreign securities, described above,
may be greater with respect to investments in developing countries.
RISK FACTORS RELATING TO INVESTING IN FOREIGN DEBT SECURITIES RATED
BELOW INVESTMENT GRADE
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Fixed-income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price
volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer and general market
liquidity (market risk). Lower rated or unrated (i.e., high yield)
securities are more likely to react to developments affecting
market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest
rates. The investment adviser considers both credit risk and
market risk in making investment decisions for the Fund. Investors
should carefully consider the relative risks of investing in high
yield securities and understand that such securities are not
generally meant for short-term trading.
Under adverse economic conditions, there is a risk that highly
leveraged issuers may be unable to service their debt obligations
or to repay their obligations upon maturity. In addition, the
secondary market for high yield securities, which is concentrated
in relatively few market makers, may not be as liquid as the
secondary market for more highly rated securities. Under adverse
market or economic conditions, the secondary market for high yield
securities could contract further, independent of any specific
adverse changes in the condition of a particular issuer. As a
result, the investment adviser could find it more difficult to sell
these securities or may be able to sell the securities only at
prices lower than if such securities were widely traded. Prices
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realized upon the sale of such lower rated or unrated securities,
under these circumstances, may be less than the prices in
calculating the Fund's net asset value.
Lower rated or unrated debt obligations also present risks
based on payment expectations. If an issuer calls the obligation
for redemption, the Fund may have to replace the security with a
lower yielding security, resulting in a decreased return for
investors. If the Fund experiences unexpected net redemptions, it
may be forced to sell its higher rated securities, resulting in a
decline in the overall credit quality of the debt portion of the
Fund's portfolio and increasing the exposure of the Fund to the
risks of high yield securities.
Convertible Securities
A convertible security is a bond or preferred stock which may
be converted at a stated price within a specified period of time
into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common
stocks in a corporation's capital structure, but are usually
subordinated to similar nonconvertible securities. While providing
a fixed income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a
similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion
feature, to participate in the capital appreciation dependent upon
a market price advance in the convertible security's underlying
common stock.
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In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). As a fixed-
income security, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in value
when interest rates rise. However, the price of a convertible
security is also influenced by the market value of the security's
underlying stock. The price of a convertible security tends to
increase as the market value of the underlying stock rises, whereas
it tends to decrease as the market value of the underlying stock
declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk
than investments in the common stock of the same issuer.
HEDGING AND INCOME ENHANCEMENT STRATEGIES
The Fund may also engage in various portfolio strategies to
reduce certain risks of its investments and to attempt to enhance
income. These strategies currently include the use of options,
forward currency exchange contracts and futures contracts and
options thereon. The Fund's ability to use these strategies may be
limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that any of these
strategies will succeed. See "Investment Objective and Policies"
and "Taxes" in the Statement of Additional Information. New
financial products and risk management techniques continue to be
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<PAGE>
developed and the Fund may use these new investments and techniques
to the extent consistent with its investment objective and
policies.
Options Transactions
The Fund may purchase and write (i.e., sell) put and call
options on securities and currencies that are traded on U.S. or
foreign securities exchanges or in the over-the-counter market to
enhance income or to hedge the Fund's portfolio. These options
will be on equity securities, financial indices (e.g., S&P 500) and
foreign currencies. The Fund may write covered put and call
options to generate additional income through the receipt of
premiums, purchase put options in an effort to protect the value of
securities (or currencies) that it owns against a decline in market
value and purchase options in an effort to protect against an
increase in the price of securities (or currencies) it intends to
purchase. The Fund may also purchase put and call options to
offset previously written put and call options of the same series.
See "Investment Objective and Policies - Options on Securities" in
the Statement of Additional Information.
A call option gives the purchaser, in exchange for a premium
paid, the right for a specified period of time to purchase the
securities or currency subject to the option at a specified price
(the exercise price or strike price). The writer of a call option,
in return for the premium, has the obligation, upon exercise of the
option, to deliver, depending upon the terms of the option
contract, the underlying securities or a specified amount of cash
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<PAGE>
to the purchaser upon receipt of the exercise price. When the Fund
writes a call option, the Fund gives up the potential for gain on
the underlying securities or currency in excess of the exercise
price of the option during the period that the option is open.
A put option gives the purchaser, in return for a premium, the
right, for a specified period of time, to sell the securities or
currency subject to the option to the writer of the put at the
specified exercise price. The writer of the put option, in return
for the premium, has the obligation, upon exercise of the option,
to acquire the securities or currency underlying the option at the
exercise price. The Fund might, therefore, be obligated to
purchase the underlying securities or currency for more than their
current market price.
The Fund will write only "covered" options. An option is
covered if, so long as the Fund is obligated under the option, it
owns an offsetting position in the underlying security or currency
or maintains cash, U.S. Government securities or other liquid high-
grade debt obligations with a value sufficient at all times to
cover its obligations in a segregated account. See "Investment
Objective and Policies - Options on Securities" in the Statement of
Additional Information. There is no limitation on the amount of
call options the Fund may write. [The Fund has undertaken with
certain state securities commissions that, so long as shares of the
Fund are registered in those states, it will not (a) write puts
having aggregate exercise prices greater than 25% of total net
assets, or (b) purchase (i) put options on stocks not held in the
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Fund's portfolio, (ii) put options on stock indices or foreign
currencies or (iii) call options on stock, stock indices or foreign
currencies if, after any such purchase, the aggregate premiums paid
for such options would exceed 10% of the Fund's total assets;
provided, however, that the Fund may purchase put options on stocks
held by the Fund if after such purchase the aggregate premiums paid
for such options do not exceed 20% of the Fund's total assets. The
aggregate value of the obligations underlying put options will not
exceed 50% of the Fund's assets.]
Forward Currency Exchange Contracts
The Fund may enter into forward foreign currency exchange
contracts to protect the value of its assets against future changes
in the level of currency exchange rates. The Fund may enter into
such contracts on a spot, i.e., cash, basis at the rate then
prevailing in the currency exchange market or on a forward basis,
by entering into a forward contract to purchase or sell currency.
A forward contract on foreign currency is an obligation to purchase
or sell a specific currency at a future date, which may be any
fixed number of days agreed upon by the parties from the date of
the contract at a price set on the date of the contract.
The Fund's dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of a
forward contract with respect to specific receivables or payables
of the Fund generally arising in connection with the purchase or
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<PAGE>
sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is the
sale of a foreign currency with respect to portfolio security
positions denominated or quoted in that currency or in a different
currency (cross hedge). Although there are no limits on the number
of forward contracts which the Fund may enter into, the Fund may
not position hedge (including cross hedges) with respect to a
particular currency for an amount greater than the aggregate market
value (determined at the time of making any sale of forward
currency) of the securities being hedged. See "Investment
Objective and Policies - Risks Related to Forward Currency Exchange
Contracts" in the Statement of Additional Information.
Futures Contracts and Options Thereon
The Fund may purchase and sell financial futures contracts and
options thereon which are traded on a commodities exchange or board
of trade for certain hedging, return enhancement and risk
management purposes in accordance with regulations of the Commodity
Futures Trading Commission. These futures contracts and related
options will be on financial indices and foreign currencies or
groups of foreign currencies such as the European Currency Unit.
A European Currency Unit is a basket of specified amounts of the
currencies of certain member states of the European Economic
Community, a European economic cooperative organization including
France, Germany, The Netherlands and the United Kingdom. A
financial futures contract is an agreement to purchase or sell an
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<PAGE>
agreed amount of securities or currencies at a set price for
delivery in the future.
The Fund may not purchase or sell futures contracts and related
options for return enhancement or risk management purposes, if
immediately thereafter the sum of the amount of initial margin
deposits on the Fund's existing futures and options on futures and
premiums paid for such related options would exceed 5% of the
liquidation value of the Fund's total assets. The Fund may
purchase and sell future contracts and related options, without
limitation, for bona fide hedging purposes. The value of all
futures contracts sold will not exceed the total market value of
the Fund's portfolio.
The Fund's successful use of futures contracts and related
options depends upon the investment adviser's ability to predict
the direction of the market and is subject to various additional
risks. The correlation between movements in the price of a futures
contract and the movements in the index or price of the currencies
being hedged is imperfect and there is a risk that the value of the
indices or currencies being hedged may increase or decrease at a
greater rate than the related futures contracts resulting in losses
to the Fund. Certain futures exchanges or boards of trade have
established daily limits on the amount that the price of futures
contracts or related options may vary, either up or down, from the
previous day's settlement price. These daily limits may restrict
the Fund's ability to purchase or sell certain futures contracts or
related options on any particular day.
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<PAGE>
The Fund's ability to enter into futures contracts and options
thereon is limited by the requirements of the Internal Revenue Code
for qualification as a regulated investment company. See "Taxes"
in the Statement of Additional Information.
Special Risks of Hedging and Income Enhancement Strategies
Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction
costs to which the Fund would not be subject absent the use of
these strategies. If the investment adviser's predictions of
movements in the direction of the securities, foreign currency and
interest rate markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such
strategies were not used. Risks inherent in the use of options,
foreign currency and futures contracts and options on futures
contracts include (1) dependence on the investment adviser's
ability to predict correctly movements in the direction of interest
rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities or
currencies being hedged; (3) the fact that skills needed to use
these strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; (5) the
possible need to defer closing out certain hedged positions to
avoid adverse tax consequences; and (6) the possible inability of
the Fund to purchase or sell a portfolio security at a time that
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<PAGE>
otherwise would be favorable for it to do so, or the possible need
for the Fund to sell a portfolio security at a disadvantageous
time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions. See
"Taxes" in the Statement of Additional Information.
The Fund will generally purchase options and futures on an
exchange only if there appears to be a liquid secondary market for
such options or futures; the Fund will generally purchase OTC
options only if management believes that the other party to options
will continue to make a market for such options. However, there
can be no assurance that a liquid secondary market will continue to
exist or that the other party will continue to make a market.
Thus, it may not be possible to close an options or futures
transaction. The inability to close options and futures positions
also could have an adverse impact on the Fund's ability to
effectively hedge its portfolio. There is also the risk of loss by
the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in
an option, a futures contract or related option.
OTHER INVESTMENTS AND POLICIES
Repurchase Agreements
The Fund will enter into repurchase agreements whereby the
seller of the security agrees to repurchase that security from the
Fund at a mutually agreed-upon time and price. The repurchase date
is usually within a day or two of the original purchase, although
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it may extend over a number of months. The Fund's repurchase
agreements will at all times be fully collateralized in an amount
at least equal to the purchase price of the underlying securities
(including accrued interest earned thereon). In the event of a
default or bankruptcy by a seller, the Fund will promptly seek to
liquidate the collateral. To the extent that the proceeds from any
sale of such collateral upon a default in the obligation to
repurchase are less than the repurchase price, the Fund will suffer
a loss. The Fund participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund
Management, Inc. pursuant to an order of the Securities and
Exchange Commission (SEC). See "Investment Objective and Policies
- - Repurchase Agreements" in the Statement of Additional
Information.
Borrowing
The Fund may borrow an amount equal to no more than 33 1/3% of the
value of its total assets (calculated when the loan is made) from
banks for temporary, extraordinary or emergency purposes or for the
clearance of transactions. The Fund may pledge up to 33 1/3% of its
total assets to secure these borrowings. If the Fund's asset coverage
for borrowings falls below 300%, the Fund will take prompt action to
reduce its borrowings.
Illiquid Securities
The Fund may invest up to 10% of its net assets in illiquid
securities including repurchase agreements which have a maturity of
longer than seven days, securities with legal or contractual
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restrictions on resale (restricted securities) and securities that
are not readily marketable in securities markets either within or
outside of the United States. Restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, as
amended (the Securities Act) and privately placed commercial paper
that have a readily available market are not considered illiquid
for purposes of this limitation. The investment adviser will
monitor the liquidity of such restricted securities under the
supervision of the Board of Directors. Repurchase agreements
subject to demand are deemed to have a maturity equal to the
applicable notice period.
The staff of the SEC has taken the position that purchased OTC
options and the assets used as "cover" for written OTC options are
illiquid securities. However, the Fund may treat the securities it
uses as "cover" for written OTC options on U.S. government
securities as liquid provided it follows a specified procedure.
The Fund may sell OTC options on U.S. Government securities only to
qualified dealers who agree that the Fund may repurchase options it
writes for a maximum price to be calculated by a predetermined
formula. In such cases, OTC options would be considered liquid
only to the extent that the maximum repurchase price under the
formula exceeds the intrinsic value of the option. See "Investment
Objective and Policies - Illiquid Securities" in the Statement of
Additional Information.
Portfolio Turnover
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<PAGE>
As a result of the Fund's investment policies, its portfolio
turnover rate may exceed 100%, although the rate is not expected to
exceed 150%. High portfolio turnover may involve correspondingly
greater brokerage commissions and other transaction costs, which
will be borne directly by the Fund. See "Portfolio Transactions
and Brokerage" in the Statement of Additional Information. In
addition, high portfolio turnover may result in increased short-
term capital gains, which, when distributed to shareholders, are
treated as ordinary income. See "Taxes, Dividends and
Distributions."
When-Issued and Delayed Delivery Securities
The Fund may purchase or sell securities on a when-issued or
delayed delivery basis. When-issued or delayed delivery
transactions arise when securities are purchased or sold by the
Fund with payment and delivery taking place a month or more in the
future in order to secure what is considered to be an advantageous
price and yield to the Fund at the time of entering into the
transaction. While the Fund will only purchase securities on a
when-issued or delayed delivery basis with the intention of
acquiring the securities, the Fund may sell the securities before
the settlement date, if it is deemed advisable. At the time the
Fund makes the commitment to purchase securities on a when-issued
or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in
determining the net asset value of the Fund. At the time of
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<PAGE>
delivery of the securities, the value may be more or less than the
purchase price. The Fund's Custodian will maintain, in a
segregated account of the Fund, cash, U.S. Government securities or
other liquid high-grade debt obligations having a value equal to or
greater than the Fund's purchase commitments; the Custodian will
likewise segregate securities sold on a delayed delivery basis.
Subject to this requirement, the Fund may purchase securities on
such basis without limit. See "Investment Objective and Policies -
When-Issued and Delayed Delivery Securities" in the Statement of
Additional Information.
Securities Lending
The Fund may lend its portfolio securities to brokers or
dealers, banks or other recognized institutional borrowers of
securities, provided that the borrower at all times maintains cash
or equivalent collateral or secures a letter of credit in favor of
the Fund in an amount equal to at least 100%, determined daily, of
the market value of the securities loaned which are maintained in
a segregate account pursuant to applicable regulations. During the
time portfolio securities are on loan, the borrower will pay the
Fund an amount equivalent to any dividend or interest paid on such
securities and the Fund may invest the cash collateral and earn
additional income, or it may receive an agreed-upon amount of
interest income from the borrower. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss
of rights in the collateral should the borrower of the securities
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<PAGE>
fail financially. As a matter of fundamental policy, the Fund
cannot lend more than 30% of the value of its total assets. See
"Investment Objective and Policies - Lending of Securities" in the
Statement of Additional Information.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which,
like its investment objective, constitute fundamental policies.
Fundamental policies cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities
as defined in the Investment Company Act. See "Investment
Restrictions" in the Statement of Additional Information.
HOW THE FUND IS MANAGED
The Fund has a Board of Directors which, in addition to
overseeing the actions of the Fund's Manager, Subadviser and
Distributor, decides upon matters of general policy. The Fund's
Manager conducts and supervises the daily business operations of
the Fund. The Fund's Subadviser furnishes daily investment
advisory services.
The Fund is responsible for the payment of certain fees and
expenses including, among others, the following: (i) management
and distribution fees; (ii) the fees of unaffiliated Directors;
(iii) the fees of the Fund's Custodian and Transfer and Dividend
Disbursing Agent; (iv) the fees of the Fund's legal counsel and
independent accountants; (v) brokerage commissions incurred in
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<PAGE>
connection with portfolio transactions; (vi) all taxes and charges
of governmental agencies; (vii) the reimbursement of organization
expenses; and (viii) expenses related to shareholder communications
including all expenses of shareholders' and Board of Directors'
meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to shareholders.
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager),
One Seaport Plaza, New York, New York 10292, is the Manager of the
Fund and is compensated for its services at an annual rate of .75
of 1% of the Fund's average daily net assets. It was incorporated
in May 1987 under the laws of the State of Delaware. See "Manager"
in the Statement of Additional Information.
As of _________, 1994, PMF served as the manager to [37] open-
end investment companies, constituting all of the Prudential Mutual
Funds, and as manager or administrator to [29] closed-end
investment companies with aggregate assets of approximately [$51]
billion.
Under the Management Agreement with the Fund, PMF manages the
investment operations of the Fund and also administers the Fund's
corporate affairs. See "Manager" in the Statement of Additional
Information.
Under the Subadvisory Agreement between PMF and The Prudential
Investment Corporation (PIC or the Subadviser), PIC furnishes
investment advisory services in connection with the management of
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<PAGE>
the Fund and is reimbursed by PMF for its reasonable costs and
expenses incurred in providing such services. Under the Management
Agreement, PMF continues to have responsibility for all investment
advisory services and supervises PIC's performance of such
services. The Fund is managed under the supervision of Daniel J.
Duane, a Managing Director and Chief Investment Officer for Global
Equity Investments of Prudential Investment Advisors, a unit of
PIC. Mr. Duane has supervised the management of the Fund's
portfolio since its inception and has been employed by PIC as a
portfolio manager since 1990. He was formerly with First Investors
Asset Management from 1986 to 1990 as a senior portfolio manager
and head of global equity investments. Mr. Duane is a Chartered
Financial Analyst. Mr. Duane also serves as the portfolio manager
of the Prudential Series Fund (Global Equity Portfolio), Prudential
Global Fund, Prudential Global Genesis Fund and Prudential Pacific
Growth Fund.
PMF and PIC are indirect, wholly-owned subsidiaries of The
Prudential Insurance Company of America (Prudential), a major
diversified insurance and financial services company.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport
Plaza, New York, New York 10292, is a corporation organized under
the laws of the State of Delaware and serves as the distributor of
the Class A shares of the Fund. It is a wholly-owned subsidiary of
PMF.
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Prudential Securities Incorporated (Prudential Securities or
PSI), One Seaport Plaza, New York, New York 10292, is a
corporation organized under the laws of the State of Delaware and
serves as the distributor of the Class B and Class C shares of the
Fund. It is an indirect, wholly-owned subsidiary of Prudential.
Under separate Distribution and Service Plans (the Class A
Plan, the Class B Plan and the Class C Plan, collectively, the
Plans) adopted by the Fund under Rule 12b-1 under the Investment
Company Act and separate distribution agreements (the Distribution
Agreements), PMFD and Prudential Securities (collectively, the
Distributor) incur the expenses of distributing the Fund's Class A,
Class B and Class C shares. These expenses include commissions and
account servicing fees paid to, or on account of, financial
advisers of Prudential Securities and Pruco Securities Corporation
(Prusec), an affiliated broker-dealer, commissions and account
servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) which have
entered into agreements with the Distributor, advertising expenses,
the cost of printing and mailing prospectuses to potential
investors and indirect and overhead costs of Prudential and Prusec
associated with the sale of Fund shares, including lease, utility,
communications and sales promotion expenses. The State of Texas
requires that shares of the Fund may be sold in that state only by
dealers or other financial institutions which are registered there
as broker-dealers.
Under the Plans, the Fund is obligated to pay distribution
39
<PAGE>
and/or service fees to the Distributor as compensation for its
distribution and service activities, not as reimbursement for
specific expenses incurred. If the Distributor's expenses exceed
its distribution and service fees, the Fund will not be obligated
to pay any additional expenses. If the Distributor's expenses are
less than such distribution and service fees, it will retain its
full fees and realize a profit.
Under the Class A Plan, the Fund may pay PMFD for its
distribution-related expenses with respect to Class A shares at an
annual rate of up to .30 of 1% of the average daily net assets of
the Class A shares. The Class A Plan provides that (i) up to .25
of 1% of the daily net assets of the Class A shares may be used to
pay for personal service and/or the maintenance of shareholder
accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1% of the
average daily net assets of the Class A shares. PMFD has agreed to
limit its distribution-related fees payable under the Class A Plan
to .25 of 1% of the average daily net assets of the Class A shares
of the fiscal year ending _________.
Under the Class B and Class C Plans, the Fund pays Prudential
Securities for its distribution-related expenses with respect to
Class B and Class C shares at an annual rate of 1% of the average
daily net assets of each of the Class B and Class C shares. The
Class B and Class C Plans provide for the payment to Prudential
Securities of (i) an asset-based sales charge of .75 of 1% of the
average daily net assets of the Class B and Class C shares,
40
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respectively, and (ii) a service fee of .25 of 1% of the average
daily net assets of each of the Class B and Class C shares. The
service fee is used to pay for personal service and/or the
maintenance of shareholder accounts. Prudential Securities also
receives contingent deferred sales charges from certain redeeming
shareholders. See "Shareholder Guide - How to Sell Your Shares -
Contingent Deferred Sales Charges."
Distribution expenses attributable to the sale of shares of the
Fund will be allocated to each class based upon the ratio of sales
of each class to the sales of all shares of the Fund other than
expenses allocable to a particular class. The distribution fee and
sales charge of one class will not be used to subsidize the sale of
another class.
Each Plan provides that it shall continue in effect from year
to year provided that a majority of the Board of Directors of the
Fund, including a majority of the Directors who are not "interested
persons" of the Fund (as defined in the Investment Company Act) and
who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan (the Rule 12b-1
Directors), vote annually to continue the Plan. Each Plan may be
terminated at any time by vote of a majority of the Rule 12b-1
Directors or of a majority of the outstanding shares of the
applicable class of the Fund. The Fund will not be obligated to
pay expenses incurred under any Plan if it is terminated or not
continued.
In addition to distribution and service fees paid by the Fund
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under the Class A, Class B and Class C Plans, the Manager (or one
of its affiliates) may make payments to dealers and other persons
which distribute shares of the Fund. Such payments may be
calculated by reference to the net asset value of shares sold by
such persons or otherwise.
The Distributor is subject to the rules of the National
Association of Securities Dealers, Inc. governing maximum sales
charges. See "Distributor" in the Statement of Additional
Information.
FEE WAIVERS AND SUBSIDY
PMF may from time to time waive all or a portion of its
management fee and subsidize all or a portion of the operating
expenses of the Fund. Fee waivers and expense subsidies will
increase the Fund's total return. See "Performance Information" in
the Statement of Additional Information and "Fund Expenses."
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission
merchant for the Fund provided that the commissions, fees or other
remuneration it receives are fair and reasonable. See "Portfolio
Transactions and Brokerage" in the Statement of Additional
Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North
42
<PAGE>
Quincy, Massachusetts 02171, serves as Custodian for the Fund's
portfolio securities and cash and, in that capacity, maintains
certain financial and accounting books and records pursuant to an
agreement with the Fund. Its mailing address is P.O. Box 1713,
Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza
One, Edison, New Jersey 08837, serves as Transfer Agent and
Dividend Disbursing Agent and in those capacities maintains certain
books and records for the Fund. PMFS is a wholly-owned subsidiary
of PMF. Its mailing address is P.O. Box 15005, New Brunswick, New
Jersey 08906-5005.
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and
dividing the remainder by the number of outstanding shares. NAV is
calculated separately for each class. For valuation purposes,
quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. The Board of Directors has
fixed the specific time of day for the computation of the Fund's
NAV to be as of 4:15 P.M., New York time.
Portfolio securities are valued based on market quotations or,
if not readily available, at fair value as determined in good faith
under procedures established by the Fund's Board of Directors. See
"Net Asset Value" in the Statement of Additional Information.
The Fund will compute its NAV once daily on days that the New
43
<PAGE>
York Stock Exchange is open for trading except on days on which no
orders to purchase, sell or redeem shares have been received by the
Fund or days on which changes in the value of the Fund's portfolio
securities do not materially affect the NAV. The New York Stock
Exchange is closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. See "Net Asset Value" in
the Statement of Additional Information.
Although the legal rights of each class of shares are
substantially identical, the different expenses borne by each class
will result in different NAVs and dividends. The NAV of Class B
and Class C shares will generally be lower than the NAV of Class A
shares as a result of the larger distribution-related fee to which
Class B and Class C shares are subject. It is expected, however,
that the NAV of the three classes will tend to converge immediately
after the recording of dividends, which will differ by
approximately the amount of distribution-related expense accrual
differential among the classes.
HOW THE FUND CALCULATES PERFORMANCE
From time to time the Fund may advertise its total return
(including "average annual" total return and "aggregate" total
return) and yield in advertisements or sales literature. Total
return and yield are calculated separately for Class A, Class B and
Class C shares. These figures are based on historical earnings and
are not intended to indicate future performance. The "total
44
<PAGE>
return" shows how much an investment in the Fund would have
increased (decreased) over a specified period of time (i.e., one,
five, or ten years or since inception of the Fund) assuming that
all distributions and dividends by the Fund were reinvested on the
reinvestment dates during the period and less all recurring fees.
The "aggregate" total return reflects actual performance over a
stated period of time. "Average annual" total return is a
hypothetical rate of return that, if achieved annually, would have
produced the same aggregate total return if performance had been
constant over the entire period. "Average annual" total return
smooths out variations in performance and takes into account any
applicable initial or contingent deferred sales charges. Neither
"average annual" total return nor "aggregate" total return takes
into account any federal or state income taxes which may be payable
upon redemption. The "yield" refers to the income generated by an
investment in the Fund over a one-month or 30-day period. This
income is then "annualized;" that is, the amount of income
generated by the investment during that 30-day period is assumed to
be generated each 30-day period for twelve periods and is shown as
a percentage of the investment. The income earned on the
investment is also assumed to be reinvested at the end of the sixth
30-day period. The Fund also may include comparative performance
information in advertising or marketing the Fund's shares. Such
performance information may include data from Lipper Analytical
Services, Inc., Morningstar Publications, Inc., and other industry
publications, business periodicals and market indices. See
45
<PAGE>
"Performance Information" in the Statement of Additional
Information. The Fund will include performance data for each class
of shares of the Fund in any advertisement or information including
performance data of the Fund. Further performance information will
be contained in the Fund's annual and semi-annual reports to
shareholders, which will be available without charge. See
"Shareholder Guide - Shareholder Services - Reports to
Shareholders."
TAXES, DIVIDENDS AND DISTRIBUTIONS
Taxation of the Fund
The Fund intends to elect to qualify and intends to remain
qualified as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the Internal Revenue Code).
Accordingly, the Fund will not be subject to federal income taxes
on its net investment income and capital gains, if any, that it
distributes to its shareholders.
The Fund may, from time to time, invest in Passive Foreign
Investment Companies (PFICs). PFICs are foreign corporations which
derive a majority of their income from passive sources. For tax
purposes, the Fund's investments in PFICs are subject to special
tax provisions that may result in the taxation of certain gains
realized by the Fund. See "Taxes" in the Statement of Additional
Information.
In addition, under the Internal Revenue Code, special rules
apply to the treatment of certain options and futures contracts
46
<PAGE>
(Section 1256 contracts). At the end of each year, such
investments held by the Fund will be required to be "marked to
market" for federal income tax purposes; that is, treated as having
been sold at market value. Sixty percent of any gain or loss
recognized on these "deemed sales" and on actual dispositions may
be treated as long-term capital gain or loss, and the remainder
will be treated as short-term capital gain or loss. See "Taxes" in
the Statement of Additional Information.
Gains or losses on disposition of debt securities denominated
in a foreign currency attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security
and the date of disposition are treated as ordinary gain or loss.
These gains or losses increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. If currency
fluctuation losses exceed other investment company taxable income
during a taxable year, distributions made by the Fund during the
year would be characterized as a return of capital to shareholders,
reducing the shareholder's basis in his or her Fund shares.
Taxation of Shareholders
All dividends out of net investment income, together with
distributions of net short-term capital gains, will be taxable as
ordinary income to the shareholder whether or not reinvested. Any
net long-term capital gains distributed to shareholders will be
47
<PAGE>
taxable as such to the shareholder, whether or not reinvested and
regardless of the length of time a shareholder has owned his or her
shares. The maximum long-term capital gains rate for corporate
shareholders is currently the same as the maximum tax rate for
ordinary income. The maximum long-term capital gains rate for
individual shareholders is currently 28% and the maximum tax rate
for ordinary income is 39.6%.
The Fund may incur foreign income taxes in connection with some
of its foreign investments. Certain of these taxes may be credited
to shareholders. See "Taxes" in the Statement of Additional
Information.
Any gain or loss realized upon a sale or redemption of shares
by a shareholder who is not a dealer in securities will be treated
as long-term capital gain or loss if the shares have been held more
than one year and otherwise as short-term capital gain or loss.
Any such loss, however, on shares that are held for six months or
less, will be treated as a long-term capital loss to the extent of
any capital gain distributions received by the shareholder.
No gain or loss will be recognized by a shareholder as a result
of a conversion of Class B shares to Class A shares.
Withholding Taxes
Under U.S. Treasury Regulations, the Fund is required to
withhold and remit to the U.S. Treasury 31% of dividend, capital
gain income and redemption proceeds, payable on the accounts of
those shareholders who fail to furnish their tax identification
numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
48
<PAGE>
foreign shareholders) with the required certifications regarding
the shareholder's status under the federal income tax law.
Shareholders are urged to consult their own tax advisers
regarding specific questions as to federal, state or local taxes.
See "Taxes" in the Statement of Additional Information.
Dividends and Distributions
The Fund expects to pay dividends of net investment income, if
any, and make distributions of any capital gains in excess of net
long-term capital losses on an annual basis. Dividends paid by the
Fund with respect to each class of shares, to the extent any
dividends are paid, will be calculated in the same manner, at the
same time, on the same day and will be in the same amount except
that each class will bear its own distribution charges, generally
resulting in lower dividends for Class B and Class C shares.
Distribution of net capital gains, if any, will be paid in the same
amount for each class of shares. See "How The Fund Values its
Shares."
Dividends and distributions will be paid in additional Fund
shares, based on the NAV of each class on the record date or such
other date as the Board of Directors may determine, unless the
shareholder elects in writing not less than five business days
prior to the record date to receive such dividends and
distributions in cash. Such election should be submitted to
Prudential Mutual Fund Services, Inc., Attn: Account Maintenance
Unit, P.O. Box 15015, New Brunswick, New Jersey 08906-5015. The
49
<PAGE>
Fund will notify each shareholder after the close of the Fund's
taxable year both of the dollar amount and the taxable status of
that year's dividends and distributions on a per share basis. If
you hold shares through Prudential Securities, you should contact
your financial advisor to elect to receive dividends and
distributions in cash.
When the Fund goes "ex-dividend", its NAV is reduced by the
amount of the dividend or distribution. If you buy shares just
prior to the ex-dividend date (which generally occurs four business
days prior to the record date), the price you pay will include the
dividend or distribution and a portion of your investment will be
returned to you as a taxable distribution. You should, therefore,
consider the timing of dividends when making your purchases.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on March 18, 1994. The
Fund is authorized to issue 2 billion shares of common stock, $.001
par value per share, divided into three classes, designated Class
A, Class B and Class C common stock. Of the authorized shares of
common stock, 1 billion shares consist of Class A common stock, 500
million shares consist of Class B common stock and 500 million
shares consist of Class C common stock. Each class of common stock
represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class bears
different distribution expenses, (ii) each class has exclusive
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<PAGE>
voting rights with respect to its distribution and service plan
(except that the Fund has agreed with the SEC in connection with
the offering of a conversion feature on Class B shares to submit
any amendment of the Class A distribution and service plan to both
Class A and Class B shareholders, (iii) each class has a different
exchange privilege and (iv) only Class B shares have a conversion
feature. See "How the Fund is Managed - Distributor." Pursuant to
an order of the SEC, the Fund is permitted to issue and sell
multiple classes of common stock. Currently, the Fund is offering
three classes, designated Class A, Class B and Class C shares. In
accordance with the Fund's Articles of Incorporation, the Board of
Directors may authorize the creation of additional series of common
stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board
may determine.
The Board of Directors may increase or decrease the number of
authorized shares. Shares of the Fund, when issued, are fully
paid, nonassessable, fully transferable and redeemable at the
option of the holder. Shares are also redeemable at the option of
the Fund under certain circumstances as described under
"Shareholder Guide - How to Sell Your Shares." Each share of each
class of common stock is equal as to earnings, assets and voting
privileges, except as noted above, and each class bears the
expenses related to the distribution of its shares. Except for the
conversion feature applicable to the Class B shares, there are no
conversion, preemptive or other subscription rights. In the event
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<PAGE>
of liquidation, each share of common stock of the Fund is entitled
to its portion of all of the Fund's assets after all debts and
expenses of the Fund have been paid. Since Class B and Class C
shares generally bear higher distribution expenses, the liquidation
proceeds to shareholders of those classes are likely to be lower
than to Class A shareholders. The Fund's shares do not have
cumulative voting rights for the election of Directors.
The Fund does not intend to hold annual meetings of
shareholders unless otherwise required by law. The Fund will not
be required to hold meetings of shareholders unless, for example,
the election of Directors is required to be acted on by
shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote
of 10% or more of the Fund's outstanding shares for the purpose of
voting on the removal of one or more Directors or to transact any
other business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional
Information which has been incorporated by reference herein, does
not contain all the information set forth in the Registration
Statement filed by the Fund with the SEC under the Securities Act.
Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge,
at the office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
52
<PAGE>
HOW TO BUY SHARES OF THE FUND
Initial Offering of Shares
Prudential Securities, as subscription agent, will solicit
subscriptions for shares of the Fund during a subscription period
(the Subscription Period) commencing on or about _________, 1994,
and currently expected to end on or about ________, 1994. The Fund
may, at its option, extend the Subscription Period beyond ______,
1994. [If the Fund receives orders during the Subscription Period
of an aggregate amount of $75,000,000 of its shares, the Fund may,
at its option, declare the Subscription Period to be closed.] The
offering price during the Subscription Period is the net asset
value per share ($___) plus a sales charge which, at the option of
the purchaser, may be imposed (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class B or Class C shares)
as described below. Shares of the Fund subscribed for during the
Subscription Period will be issued on a closing date (which is
expected to occur on the fifth business day after the end of
the Subscription Period).
Your dealer will notify you of the end of the Subscription
Period, and payment will be due within five days thereafter.
Payment for shares will not be accepted during the Subscription
Period. If any orders received during the Subscription Period are
accompanied by payment, such payment will be returned unless
instructions have been received authorizing investment in a money
market fund. All such funds invested in a money market fund will
53
<PAGE>
be automatically invested in the Fund on the closing date without
any further action by you. Shareholders who purchase their shares
during the Subscription Period will not receive stock certificates.
The minimum initial investment during the Subscription Period is
$1,000 per class for Class A and Class B shares and $5,000 for
Class C shares, except that there are no minimum investment
requirements for certain retirement and employee savings plans or
custodial accounts for the benefit of minors.
Subscribers for shares will not have any of the rights of a
shareholder of the Fund until the shares subscribed for have been
paid for and their issuance has been reflected in the books of the
Fund. The Fund reserves the right to withdraw, modify or terminate
the initial offering without notice and to refuse any order in
whole or in part.
Continuous Offering of Shares
The Fund expects to commence a continuous offering of its
shares within [120 days] after the end of the Subscription Period.
Shares of the Fund may be purchased directly from the Fund, through
its Transfer Agent, Prudential Mutual Fund Services, Inc. (PMFS) or
through Prudential Securities or Prusec. The offering price is the
NAV next determined following receipt of an order by the Transfer
Agent or Prudential Securities plus a sales charge which, at your
option, may be imposed either (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class B or Class C shares).
See "Alternative Purchase Plan" below. See also "How the Fund
Values its Shares."
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<PAGE>
Application forms can be obtained from PMFS, Prudential
Securities or Prusec. If a stock certificate is desired, it must
be requested in writing for each transaction. Certificates are
issued only for full shares. Shareholders who hold their shares
through Prudential Securities will not receive stock certificates.
The minimum initial investment is $1,000 per class for Class A
and Class B shares and $5,000 for Class C shares. The minimum
subsequent investment is $100 for all classes. All minimum
investment requirements are waived for certain retirement and
employee savings plans or custodial accounts for the benefit of
minors. For purchases through the Automatic Savings Accumulation
Plan the minimum initial and subsequent investment is $50. See
"Shareholder Services."
The Fund reserves the right to reject any purchase order
(including an exchange) or to suspend or modify the continuous
offering of its shares. See "How to Sell Your Shares."
Your dealer is responsible for forwarding payment promptly to
the Fund. The Distributor reserves the right to cancel any
purchase order for which payment has not been received by the fifth
business day following the investment.
Transactions in Fund shares made through dealers other than
Prudential Securities or Prusec may be subject to postage and
handling charges imposed by the dealer; however, you may avoid such
charges by placing orders directly with the Fund's Transfer Agent,
Prudential Mutual Fund Services, Inc., Attention: Investment
Services, P.O. Box 15020, New Brunswick, New Jersey 08906-5020.
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<PAGE>
Purchase by Wire. For an initial purchase of shares of the
Fund by wire, you must first telephone PMFS to receive an account
number at (800) 225-1852 (toll-free). The following information
will be requested: your name, address, tax identification number,
class election, dividend distribution election, amount being wired
and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust
Company (State Street), Boston, Massachusetts, Custody and
Shareholder Services Division, Attention: Prudential Europe Growth
Fund, Inc., specifying on the wire the account number assigned by
PMFS and your name and identifying the sales charge alternative
(Class A, Class B or Class C shares).
If you arrange for receipt by State Street of federal funds
prior to 4:15 P.M., New York time, on a business day, you may
purchase shares of the Fund as of that day.
In making a subsequent purchase order by wire, you should wire
State Street directly and should be sure that the wire specifies
Prudential Europe Growth Fund, Inc., Class A, Class B or Class C
shares and your name and individual account number. It is not
necessary to call PMFS to make subsequent purchase orders utilizing
federal funds. The minimum amount which may be invested by wire is
$1,000.
ALTERNATIVE PURCHASE PLAN
The Fund offers three classes of shares (Class A, Class B and
Class C shares) which allows you to choose the most beneficial
sales charge structure for your individual circumstances given the
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<PAGE>
amount of the purchase, the length of time you expect to hold the
shares and other relevant circumstances (Alternative Purchase
Plan).
57
<PAGE>
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average Other
Sales Charge daily net assets) Information
------------ ------------------- -----------
<S> <C> <C> <C>
Class A Maximum initial 0.30% (currently Initial sales
sales charge of being charged at a charge waived or
5% of the public rate of 0.25%) reduced for certain
offering price purchases
Class B Maximum 1% Shares convert to
contingent Class A shares
deferred sales approximately seven
charge or CDSC of years after
5% of the lesser purchase
of the amount
invested or the
redemption
proceeds; dec-
lines to zero
after six years
Class C Maximum CDSC of 1% Shares do not
1% of the lesser convert to another
of the amount class
invested or the
redemption
proceeds on
redemptions made
within one year
of purchase.
</TABLE>
58
<PAGE>
The three classes of shares represent an interest in the same
portfolio of investments of the Fund and have the same rights,
except that (i) each class bears the separate expenses of its Rule
12b-1 distribution and service plan, (ii) each class has exclusive
voting rights with respect to its plan (except as noted under the
heading "General Information - Description of Common Stock") and
(iii) only Class B shares have a conversion feature. The three
classes also have separate exchange privileges. See "How to
Exchange Your Shares" below. The net income attributable to each
class and the dividends payable on the shares of each class will be
reduced by the amount of the distribution fee of each class. Class
B and Class C shares bear the expenses of a higher distribution fee
which will generally cause them to have higher expense ratios and
to pay lower dividends than the Class A shares.
Financial advisers will receive different compensation for
selling Class A, Class B and Class C shares.
In selecting a purchase alternative, you should consider,
among other things, (1) the length of time you expect to hold your
investment, (2) the amount of any applicable sales charge (whether
imposed at the time of purchase or redemption) and distribution-
related fees, as noted above, (3) whether you qualify for any
reduction or waiver of any applicable sales charge, (4) the various
exchange privileges among the different classes of shares (see "How
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<PAGE>
to Exchange Your Shares" below) and (5) the fact that Class B
shares automatically convert to Class A shares approximately seven
years after purchase (see "Conversion Feature - Class B Shares"
below).
The following is provided to assist you in determining which
method of purchase best suits your individual circumstances and is
based on current fees and expenses being charged to the Fund.
If you intend to hold your investment in the Fund for less
than 7 years and do not qualify for a reduced sales charge on Class
A shares, since Class A shares are subject to an initial sales
charge of 5% and Class B shares are subject to a CDSC of 5% which
declines to zero over a 6-year period, you should consider
purchasing Class A or Class C shares over Class B shares.
If you intend to hold your investment for 7 years or more and
do not qualify for a reduced sales charge on Class A shares, since
Class B shares convert to Class A shares approximately 7 years
after purchase and because all of your money would be invested
initially in the case of Class B shares, you should consider
purchasing Class A or Class B shares over Class C shares.
If you qualify for a reduced sales charge on Class A shares,
it may be more advantageous for you to purchase Class A shares over
either Class B or Class C shares regardless of how long you intend
to hold your investment. However, unlike Class B and Class C
shares, you would not have all of your money invested initially
because the sales charge on Class A shares is deducted at the time
of purchase.
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<PAGE>
[If you do not qualify for a reduced sales charge on Class A
shares and you purchase Class B or Class C shares, you would have
to hold your investment for more than [___ years in the case of
Class B shares and ___ years in the case of Class C shares] for the
higher cumulative annual distribution-related fee on those shares
to exceed the initial sales charge plus cumulative annual
distribution-related fee on Class A shares. This does not take
into account the time value of money, which further reduces the
impact of the higher Class B or Class C distribution-related fee on
the investment, fluctuations in net asset value, the effect of the
return on the investment over this period of time or redemptions
during which the CDSC is applicable.]
All purchases of $1 million or more for individual investors
and for certain retirement plans, either as part of a single
investment or under rights of accumulation or letters of intent,
must be for Class A shares. See "Reduction and Waiver of Initial
Sales Charges" below.
Class A Shares
The offering price of Class A shares for investors choosing
the initial sales charge alternative is the next determined NAV
plus a sales charge (expressed as a percentage of the offering
price and of the amount invested) as shown in the following table:
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<PAGE>
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Dealer Concession
Percentage of Percentage of as Percentage of
Offering Price Amount Invested Offering Price
--------------- --------------- -----------------
<S> <C> <C> <C>
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50 4.71 4.25
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.25 3.36 3.00
$250,000 to $499,999 2.50 2.56 2.40
$500,000 to $999,999 2.00 2.04 1.90
$1,000,000 and above None None None
</TABLE>
Selling dealers may be deemed to be underwriters, as that term
is defined in the Securities Act.
Reduction and Waiver of Initial Sales Charges. [Sales charges
are reduced under Rights of Accumulation and Letters of Intent.
Class A shares are offered at NAV to participants in certain
retirement and deferred compensation plans, including qualified or
non-qualified plans under the Internal Revenue Code and certain
affinity group and group savings plans, provided that the plan has
existing assets of at least [$1] million or [1,000] eligible
employees or members. Additional information concerning the
reduction and waiver of initial sales charges is set forth in the
Statement of Additional Information. In the case of pension,
profit-sharing or stock bonus plans under Section 401 of the
Internal Revenue Code and deferred compensation and annuity plans
under Sections 457 and 403(b)(7) of the Internal Revenue Code
(Benefit Plans) whose accounts are held directly with the Transfer
Agent and for which the Transfer Agent does individual account
record keeping (Direct Account Benefit Plans) and Benefit Plans
sponsored by PSI or its subsidiaries (PSI or Subsidiary Prototype
Benefit Plans), Class A shares are offered at NAV to participants
who are repaying loans made from such plans to the participant.]
[Prudential Retirement Accumulation Program 401(k) Plan.
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<PAGE>
Class A shares may be purchased at net asset value, with a waiver
of the initial sales charge, by or on behalf of participants in the
Prudential Retirement Accumulation Program 401(k) Plan for which
Prudential Mutual Fund Services, Inc., the Fund's transfer agent,
provides recordkeeping services, provided that (i) for existing
plans, the plan has existing assets of $1 million or more, as
measured on the last business day of the month, invested in shares
of Prudential Mutual Funds (excluding money market funds other than
those acquired pursuant to the exchange privilege) held at the
transfer agent and (ii) for new plans, the plan initially invests
$1 million or more in shares of non-money market Prudential Mutual
Funds or has at least 1,000 eligible employees or members.
Prudential Vista Program. Class A shares are offered at net
asset value to certain qualified employee retirement benefit plans
under section 401 of the Internal Revenue Code of 1986, as amended,
for which Prudential Defined Contribution Services serves as the
recordkeeper, provided that such plan is also participating in the
Prudential Vista Program (The Vista Program), and provided further
that (i) for existing plans, the plan has existing assets of at
least $1 million and at least 100 eligible employees or members,
and (ii) for new plans, the plan has at least 500 eligible
employees or members. The term "existing assets" for this purpose
includes transferable cash and GICs (guaranteed investment
contracts) maturing within 4 years.]
Class A shares are offered at NAV to Directors and officers of
the Fund and other Prudential Mutual Funds, to employees of
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<PAGE>
Prudential Securities and PMF and their subsidiaries and to members
of the families of such persons who maintain an "employee related"
account at Prudential Securities or the Transfer Agent. Class A
shares are offered at NAV to employees and special agents of
Prudential and its subsidiaries and to all persons who have retired
directly from active service with Prudential or one of its
subsidiaries.
Class A shares are offered at NAV to an investor who has a
business relationship with a financial adviser who joined
Prudential Securities from another investment firm, provided that
(i) the purchase is made within 90 days of the commencement of the
financial adviser's employment at Prudential Securities, (ii) the
purchase is made with proceeds of a redemption of shares of any
open-end investment company sponsored by the financial adviser's
previous employer (other than a money market fund or other no-load
fund which imposes a distribution or service fee of .25 of 1% or
less) on which no deferred sales load, fee or other charge was
imposed on redemption and (iii) the financial adviser served as the
client's broker on the previous purchases.
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec that you are entitled to the
reduction or waiver of the sales charge. The reduction or waiver
will be granted subject to confirmation of your entitlement. No
initial sales charges are imposed upon Class A shares purchased
upon the reinvestment of dividends and distributions. See
"Purchase and Redemption of Fund Shares - Reduction and Waiver of
64
<PAGE>
Initial Sales Charges - Class A Shares" in the Statement of
Additional Information.
Class B and Class C Shares
The offering price of Class B and Class C shares for investors
choosing one of the deferred sales charge alternatives is the NAV
next determined following receipt of an order by the Transfer
Agent, Prudential Securities or Prusec. Although there is no sales
charge imposed at the time of purchase, redemption of Class B and
Class C shares may be subject to a CDSC. See "How to Sell Your
Shares - Contingent Deferred Sales Charges."
HOW TO SELL YOUR SHARES
You can redeem shares of the Fund at any time for cash at the
NAV per share next determined after the redemption request is
received in proper form by the Transfer Agent or Prudential
Securities. See "How the Fund Values its Shares." In certain
cases, however, redemption proceeds will be reduced by the amount
of any applicable contingent deferred sales charge, as described
below. See "Contingent Deferred Sales Charges" below.
If you hold shares of the Fund through Prudential Securities,
you must redeem your shares by contacting your Prudential
Securities financial adviser. If you hold shares in non-
certificate form, a written request for redemption signed by you
exactly as the account is registered is required. If you hold
certificates, the certificates signed in the names(s) shown on the
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<PAGE>
face of the certificates, must be received by the Transfer Agent in
order for the redemption request to be processed. If redemption is
requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must
be submitted before such request will be accepted. All
correspondence and documents concerning redemptions should be sent
to the Fund in care of its Transfer Agent, Prudential Mutual Fund
Services, Inc., Attention: Redemption Services, P.O. Box 15010,
New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are
to be paid to a person other than the record owner, (c) are to be
sent to an address other than the address on the Transfer Agent's
records, or (d) are to be paid to a corporation, partnership, trust
or fiduciary, the signature(s) on the redemption request and on the
certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union.
The Transfer Agent reserves the right to request additional
information from, and make reasonable inquiries of, any eligible
guarantor institution. For clients of Prusec, a signature
guarantee may be obtained from the agency or office manager of most
Prudential Insurance and Financial Services or Prudential Preferred
Financial Services offices.
Payment for shares presented for redemption will be made by
check within seven days after receipt by the Transfer Agent of the
certificate and/or written request except as indicated below. Such
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<PAGE>
payment may be postponed or the right of redemption suspended at
times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on such Exchange
is restricted, (c) when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (d) during any other
period when the SEC, by order, so permits; provided that applicable
rules and regulations of the SEC shall govern as to whether the
conditions prescribed in (b), (c) or (d) exist.
Payment for redemption of recently purchased shares will be
delayed until the Fund or its Transfer Agent has been advised that
the purchase check has been honored, up to 10 calendar days from
the time of receipt of the purchase check by the Transfer Agent.
Such delay may be avoided by purchasing shares by wire or by
certified or official bank check.
Redemption in Kind. If the Board of Directors determines that
it would be detrimental to the best interests of the remaining
shareholders of the Fund to make payment wholly or partly in cash,
the Fund may pay the redemption price in whole or in part by a
distribution in kind of securities from the investment portfolio of
the Fund, in lieu of cash, in conformity with applicable rules of
the SEC. Securities will be readily marketable and will be valued
in the same manner as a regular redemption. See "How the Fund
Values its Shares." If your shares are redeemed in kind, you would
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<PAGE>
incur transaction costs in converting the assets into cash. The
Fund has, however, elected to be governed by Rule 18f-1 under the
Investment Company Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund during the 90-day period for any one
shareholder.
Involuntary Redemption. In order to reduce expenses of the
Fund, the Board of Directors may redeem all of the shares of any
shareholder, other than a shareholder which is an IRA or other tax-
deferred retirement plan, whose account has a net asset value of
less than $500 due to a redemption. The Fund will give any such
shareholder 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption. No
contingent deferred sales charge will be imposed on any involuntary
redemption.
30-day Repurchase Privilege. If you redeem your shares and
have not previously exercised the repurchase privilege, you may
reinvest any portion or all of the proceeds of such redemption in
shares of the Fund at the NAV next determined after the order is
received, which must be within 30 days after the date of
redemption. No sales charge will apply to such repurchases. You
will receive pro rata credit for any contingent deferred sales
charge paid in connection with the redemption of Class B shares.
You must notify the Fund's Transfer Agent, either directly or
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<PAGE>
through Prudential Securities or Prusec, at the time the repurchase
privilege is exercised that you are entitled to credit for the
contingent deferred sales charge previously paid. Exercise of the
repurchase privilege will not affect the federal income tax
treatment of any gain realized upon redemption. If the redemption
resulted in a loss, some or all of the loss, depending on the
amount reinvested, will not be allowed for federal income tax
purposes.
Contingent Deferred Sales Charges
Redemptions of Class B shares will be subject to a contingent
deferred sales charge or CDSC declining from 5% to zero over a six-
year period. Class C shares redeemed within one year of purchase
will be subject to a 1% CDSC. The CDSC will be deducted from the
redemption proceeds and reduce the amount paid to you. The CDSC
will be imposed on any redemption by you which reduces the current
value of your Class B or Class C shares to an amount which is lower
than the amount of all payments by you for shares during the
preceding six years, in the case of Class B shares, and one year,
in the case of Class C shares. A CDSC will be applied on the
lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or
shares purchased through reinvestment of dividends or distributions
are not subject to CDSC. The amount of any contingent deferred
sales charge will be paid to and retained by the Distributor. See
"How the Fund is Managed - Distributor" and "Waiver of the
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<PAGE>
Contingent Deferred Sales Charges" below.
The amount of the CDSC, if any, will vary depending on the
number of years from the time of payment for the purchase of your
shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any
payment for the purchase of shares, all payments during a month
will be aggregated and deemed to have been made on the last day of
the month.
The following table sets forth the rates of the CDSC
applicable to redemptions of Class B shares:
<TABLE>
<CAPTION>
Contingent Deferred Sales
Charge as a Percentage
Year Since Purchase of Dollars Invested or
Payment Made Redemption Proceeds
--------------------- --------------------------
<S> <C>
First. . . . . . . . . . . . . 5.0%
Second . . . . . . . . . . . . 4.0%
Third. . . . . . . . . . . . . 3.0%
Fourth . . . . . . . . . . . . 2.0%
Fifth. . . . . . . . . . . . . 1.0%
Sixth. . . . . . . . . . . . . 1.0%
Seventh. . . . . . . . . . . . None
</TABLE>
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results generally in the
lowest possible rate. It will be assumed that the redemption is
made first of amounts representing shares acquired pursuant to the
reinvestment of dividends and distributions; then of amounts
representing the increase in net asset value above the total amount
of payments for the purchase of Fund shares made during the
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<PAGE>
preceding six years; then of amounts representing the cost of
shares held beyond the applicable CDSC period; and finally, of
amounts representing the cost of shares held for the longest period
of time within the applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per
share for a cost of $1,000. Subsequently, you acquired 5
additional Class B shares through dividend reinvestment. During
the second year after the purchase, you decided to redeem $500 of
your investment. Assuming at the time of the redemption the NAV
had appreciated to $12 per share, the value of your Class B shares
would be $1,260 (105 shares at $12 per share). The CDSC would not
be applied to the value of the reinvested dividend shares and the
amount which represents appreciation ($260). Therefore, $240 of
the $500 redemption proceeds ($500 minus $260) would be charged at
a rate of 4% (the applicable rate in the second year after
purchase) for a total CDSC of $9.60.
For federal income tax purposes, the amount of the CDSC will
reduce the gain or increase the loss, as the case may be, on the
amount recognized on the redemption of shares.
Waiver of Contingent Deferred Sales Charges - Class B Shares.
The CDSC will be waived in the case of a redemption following the
death or disability of a shareholder or, in the case of a trust
account, following the death or disability of the grantor. The
waiver is available for total or partial redemptions of shares
owned by a person, either individually or in joint tenancy (with
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<PAGE>
rights of survivorship), or a trust, at the time of death or
initial determination or disability, provided that the shares were
purchased prior to death or disability.
The CDSC will also be waived in the case of a total or partial
redemption in connection with certain distributions made without
penalty under the Internal Revenue Code from a tax-deferred
retirement plan, an IRA or Section 403(b) custodial account. These
distributions include a lump-sum or other distribution after
retirement, or for an IRA or Section 403(b) custodial account,
after attaining age 59 1/2, a tax-free return of an excess
contribution or plan distributions following the death or
disability of the shareholder, provided that the shares were
purchased prior to death or disability. The waiver does not apply
in the case of a tax-free rollover or transfer of assets, other
than one following a separation from service. In the case of
Direct Account and PSI or Subsidiary Prototype Benefit Plans, the
CDSC will be waived on redemptions which represent borrowings from
such plans. Shares purchased with amounts used to repay a loan
from such plans on which a CDSC was not previously deducted will
thereafter be subject to a CDSC without regard to the time such
amounts were previously invested. In the case of a 401(k) plan,
the CDSC will also be waived upon the redemption of shares
purchased with amounts used to repay loans made from the account to
the participant and from which a CDSC was previously deducted.
In addition, the CDSC will be waived on redemptions of shares
held by Directors of the Fund.
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<PAGE>
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that
you are entitled to waiver of the CDSC. The waiver will be granted
subject to confirmation of your entitlement.
CONVERSION FEATURE - CLASS B SHARES
Class B shares will automatically convert to Class A shares on
a quarterly basis approximately seven years after purchase.
Conversions will occur during the month following each calendar
quarter and will be effected at relative net asset value without
the imposition of any additional sales charge. It is currently
anticipated that conversions will occur on the first Friday or next
business day of the month following each calendar quarter.
Since the Fund tracks amounts paid rather than the number of
shares bought on each purchase of Class B shares, the number of
Class B shares eligible to convert to Class A shares (excluding
shares acquired through the automatic reinvestment of dividends and
other distributions) (the Eligible Shares) will be determined on
each conversion date in accordance with the following formula:
(i) the ratio of (a) the amounts paid for Class B shares purchased
at least seven years prior to the conversion date to (b) the total
amount paid for all Class B shares purchased and then held in your
account (ii) multiplied by the total number of Class B shares then
in your account. Each time any Eligible Shares in your account
convert to Class A shares, all shares or amounts representing Class
B shares then in your account that were acquired through the
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<PAGE>
automatic reinvestment of dividends and other distributions will
convert to Class A shares.
For purposes of determining the number of Eligible Shares, if the
Class B shares in your account on any conversion date are the
result of multiple purchases at different net asset values per
share, the number of Eligible Shares calculated as described above
will generally be either more or less than the number of shares
actually purchased approximately seven years before such conversion
date. For example, if 100 shares were initially purchased at $10
per share (for a total of $1,000) and a second purchase of 100
shares was subsequently made at $11 per share (for a total of
$1,100), 95.24 shares would convert approximately seven years from
the initial purchase (i.e., $1,000 divided by $2,100 or 47.62%
multiplied by 200 shares or 95.24 shares). The Manager reserves
the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to
shareholders.
Since annual distribution-related fees are lower for Class A
shares than Class B shares, the per share net asset value of the
Class A shares may be higher than that of the Class B shares at the
time of conversion. Thus, although the aggregate dollar value will
be the same, you may receive fewer Class A shares than Class B
shares converted. See "How the Fund Values its Shares."
For purposes of calculating the applicable holding period for
conversions, all payments for Class B shares during a month will be
deemed to have been made on the last day of the month, or for Class
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<PAGE>
B shares acquired through exchange, or a series of exchanges, on
the last day of the month in which the original payment for
purchases of such Class B shares was made. For Class B shares
previously exchanged for shares of a money market fund, the time
period during which such shares were held in the money market fund
will be excluded. For example, Class B shares held in a money
market fund for one year will not convert to Class A shares until
approximately eight years from purchase. It is currently
anticipated that the first conversion of Class B shares will occur
in or about January, 1995. At that time, all amounts representing
Class B shares then outstanding beyond the applicable conversion
period will automatically convert to Class A shares, together with
all shares or amounts representing Class B shares acquired through
the automatic reinvestment of dividends and distributions then held
in your account.
The conversion feature is subject to the continuing availability
of opinions of counsel (i) that the dividends and other
distributions paid on Class A, Class B, and Class C shares will not
constitute "preferential dividends" under the Internal Revenue Code
and (ii) that the conversion of shares does not constitute a
taxable event.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Fund you have an exchange privilege with
certain other Prudential Mutual Funds, including one or more
specified money market funds, subject to the minimum investment
75
<PAGE>
requirements of such funds. Class A, Class B and Class C shares
may be exchanged for Class A, Class B and Class C shares,
respectively, of another fund on the basis of the relative NAV.
Any applicable CDSC payable upon the redemption of shares exchanged
will be that imposed by the fund in which shares are initially
purchased and will be calculated from the first day of the month
after the initial purchase, excluding the time shares were held in
a money market fund. Class B and Class C shares may not be
exchanged into money market funds other than Prudential Special
Money Market Fund. For purposes of calculating the holding period
applicable to the Class B conversion feature, the time period
during which Class B shares were held in a money market fund will
be excluded. See "Conversion Feature - Class B Shares" above. An
exchange will be treated as a redemption and purchase for tax
purposes. See "Shareholder Investment Account - Exchange
Privilege" in the Statement of Additional Information.
In order to exchange shares by telephone, you must authorize
telephone exchanges on your initial application form or by written
notice to the Transfer Agent and hold shares in non-certificate
form. Thereafter, you may call the Fund at (800) 225-1852 to
execute a telephone exchange of shares, on weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York
time. For your protection and to prevent fraudulent exchanges,
your telephone call will be recorded and you will be asked to
provide your personal identification number. A written
confirmation of the exchange transaction will be sent to you. All
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<PAGE>
exchanges will be made on the basis of the relative NAV of the two
funds next determined after the request is received in good order.
The exchange privilege is available only in states where the
exchange may legally be made. Neither the Fund nor its agents will
be liable for any loss, liability or cost which results from acting
upon instructions reasonably believed to be genuine under the
foregoing procedures.
If you hold shares through Prudential Securities, you must
exchange your shares by contacting your Prudential Securities
financial adviser.
If you hold certificates, the certificates, signed in the name(s)
shown on the face of the certificates, must be returned in order
for the shares to be exchanged. See "How to Sell Your Shares"
above.
You may also exchange shares by mail by writing to Prudential
Mutual Fund Services, Inc., Attention: Exchange Processing, P.O.
Box 15010, New Brunswick, New Jersey 08906-5010.
In periods of severe market or economic conditions the telephone
exchange of shares may be difficult to implement and you should
make exchanges by mail by writing to Prudential Mutual Fund
Services, Inc., at the address noted above.
The exchange privilege may be modified or terminated at any time
on sixty days' notice.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the
77
<PAGE>
Fund, you can take advantage of the following additional services
and privileges:
o Automatic Reinvestment of Dividends and/or Distribution
Without a Sales Charge. For your convenience, all dividends and
distributions are automatically reinvested in full and fractional
shares of the Fund at NAV without a sales charge. You may direct
the Transfer Agent in writing not less than 5 full business days
prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold
shares through Prudential Securities, you should contact your
financial adviser.
o Automatic Savings Accumulation Plan (ASAP). Under ASAP you
may make regular purchases of the Fund's shares in amounts as
little as $50 via an automatic debit to a bank account or
Prudential Securities account (including a Command Account). For
additional information about this service, you may contact your
Prudential Securities financial adviser, Prusec registered
representative or the Transfer Agent directly.
o Tax-Deferred Retirement Plans. Various tax-deferred
retirement plans, including a 401(k) plan, self-directed individual
retirement accounts and "tax-sheltered accounts" under Section
403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed
78
<PAGE>
individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account
arrangement. Information regarding the establishment of these
plans, the administration, custodial fees and other details is
available from Prudential Securities or the Transfer Agent. If you
are considering adopting such a plan, you should consult with your
own legal or tax adviser with respect to the establishment and
maintenance of such a plan.
o Systematic Withdrawal Plan. A systematic withdrawal plan is
available to shareholders, which provides for monthly or quarterly
checks. Withdrawals of Class B and Class C shares may be subject
to a CDSC. See "How to Sell Your Shares - Contingent Deferred
Sales Charges." See also "Shareholder Investment Account -
Systematic Withdrawal Plan" in the Statement of Additional
Information.
o Reports to Shareholders. The Fund will send you annual and
semi-annual reports. The financial statements appearing in annual
reports are audited by independent accountants. In order to reduce
duplicate mailing and printing expenses, the Fund will provide one
annual and semi-annual shareholder report and annual prospectus per
household. You may request additional copies of such reports by
calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, New York 10292. In addition, monthly unaudited
financial data are available upon request from the Fund.
79
<PAGE>
o Shareholder Inquiries. Inquiries should be addressed to the
Fund at One Seaport Plaza, New York, New York 10292, or by
telephone, at (800) 225-1852 (toll-free) or, from outside the
U.S.A. at (908) 417-7555 (collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the
Statement of Additional Information.
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<PAGE>
No dealer, sales representative or any other person has been
authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained herein,
and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Fund or the Distributor. This Prospectus
does not constitute an offer by the Fund or by the
Distributor to sell or a solicitation of any offer to buy any
of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such
jurisdiction.
- --------------------------------------------------------------------------
TABLE OF CONTENTS
Page
FUND HIGHLIGHTS...........................
FUND EXPENSES.............................
HOW THE FUND INVESTS......................
Investment Objective and Policies......
Special Considerations and Risks of
Investing in Foreign Securities......
Hedging and Income Enhancement
Strategies...........................
Other Investments and Policies.........
Investment Restrictions................
HOW THE FUND IS MANAGED...................
Manager................................
Distributor............................
Fee Waivers and Subsidy................
Portfolio Transactions.................
Custodian and Transfer and Dividend
Disbursing Agent.....................
HOW THE FUND VALUES ITS SHARES............
HOW THE FUND CALCULATES PERFORMANCE.......
TAXES, DIVIDENDS AND DISTRIBUTIONS........
GENERAL INFORMATION.......................
Description of Common Stock............
Additional Information.................
SHAREHOLDER GUIDE.........................
How to Buy Shares of the Fund..........
Alternative Purchase Plan..............
How to Sell Your Shares................
Conversion Feature - Class B Shares.....
How to Exchange Your Shares............
Shareholder Services...................
THE PRUDENTIAL MUTUAL FUND FAMILY.........
- --------------------------------------------------------------------------
CUSIP No.: Class A:
Class B:
Class C:
81
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Additional Information
dated , 1994
Prudential Europe Growth Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity securities (common stock and securities convertible into common stock) of
companies domiciled in Europe. Under normal circumstances, the Fund intends to
invest at least 65% of its total assets in such securities. The Fund may also
invest in equity securities of other companies and in non-convertible debt
securities, options on stocks, stock indices, foreign currencies and futures
contracts on foreign currencies and may purchase and sell futures contracts on
foreign currencies and groups of currencies and on financial or stock indices to
hedge its portfolio and to attempt to enhance income. There can be no assurance
that the Fund's investment objective will be achieved. See ``Investment
Objective and Policies.''
The Fund's address is One Seaport Plaza, New York, New York 10292, and its
telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus dated , 1994, a copy of
which may be obtained from the Fund upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
to page in
Page Prospectus
----- ----------------
<S> <C> <C>
Investment Objective and Policies.......................................... B-2
Investment Restrictions.................................................... B-11
Directors and Officers..................................................... B-12
Manager.................................................................... B-13
Distributor................................................................ B-14
Portfolio Transactions and Brokerage....................................... B-15
Purchase and Redemption of Fund Shares..................................... B-16
Shareholder Investment Account............................................. B-18
Net Asset Value............................................................ B-21
Taxes...................................................................... B-21
Performance Information.................................................... B-24
Custodian, Transfer and Dividend Disbursing Agent and Independent
Accountants.............................................................. B-25
Description of Security Ratings............................................ B-26
Independent Auditors' Report............................................... B-28
Financial Statements.......................................................
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in equity securities, common
stocks, common stock equivalents (including warrants and convertible debt
securities) and other equity securities of companies doing business in or
domiciled in Europe. See ``How the Fund Invests--Investment Objective and
Policies'' in the Prospectus.
U.S. Government Securities
U.S. Treasury Securities. The Fund is permitted to invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the ``full faith and credit'' of the
United States. They differ primarily in their interest rates, the lengths of
their maturities and the dates of their issuances.
Securities Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. The Fund may invest in securities issued by agencies of the
U.S. Government or instrumentalities of the U.S. Government. These obligations,
including those which are guaranteed by Federal agencies or instrumentalities,
may or may not be backed by the full faith and credit of the United States.
Obligations of the Government National Mortgage Association (GNMA), the Farmers
Home Administration and the Small Business Administration are backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the Fund must look principally
to the agency issuing or guaranteeing the obligation for ultimate repayment and
may not be able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments. Securities in which the Fund may
invest which are not backed by the full faith and credit of the United States
include obligations such as those issued by the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Student Loan Marketing Association, Resolution Funding
Corporation and the Tennessee Valley Authority, each of which has the right to
borrow from the U.S. Treasury to meet its obligations, and obligations of the
Farm Credit System, the obligations of which may be satisfied only by the
individual credit of the issuing agency. FHLMC investments may include
collateralized mortgage obligations. See ``Other Investments and Investment
Techniques'' below.
Obligations issued or guaranteed as to principal and interest by the United
States Government may be acquired by the Fund in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. Such notes and bonds are held
in custody by a bank on behalf of the owners. These custodial receipts are
commonly referred to as Treasury strips.
Mortgage-Related Securities Issued by U.S. Government Agencies and
Instrumentalities. The Fund may invest in mortgage-backed securities, including
those which represent undivided ownership interests in pools of mortgages. The
U.S. Government or the issuing agency or instrumentality guarantees the payment
of interest on and principal of these securities. However, the guarantees do not
extend to the yield or value of the securities nor do the guarantees extend to
the yield or value of the Fund's shares. These securities are in most cases
``pass-through'' instruments, through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees. Because the prepayment characteristics of the underlying
mortgages vary, it is not possible to predict accurately the average life of a
particular issue of pass-through certificates. Mortgage-backed securities are
often subject to more rapid repayment than their maturity date would indicate as
a result of the pass-through of prepayments of principal on the underlying
mortgage obligations. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
The Fund's ability to maintain a portfolio of high-yielding mortgage-backed
securities will be adversely affected to the extent that prepayments of
mortgages must be reinvested in securities which have lower yields than the
prepaid mortgages. Moreover, prepayments of mortgages which underlie securities
purchased at a premium could result in capital losses.
The Fund may also invest in mortgage pass-through securities where all
interest payments go to one class of holders (Interest Only Securities or IOs)
and all principal payments go to a second class of holders (Principal Only
Securities or POs). These securities are commonly referred to as mortgage-backed
securities strips or MBS strips. The yields to maturity on IOs are very
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on yield to maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Fund
may not fully recoup its initial investment in these securities. Conversely, if
the underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially adversely affected. The Fund
will only invest in MBS strips rated Aaa by Moody's Investor's Service (Moody's)
or AAA by Standard & Poor's Ratings Group (S&P).
The Fund will invest in both Adjustable Rate Mortgage Securities (ARMs),
which are pass-through mortgage securities collateralized by adjustable rate
mortgages, and Fixed-Rate Mortgage Securities (FRMs), which are collateralized
by fixed-rate mortgages.
B-2
<PAGE>
The values of U.S. Government securities (like those of other fixed-income
securities generally) will change as interest rates fluctuate. During periods of
falling U.S. interest rates, the values of U.S. Government securities generally
rise and, conversely, during periods of rising interest rates, the values of
such securities generally decline. The magnitude of these fluctuations will
generally be greater for securities with longer-term maturities.
Foreign Debt Securities
The Fund is permitted to invest in foreign corporate and government
securities. ``Foreign Government securities'' include debt securities issued or
guaranteed, as to payment of principal and interest, by governments,
quasi-governmental entities, governmental agencies, supranational entities and
other governmental entities (collectively, Government Entities) of foreign
countries denominated in the currencies of such countries or in U.S. dollars
(including debt securities of a Government Entity in any such country
denominated in the currency of another such country).
A ``supranational entity'' is an entity constituted by the national
governments of several countries to promote economic development. Examples of
such supranational entities include, among others, the World Bank (International
Bank for Reconstruction and Development), the European Investment Bank and the
Asian Development Bank. Debt securities of ``quasi-governmental entities'' are
issued by entities owned by a national, state, or equivalent government or are
obligations of a political unit that are not backed by the national government's
``full faith and credit'' and general taxing powers. Examples of
quasi-government issuers include, among others, the Province of Ontario and the
City of Stockholm. ``Foreign government securities'' shall also include debt
securities of Government Entities denominated in European Currency Units. A
European Currency Unit represents specified amounts of the currencies of certain
of the twelve member states of the European Community. Foreign government
securities shall also include mortgage-backed securities issued by foreign
Government Entities including quasi-governmental entities and the remaining
maturities of such securities shall be treated by the Fund in the same manner as
mortgage-backed U.S. Government securities.
Options on Securities
The Fund may purchase and write (i.e., sell) put and call options on
securities that are traded on U.S. or foreign securities exchanges or that are
traded in the over-the-counter markets. A call option is a short-term contract
pursuant to which the purchaser, in return for a premium paid, has the right to
buy the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation, upon exercise of the option, to deliver the
underlying security against payment of the exercise price. A put option is a
similar contract which gives the purchaser, in return for a premium, the right
to sell the underlying security at a specified price during the term of the
option. The writer of the put, who receives the premium, has the obligation to
buy the underlying security upon exercise at the exercise price. The Fund will
generally write put options when its investment adviser desires to invest in the
underlying security. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates.
A call option written by the Fund is ``covered'' if the Fund owns the
security underlying the option or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds on a share-for-share basis a call on the same security
as the call written where the exercise price of the call held is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Fund in cash,
U.S. Government securities or other liquid high-grade debt obligations in a
segregated account with its Custodian. A put option written by the Fund is
``covered'' if the Fund maintains cash, U.S. Government securities or other
liquid high-grade debt obligations with a value equal to the exercise price in a
segregated account with its Custodian, or else holds on a share-for-share basis
a put of the same security as the put written where the exercise price of the
put held is equal to or greater than the exercise price of the put written.
If the writer of an option wishes to terminate the obligation, he or she
may effect a ``closing purchase transaction.'' This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she had been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a ``closing sale transaction.'' This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected. To secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option is generally required to pledge
for the benefit of the broker the underlying security or other assets in
accordance with the rules of the relevant exchange or clearinghouse, such as The
Options Clearing Corporation (OCC), an institution created to interpose itself
between buyers and sellers of options in the United States. Technically, the
clearinghouse assumes the other side of every purchase and sale transaction on
an exchange and, by doing so, guarantees the transaction.
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The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option may be offset in whole or in
part if the Fund holds the underlying security by appreciation of the underlying
security owned by the Fund.
The Fund may also purchase a ``protective put,'' i.e., a put option
acquired for the purpose of protecting a portfolio security from a decline in
market value. In exchange for the premium paid for the put option, the Fund
acquires the right to sell the underlying security at the exercise price of the
put regardless of the extent to which the underlying security declines in value.
The loss to the Fund is limited to the premium paid for, and transaction costs
in connection with, the put plus the initial excess, if any, of the market price
of the underlying security over the exercise price. However, if the market price
of the security underlying the put rises, the profit the Fund realizes on the
sale of the security will be reduced by the premium paid for the put option less
any amount (net of transaction costs) for which the put may be sold. Similar
principles apply to the purchase of puts on stock indices, as described below.
Options on Securities Indices. In addition to options on securities, the
Fund may also purchase and sell put and call options on securities indices
traded on U.S. or foreign securities exchanges or traded in the over-the-counter
markets. Options on securities indices are similar to options on securities
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the multiplier). The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. All
settlements on options on indices are in cash, and gain or loss depends on price
movements in the securities market generally (or in a particular industry or
segment of the market) rather than price movements in individual securities.
The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per contract
of each point in the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers. Because exercises of index options are settled in cash, a
call writer cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding the
underlying securities. In addition, unless the Fund has other liquid assets
which are sufficient to satisfy the exercise of a call, the Fund would be
required to liquidate portfolio securities or borrow in order to satisfy the
exercise.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of security prices in the market generally or in an
industry or market segment rather than movements in the price of a particular
security. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the securities market generally or of a particular industry.
This requires different skills and techniques than predicting changes in the
price of individual stocks. The investment adviser currently uses such
techniques in conjunction with the management of other mutual funds.
Risks of Transactions in Options
An option position may be closed out only on an exchange, board of trade or
other trading facility which provides a secondary market for an option of the
same series. Although the Fund will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange or otherwise may exist. In such event it might not be
possible to effect closing transactions in particular options, with the result
that the Fund would have to exercise its options in order to realize any profit
and would incur brokerage commissions upon the exercise of call options and upon
the subsequent disposition of underlying securities acquired through the
exercise of call options or upon the purchase of underlying securities for the
exercise of put options. If the Fund as a covered call option writer is unable
to effect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or
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series of options), in which event the secondary market on that exchange (or in
the class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms. There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of any of the clearing corporations inadequate, and thereby result in
the institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders. The Fund intends to purchase and sell
only those options which are cleared by clearinghouses whose facilities are
considered to be adequate to handle the volume of options transactions.
Risks of Options on Indices
The Fund's purchase and sale of options on indices will be subject to risks
described above under ``Risks of Transactions in Options.'' In addition, the
distinctive characteristics of options on indices create certain risks that are
not present with stock options.
Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the Fund's policy to purchase or
write options only on indices which include a number of stocks sufficient to
minimize the likelihood of a trading halt in the index.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until, in
the investment adviser's opinion, the market for such options has developed
sufficiently that the risk in connection with such transactions is not
substantially greater than the risk in connection with options on securities in
the index.
Special Risks of Writing Calls on Indices
Because exercises of index options are settled in cash, a call writer such
as the Fund cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding the
underlying securities. However, the Fund will write call options on indices only
under the circumstances described below under ``Limitations on Purchase and Sale
of Stock Options and Options on Stock Indices, Foreign Currencies and Futures
Contracts on Foreign Currencies.''
Price movements in the Fund's portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, the Fund
bears the risk that the price of the securities held by the Fund may not
increase as much as the index. In such event, the Fund would bear a loss on the
call which is not completely offset by movements in the price of the Fund's
portfolio. It is also possible that the index may rise when the Fund's portfolio
of stocks does not rise. If this occurred, the Fund would experience a loss on
the call which is not offset by an increase in the value of its portfolio and
might also experience a loss in its portfolio. However, because the value of a
diversified portfolio will, over time, tend to move in the same direction as the
market, movements in the value of the Fund in the opposite direction as the
market would be likely to occur for only a short period or to a small degree.
Unless the Fund has other liquid assets which are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio securities
in order to satisfy the exercise. Because an exercise must be settled within
hours after receiving the notice of exercise, if the Fund fails to anticipate an
exercise, it may have to borrow from a bank (in amounts not exceeding 20% of the
Fund's total assets) pending settlement of the sale of securities in its
portfolio and would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a price
which is fixed as of the closing level of the index on the date of exercise, and
the time the Fund is able to sell stocks in its portfolio. As with stock
options, the Fund will not learn that an index option has been exercised until
the day following the exercise date but, unlike a call on stock where the Fund
would be able to deliver the underlying securities in settlement, the Fund may
have to sell part of its investment portfolio in order to make settlement in
cash, and the price of such investments might decline before they can be sold.
This timing risk makes certain strategies involving more than one option
substantially more risky with index options than with stock options. For
example, even if an index call which the Fund has written is ``covered'' by an
index call held by the Fund with the same strike price, the Fund will bear the
risk that the level of the index may decline between the close of trading on the
date the exercise notice is filed with the clearing corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call which, in either case, would occur no earlier than the day
following the day the exercise notice was filed.
If the Fund holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercised option to fall out-of-the-money, the Fund will be required to pay
the difference between the closing index value and the exercise price of the
option of the option (times the applicable multiplier) to the assigned writer.
Although the Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
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not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
Risks of Options on Foreign Currencies
Options on foreign currencies involve the currencies of two nations and
therefore, developments in either or both countries affect the values of options
on foreign currencies. Risks include those described in the Prospectus under
``How the Fund Invests--Special Considerations and Risks of Investing in Foreign
Securities,'' including government actions affecting currency valuation and the
movements of currencies from one country to another. The quantity of currency
underlying option contracts represent odd lots in a market dominated by
transactions between banks; this can mean extra transaction costs upon exercise.
Option markets may be closed while round-the-clock interbank currency markets
are open, and this can create price and rate discrepancies.
Risks Related to Forward Foreign Currency Exchange Contracts
The Fund may enter into forward foreign currency exchange contracts in
several circumstances. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to ``lock-in'' the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund may be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when the investment adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. The Fund's Custodian will
place cash or liquid securities into a segregated account of the Fund in an
amount equal to the value of the Fund's total assets committed to the
consummation of forward foreign currency exchange contracts. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.
The Fund generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an ``offsetting'' contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the forward contract.
Accordingly, if a decision is made to sell the security and make delivery of the
foreign currency and if the market value of the security is less than the amount
of foreign currency that the Fund is obligated to deliver, then it would be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase).
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Should forward contract prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent that the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward contract prices increase,
the Fund will suffer a loss to the extent that the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. Of course, the Fund is
not required to enter into such transactions with regard to its foreign
currency-denominated securities. It also should be recognized that this method
of protecting the value of the Fund's portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying prices
of the securities which are unrelated to exchange rates. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend physically to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors should
be aware of the costs of currency
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conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the spread)
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures contracts as
a hedging device. Due to the imperfect correlation between the price of futures
contracts and movements in the currency or group of currencies, the price of a
futures contract may move more or less than the price of the currencies being
hedged. In the case of futures contracts on securities indices, the correlation
between the price of the futures contract and the movements in the index may not
be perfect. Therefore, a correct forecast of currency rates, market trends or
international political trends by the investment adviser may still not result in
a successful hedging transaction.
Although the Fund will purchase or sell futures contracts only on exchanges
where there appears to be an adequate secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
contract or at any particular time. Accordingly, there can be no assurance that
it will be possible, at any particular time, to close a futures position. In the
event the Fund could not close a futures position and the value of such position
declined, the Fund would be required to continue to make daily cash payments of
variation margin. There is no guarantee that the price movements of the
portfolio securities denominated in foreign currencies will, in fact, correlate
with the price movements in the futures contract and thus provide an offset to
losses on a futures contract. Currently, currency futures contracts are
available on various foreign currencies including the Australian Dollar, British
Pound, Canadian Dollar, Japanese Yen, Swiss Franc, German Mark and Eurodollars.
Index futures contracts are available on various U.S. and foreign securities
indices.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the Investment
Company Act), are exempt from the definition of ``commodity pool operator,''
subject to compliance with certain conditions. The exemption is conditioned upon
a requirement that all of the Fund's futures or options transactions constitute
bona fide hedging transactions within the meaning of the regulations of the
Commodity Futures Trading Commission (CFTC). The Fund will use currency futures
and options on futures or commodity options contracts in a manner consistent
with this requirement. The Fund may also enter into futures or related options
contracts for income enhancement and risk management purposes if the aggregate
initial margin and option premiums do not exceed 5% of the liquidation value of
the Fund's total assets, after taking into account unrealized profits and
unrealized losses on any such contracts, provided, however, that in the case of
an option that is in-the-money, the in-the-money amount may be excluded in
computing such 5%. The above restriction does not apply to the purchase and sale
of futures and related options contracts for bona fide hedging purchases.
Successful use of futures contracts by the Fund is also subject to the
ability of the Fund's investment adviser to predict correctly movements in the
direction of markets and other factors affecting currencies or the securities
market generally. For example, if the Fund had hedged against the possibility of
an increase in currency rates which would adversely affect the price of
securities in its portfolio and the price of such securities increases instead,
the Fund will lose part or all of the benefit of the increased value of its
securities because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash to meet daily
variation margin requirements, it may need to sell securities to meet such
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it is disadvantageous to do so.
The hours of trading of futures contracts may not conform to the hours
during which the Fund may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be reflected
in the futures markets.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. Currency options can
be purchased or written with respect to futures contracts on various foreign
currencies, including the Australian Dollar, British Pound, Canadian Dollar,
Japanese Yen, Swiss Franc, German Mark and Eurodollars. With respect to stock
indices, options are traded on futures contracts for various U.S. and foreign
stock indices including the S&P 500 Stock Index and the NYSE Composite Index.
The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such closing
transactions can be effected.
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Limitations on Purchase and Sale of Stock Options and Options on Stock Indices,
Foreign Currencies and Futures Contracts on Foreign Currencies
The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund will write put options on stock indices and foreign currencies
and futures contracts on foreign currencies only if they are covered by
segregating with the Fund's Custodian an amount of cash, U.S. Government
securities, or liquid assets equal to the aggregate exercise price of the puts.
[The Fund has undertaken with certain state securities commissions that, so long
as shares of the Fund are registered in those states, it will not (a) write puts
having aggregate exercise prices greater than 25% of total net assets; or (b)
purchase (i) put options on stocks not held in the Fund's portfolio, (ii) put
options on stock indices, foreign currencies or futures contracts on foreign
currencies or (iii) call options on stocks, stock indices or foreign currencies
if, after any such purchase, the aggregate premiums paid for such options would
exceed 10% of the Fund's total net assets; provided, however, that the Fund may
purchase put options on stocks held by the Fund if after such purchase the
aggregate premiums paid for such options do not exceed 20% of the Fund's total
assets.] In addition, the Fund will not enter into futures contracts or related
options if the aggregate initial margin and premiums exceed 5% of the
liquidation value of the Fund's total assets, taking into account unrealized
profits and losses on such contracts, provided, however, that in the case of an
option that is in-the-money, the in-the-money amount may be excluded in
computing such 5%. The above restriction does not apply to the purchase or sale
of futures contracts and related options for bona fide hedging purposes. The
Fund does not intend to purchase options on equity securities or securities
indices if the aggregate premiums paid for such outstanding options would exceed
10% of the Fund's total assets.
Except as described below, the Fund will write call options on indices only
if on such date it holds a portfolio of stocks at least equal to the value of
the index times the multiplier times the number of contracts. When the Fund
writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, cash, U.S. Government securities, liquid high-grade
debt securities or at least one ``qualified security'' with a market value at
the time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts.
If the Fund has written an option on an industry or market segment index,
it will segregate or put into escrow with its Custodian, or pledge to a broker
as collateral for the option, at least ten ``qualified securities,'' all of
which are stocks of issuers in such industry or market segment, with a market
value at the time the option is written of not less than 100% of the current
index value times the multiplier times the number of contracts. Such stocks will
include stocks which represent at least 50% of the weighting of the industry or
market segment index and will represent at least 50% of the Fund's holdings in
that industry or market segment. No individual security will represent more than
15% of the amount so segregated, pledged or escrowed in the case of
broadly-based stock market index options or 25% of such amount in the case of
industry or market segment index options. If at the close of business on any day
the market value of such qualified securities so segregated, escrowed or pledged
falls below 100% of the current index value times the multiplier times the
number of contracts, the Fund will so segregate, escrow or pledge an amount in
cash, U.S. Government securities or other high-grade short-term debt obligations
equal in value to the difference. In addition, when the Fund writes a call on an
index which is in-the-money at the time the call is written, the Fund will
segregate with its Custodian or pledge to the broker as collateral cash, U.S.
Government securities or other high-grade short-term debt obligations equal in
value to the amount by which the call is in-the-money times the multiplier times
the number of contracts. Any amount segregated pursuant to the foregoing
sentence may be applied to the Fund's obligation to segregate additional amounts
in the event that the market value of the qualified securities falls below 100%
of the current index value times the multiplier times the number of contracts. A
``qualified security'' is an equity security which is listed on a national
securities exchange or listed on NASDAQ against which the Fund has not written a
stock call option and which has not been hedged by the Fund by the sale of stock
index futures. However, if the Fund holds a call on the same index as the call
written where the exercise price of the call held is equal to or less than the
exercise price of the call written or greater than the exercise price of the
call written if the difference is maintained by the Fund in cash, Treasury bills
or other high-grade short-term obligations in a segregated account with its
Custodian, it will not be subject to the requirements described in this
paragraph.
The Fund may engage in futures contracts and options on futures
transactions as a hedge against changes, resulting from market or political
conditions, in the value of the currencies to which the Fund is subject or to
which the Fund expects to be subject in connection with future purchases. The
Fund may engage in such transactions when they are economically appropriate for
the reduction of risks inherent in the ongoing management of the Fund. The Fund
may write options on futures contracts to realize through the receipt of premium
income a greater return than would be realized in the Fund's portfolio
securities alone.
Position Limits. Transactions by the Fund in futures contracts and options
will be subject to limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ) governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges, boards of trade or
other trading facilities or are held or written in one or more accounts or
through one or more brokers. Thus, the number of futures contracts and options
which the Fund may write or purchase may be affected by the futures contracts
and options written or purchased by other investment advisory clients of the
investment adviser. An exchange,
B-8
<PAGE>
board of trade or other trading facility may order the liquidations of positions
found to be in excess of these limits, and it may impose certain other
sanctions.
Defensive Strategy and Short-Term Investments
When conditions dictate a defensive strategy, the Fund may invest in money
market instruments, including commercial paper of corporations, certificates of
deposit, bankers' acceptances and other obligations of domestic and foreign
banks, obligations issued or guaranteed by the U.S. Government, its agencies or
its instrumentalities and repurchase agreements (described more fully below).
Such investments may be subject to certain risks, including future political and
economic developments, the possible imposition of withholding taxes on interest
income, the seizure or nationalization of foreign deposits and foreign exchange
controls or other restrictions.
When-Issued and Delayed Delivery Securities
From time to time, in the ordinary course of business, the Fund may
purchase or sell securities on a when-issued or delayed delivery basis, that is,
delivery and payment can take place a month or more after the date of the
transaction. The Fund will limit such purchases to those in which the date for
delivery and payment falls within 120 days of the date of the commitment. The
Fund will make commitments for such when-issued transactions only with the
intention of actually acquiring the securities. The Fund's Custodian will
maintain, in a separate account of the Fund, cash, U.S. Government securities or
other liquid high-grade debt obligations having a value equal to or greater than
such commitments. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could, as with the disposition
of any other portfolio security, incur a gain or loss due to market
fluctuations. [The Fund does not intend to have more than 5% of its net assets
(determined at the time of entering into the transaction) involved in
transactions on a when-issued or delayed delivery basis during the coming year.]
Short Sales Against-the-Box
The Fund may make short sales of securities or maintain a short position,
provided that at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for an equal amount of the
securities of the same issuer as the securities sold short (a short sale
against-the-box), and that not more than 25% of the Fund's net assets
(determined at the time of the short sale) may be subject to such sales. Short
sales will be made primarily to defer realization of gain or loss for federal
tax purposes. As a matter of current operating policy, the Fund will not engage
in short-sales other than short-sales against-the-box. [The Fund does not intend
to have more than 5% of its net assets (determined at the time of the short
sale) subject to short sales against-the-box during the coming year.]
Repurchase Agreements
The Fund's repurchase agreements will be collateralized by U.S. Government
obligations. The Fund will enter into repurchase transactions only with parties
meeting creditworthiness standards approved by the Fund's Board of Directors.
The Fund's investment adviser will monitor the creditworthiness of such parties,
under the general supervision of the Board of Directors. In the event of a
default or bankruptcy by a seller, the Fund will promptly seek to liquidate the
collateral. To the extent that the proceeds from any sale of such collateral
upon a default in the obligation to repurchase are less than the repurchase
price, the Fund will suffer a loss.
The Fund participates in a joint repurchase agreement account with other
investment companies managed by Prudential Mutual Fund Management, Inc. (PMF) or
the Manager pursuant to an order of the Securities and Exchange Commission
(SEC). On a daily basis, any uninvested cash balances of the Fund may be
aggregated with those of such investment companies and invested in one or more
repurchase agreements. Each fund participates in the income earned or accrued in
the joint account based on the percentage of its investment.
Lending of Securities
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 30% of the value of the
Fund's total assets and provided that such loans are callable at any time by the
Fund and are at all times secured by cash or equivalent collateral that is equal
to at least the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to receive payments in lieu
of the interest and dividends of the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations.
A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of
B-9
<PAGE>
portfolio securities will only be made to firms determined to be creditworthy
pursuant to procedures approved by the Board of Directors of the Fund. On
termination of the loan, the borrower is required to return the securities to
the Fund, and any gain or loss in the market price during the loan would inure
to the Fund.
Since voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loan, in whole or
in part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in the
securities which are the subject of the loan. The Fund will pay reasonable
finders', administrative and custodial fees in connection with a loan of its
securities or may share the interest earned on collateral with the borrower.
Illiquid Securities
The Fund may not invest more than 10% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market (either within or outside of the United States) or
legal or contractual restrictions on resale. Historically, illiquid securities
have included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (Securities Act), securities which are otherwise not readily marketable
and repurchase agreements having a maturity of longer than seven days.
Securities which have not been registered under the Securities Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the unregistered
security can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a ``safe harbor'' from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
and foreign securities will expand further as a result of this regulation and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security and (4) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer). Repurchase agreements subject to demand are deemed to have a maturity
equal to the notice period.
Securities of Other Investment Companies
The Fund may invest up to 10% of its total assets in securities of other
investment companies. Generally, the Fund does not intend to invest in such
securities. If the Fund does invest in securities of other investment companies,
shareholders of the Fund may be subject to duplicate management and advisory
fees.
Portfolio Turnover
As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions, but the Fund's portfolio
turnover rate is not expected to exceed 150%. The portfolio turnover rate is
generally the percentage computed by dividing the lesser of portfolio purchases
or sales (excluding all securities, including options, whose maturities or
expiration date at acquisition were one year or less) by the monthly average
value of the portfolio. High portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs, which are borne directly by
the Fund. In addition, high portfolio turnover may also mean that a
proportionately greater amount of distributions to shareholders will be taxed as
ordinary income rather than long-term
B-10
<PAGE>
capital gains compared to investment companies with lower portfolio turnover.
See ``Portfolio Transactions and Brokerage'' and ``Taxes.''
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A ``majority of the Fund's
outstanding voting securities,'' when used in this Statement of Additional
Information, means the lesser of (i) 67% of the 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 outstanding shares.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment by the Fund of initial or maintenance margin in
connection with futures or options is not considered the purchase of a security
on margin.
2. Make short sales of securities or maintain a short position if, when
added together, more than 25% of the value of the Fund's net assets would be (i)
deposited as collateral for the obligation to replace securities borrowed to
effect short sales and (ii) allocated to segregated accounts in connection with
short sales. Short sales ``against-the-box'' are not subject to this limitation.
3. Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow from banks up to 20% of the value of its total assets
(calculated when the loan is made) for temporary, extraordinary or emergency
purposes or for the clearance of transactions. The Fund may pledge up to 20% of
the value of its total assets to secure such borrowings. For purposes of this
restriction, the purchase or sale of securities on a when-issued or delayed
delivery basis, forward foreign currency exchange contracts and collateral
arrangements relating thereto, and collateral arrangements with respect to
futures contracts and options thereon and with respect to the writing of options
and obligations of the Fund to Directors pursuant to deferred compensation
arrangements are not deemed to be a pledge of assets or the issuance of a senior
security.
4. Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (i) with respect to 75% of
the Fund's total assets, more than 5% of the Fund's total assets (determined at
the time of investment) would then be invested in securities of a single issuer,
or (ii) 25% or more of the Fund's total assets (determined at the time of the
investment) would be invested in a single industry.
5. Purchase any security if as a result the Fund would then have more than
5% of its total assets (determined at the time of investment) invested in
securities of companies (including predecessors) less than three years old,
except that the Fund may invest in the securities of any U.S. Government agency
or instrumentality, and in any security guaranteed by such an agency or
instrumentality.
6. Buy or sell real estate or interests in real estate, except that the
Fund may purchase and sell securities which are secured by real estate,
securities of companies which invest or deal in real estate and publicly traded
securities of real estate investment trusts. The Fund may not purchase interests
in real estate limited partnerships which are not readily marketable.
7. Buy or sell commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts and options thereon. (For
purposes of this restriction, futures contracts on currencies and on securities
indices and forward foreign currency exchange contracts are not deemed to be
commodities or commodity contracts.)
8. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws. The Fund has not adopted a fundamental
investment policy with respect to investments in restricted securities. See
``Illiquid Securities.''
9. Make investments for the purpose of exercising control or management.
10. Invest in securities of other investment companies, except by purchases
in the open market involving only customary brokerage commissions and as a
result of which the Fund will not hold more than 3% of the outstanding voting
securities of any one investment company, will not have invested more than 5% of
its total assets in any one investment company and will not have invested more
than 10% of its total assets (determined at the time of investment) in such
securities of one or more investment companies, or except as part of a merger,
consolidation or other acquisition.
11. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the securities of
companies which invest in or sponsor such programs.
12. Make loans, except through (i) repurchase agreements and (ii) loans of
portfolio securities limited to 30% of the Fund's total assets.
13. Purchase more than 10% of all outstanding voting securities of any one
issuer.
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<PAGE>
In order to comply with certain ``blue sky'' restrictions, the Fund will
not as a matter of operating policy:
1. Invest in oil, gas and mineral leases.
2. Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or Director of the Fund or the Fund's Manager or Subadviser (as defined
below) owns more than 1/2 of 1% of the outstanding securities of such issuer,
and such officers and directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
3. Purchase warrants if as a result the Fund would then have more than 5%
of its assets (determined at the time of investment) invested in warrants.
Warrants will be valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange or a major foreign exchange will be limited to 2% of the Fund's net
assets (determined at the time of investment). For purposes of this limitation,
warrants acquired in units or attached to securities are deemed to be without
value.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take prompt action
to reduce its borrowings, as required by applicable law.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address the Fund During Past 5 Years
- ---------------------- -------------- --------------------------------------------------------
<S> <C> <C>
*Lawrence C. McQuade President and Vice Chairman of PMF (since 1988) and Managing Director,
One Seaport Plaza Director Investment Banking of Prudential Securities
New York, New York (1988-1991); Director, Quixote Corporation (since
February 1992); Director, BUNZL, P.L.C. (since June
1991); formerly Director of Crazy Eddie Inc.
(1987-1990) of Kaiser Tech., Ltd., Kaiser Aluminum and
Chemical Corp. (March 1987-November 1988); formerly
Executive Vice President and Director of W. R. Grace &
Co. (1975-1987); President and Director of The High
Yield Income Fund, Inc., The Global Yield Fund, Inc.
and The Global Government Plus Fund, Inc.
Robert F. Gunia Vice President Director (since January 1989), Chief Administrative
One Seaport Plaza Officer (since July 1990) and Executive Vice
New York, New York President, Treasurer and Chief Financial Officer
(since June 1987) of PMF; Senior Vice President (since
March 1987) of Prudential Securities; Vice President
and Director of The Asia Pacific Fund, Inc. (since May
1989).
*S. Jane Rose Secretary and Senior Vice President (since January 1991), Senior
One Seaport Plaza Director Counsel (since June 1987) and First Vice President
New York, New York (June 1987-December 1990) of PMF; Senior Vice
President and Senior Counsel of Prudential Securities
(since July 1992); formerly Vice President and
Associate General Counsel of Prudential Securities.
Susan C. Cote Treasurer and Senior Vice President of PMF; Senior Vice President
One Seaport Plaza Principal (since January 1992) and Vice President (January
New York, New York Financial and 1986-December 1991) of Prudential Securities
Accounting
Officer
*Ronald Amblard Director and First Vice President (since January 1994) and Associate
One Seaport Plaza Assistant General Counsel (since January 1992) of PMF; Vice
New York, New York Secretary President and Associate General Counsel of Prudential
Securities (January 1992-December 1993); Assistant
General Counsel (August 1988-December 1991), Associate
Vice President (January 1989-December 1990) and Vice
President (January 1991-December 1993) of PMF.
- ---------------
* ``Interested'' director, as defined in the Investment Company Act, by reason of his or her
affiliation with Prudential Securities or PMF.
</TABLE>
Prior to the Fund's offering of shares, the initial Directors will be
replaced and new directors will be elected.
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities or PMFD.
B-12
<PAGE>
The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
``Manager'' and ``Distributor,'' oversee such actions and decide on general
policy.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the Manager.
The Fund pays each of its Directors who is not an affiliated person of PMF
or The Prudential Investment Corporation (PIC) or the Subadviser annual
compensation of $ , in addition to certain out-of-pocket expenses.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Directors' fees in installments which accrue interest at a
rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury bills
at the beginning of each calendar quarter or, pursuant to an SEC exemptive
order, at the daily rate of return of the Fund (the Fund rate). Payment of the
interest so accrued is also deferred and accruals become payable at the option
of the Director. The Fund's obligation to make payments of deferred Directors'
fees, together with interest thereon, is a general obligation of the Fund.
As of , 1994, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF or
the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as manager
to all of the other investment companies that, together with the Fund, comprise
the Prudential Mutual Funds. See ``How the Fund is Managed--Manager'' in the
Prospectus. As of March 31, 1994, PMF managed and/or administered open-end and
closed-end management investment companies with assets of approximately
$ billion. According to the Investment Company Institute, as of
December 31, 1993, the Prudential Mutual Funds were the 12th largest family of
mutual funds in the United States.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors and
in conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities and other assets. In
connection therewith, PMF is obligated to keep certain books and records of the
Fund. PMF also administers the Fund's corporate affairs and, in connection
therewith, furnishes the Fund with office facilities, together with those
ordinary clerical and bookkeeping services which are not being furnished by
State Street Bank and Trust Company, the Fund's custodian (the Custodian), and
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent), the Fund's
transfer and dividend disbursing agent. The management services of PMF for the
Fund are not exclusive under the terms of the Management Agreement and PMF is
free to, and does, render management services to others.
For its services, PMF receives, pursuant to the Management Agreement, a fee
at an annual rate of .75 of 1% of the Fund's average daily net assets. The fee
is computed daily and payable monthly. The Management Agreement also provides
that, in the event the expenses of the Fund (including the fees of PMF, but
excluding interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the Fund's
shares are qualified for offer and sale, the compensation due to PMF will be
reduced by the amount of such excess. Reductions in excess of the total
compensation payable to PMF will be paid by PMF to the Fund. Currently, the Fund
believes that the most restrictive expense limitation of state securities
commissions is 2 1/2% of the Fund's average daily net assets up to $30 million,
2% of the next $70 million of such assets and 1 1/2% of such assets in excess of
$100 million. [Because the expenses incurred by the Fund are anticipated to be
higher than those of funds that invest only in U.S. securities, the Fund has
received waivers from applicable state expense limitations to exclude certain
foreign transactional expenses subject to the limitation.]
In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel except
the fees and expenses of Directors who are not affiliated persons of PMF or the
Fund's investment adviser;
(b) all expenses incurred by PMF or by the Fund in connection with managing
the ordinary course of the Fund's business, other than those assumed by the Fund
as described below; and
(c) the costs and expenses payable to PIC pursuant to the Subadvisory
Agreement between PMF and PIC (the Subadvisory Agreement).
B-13
<PAGE>
Under the terms of the Management Agreement, the Fund is responsible for
the payment of the following expenses: (a) the fees payable to the Manager, (b)
the fees and expenses of Directors who are not affiliated persons of the Manager
or the Fund's investment adviser, (c) the fees and certain expenses of the
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of legal counsel and independent accountants for the
Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Fund to governmental agencies, (g) the fees of any
trade associations of which the Fund may be a member, (h) the cost of stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) certain organization expenses of the Fund and the fees
and expenses involved in registering and maintaining registration of the Fund
and of its shares with the SEC, registering the Fund as a broker or dealer and
qualifying its shares under state securities laws, including the preparation and
printing of the Fund's registration statements and prospectuses for such
purposes, (k) allocable communications expenses with respect to investor
services and all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing reports, proxy statements and prospectuses to
shareholders in the amount necessary for distribution to the shareholders, (l)
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business and (m) distribution
fees.
The Management Agreement provides that PMF will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the matters
to which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Management Agreement provides that it will terminate automatically if assigned,
and that it may be terminated without penalty by either party upon not more than
60 days' nor less than 30 days' written notice. The Management Agreement will
continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act. The Management Agreement
was approved by the Board of Directors of the Fund, including all of the
Directors who are not parties to the contract or interested persons of any such
party, as defined in the Investment Company Act, on , 1994, and by the
initial shareholder of the Fund on , 1994.
PMF has entered into the Subadvisory Agreement with PIC, a wholly-owned
subsidiary of Prudential. The Subadvisory Agreement provides that PIC will
furnish investment advisory services in connection with the management of the
Fund. In connection therewith, PIC is obligated to keep certain books and
records of the Fund. PMF continues to have responsibility for all investment
advisory services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable costs
and expenses incurred by PIC in furnishing those services.
The Subadvisory Agreement was approved by the Board of Directors, including
a majority of the Directors who are not parties to the contract or interested
persons of any such party, as defined in the Investment Company Act, on ,
1994, and by the initial shareholder of the Fund on , 1994.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PMF or PIC upon not more than 60 days', nor less than 30
days', written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved at least annually in accordance with
the requirements of the Investment Company Act.
The Manager and the Subadviser are subsidiaries of The Prudential which, as
of December 31, 1993, was the largest insurance company in the United States and
the second largest insurance company in the world. Prudential has been engaged
in the insurance business since 1875. In July 1993, Institutional Investor
ranked The Prudential the third largest institutional money manager of the 300
largest money management organizations in the United States as of December 31,
1992.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Class A shares of the Fund.
Prudential Securities Incorporated (Prudential Securities), One Seaport Plaza,
New York, New York 10292 acts as the distributor of the Class B and Class C
shares of the Fund.
Pursuant to separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively, the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. See ``How the Fund is
Managed--Distributor'' in the Prospectus.
On June , 1994, the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A, Class B or Class C
Plan or in any agreement related to Plans (the Rule 12b-1 Directors), at a
meeting called for the purpose of voting on each Plan, adopted a plan of
distribution for the Class A shares, Class B shares and Class C shares of the
Fund (the Class A Plan, the Class B Plan and the Class C Plan, respectively).
The Class A Plan
B-14
<PAGE>
provides that (i) .25 of 1% of the average daily net assets of the Class A
shares may be used to pay for personal service and the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1%. The Class B and Class C
Plans provide that (i) .25 of 1% of the average daily net assets of the Class B
and Class C shares, respectively, may be paid as a service fee and (ii) .75 of
1% (not including the service fee) may be paid for distribution-related expenses
with respect to the Class B and Class C shares, respectively (asset-based sales
charge). The Plans were each approved by the sole shareholder of the Class A,
Class B and Class C shares on , 1994.
Class A Plan. PMFD receives the proceeds of initial sales charges upon the
purchase of Class A shares.
Class B Plan. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by holders of Class B shares upon certain
redemptions of Class B shares. See ``Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges'' in the Prospectus.
Class C Plan. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class C
shares. See ``Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges'' in the Prospectus.
The Class A, Class B and Class C Plans will continue in effect from year to
year, provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class on not more than
60 days', nor less than 30 days' written notice to any other party to the Plans.
The Plans may not be amended to increase materially the amounts to be spent for
the services described therein without approval by the shareholders of the
applicable class, and all material amendments are required to be approved by the
Board of Directors in the manner described above. Each Plan will automatically
terminate in the event of its assignment. The Fund will not be obligated to pay
expenses incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least
quarterly a written report of the distribution expenses incurred on behalf of
each class of shares of the Fund by PMFD and Prudential Securities. The report
will include an itemization of the distribution expenses and the purposes of
such expenditures. In addition, as long as the Plans remain in effect, the
selection and nomination of Rule 12b-1 Directors shall be committed to the Rule
12b-1 Directors.
Pursuant to each Distribution Agreement, the Fund has agreed to indemnify
PMFD and Prudential Securities to the extent permitted by applicable law against
certain liabilities under the Securities Act.
NASD Maximum Sales Charge Rule.
Pursuant to rules of the NASD, the Distributor is required to limit
aggregate initial sales charges, deferred sales charges and asset-based sales
charges to 6.25% of total gross sales of each class of shares. In the case of
Class B shares, interest charges equal to the prime rate plus one percent per
annum may be added to the 6.25% limitation. Sales from the reinvestment of
dividends and distributions are not required to be included in the calculation
of the 6.25% limitation. The annual asset-based sales charge with respect to
Class B and Class C shares of the Fund may not exceed .75 of 1%. The 6.25%
limitation applies to the Fund rather than on a per shareholder basis. If
aggregate sales charges were to exceed 6.25% of total gross sales of any class,
all sales charges on shares of that class would be suspended.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities,
futures and options on securities and futures for the Fund, the selection of
brokers, dealers and futures commission merchants to effect the transactions and
the negotiation of brokerage commissions, if any. The term ``Manager'' as used
in this section includes the Subadviser. Broker-dealers may receive negotiated
brokerage commissions on Fund portfolio transactions, including options and the
purchase and sale of underlying securities upon the exercise of options. On
foreign securities exchanges, commissions may be fixed. Orders may be directed
to any broker or futures commission merchant including, to the extent and in the
manner permitted by applicable law, Prudential Securities and its affiliates.
Equity securities traded in the over-the-counter market and bonds,
including convertible bonds, are generally traded on a ``net'' basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments and U.S. Government agency securities may be purchased directly from
the issuer, in which case no commissions or discounts are paid. The Fund will
not deal with Prudential Securities or any affiliate in any transaction in which
Prudential Securities or any affiliate acts as principal. Thus, it will not deal
with Prudential Securities acting as market maker, and it will not execute a
negotiated
B-15
<PAGE>
trade with Prudential Securities if execution involves Prudential Securities'
acting as principal with respect to any part of the Fund's order.
Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities, or an affiliate, during the existence
of the syndicate, is a principal underwriter (as defined in the Investment
Company Act), except in accordance with rules of the SEC. This limitation, in
the opinion of the Fund, will not significantly affect the Fund's ability to
pursue its present investment objective. However, in the future in other
circumstances, the Fund may be at a disadvantage because of this limitation in
comparison to other funds with similar objectives but not subject to such
limitations.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund's, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker in the light
of generally prevailing rates. The Manager's policy is to pay higher commissions
to brokers, other than Prudential Securities, for particular transactions than
might be charged if a different broker had been selected, on occasions when, in
the Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers other than
Prudential Securities (or any affiliate) in order to secure research and
investment services described above, subject to review by the Fund's Board of
Directors from time to time as to the extent and continuation of this practice.
The allocation or orders among brokers and the commission rates paid are
reviewed periodically by the Fund's Board of Directors. The Fund will not pay up
for research in principal transactions.
Subject to the above considerations, Prudential Securities (or any
affiliate) may act as a securities broker or futures commission merchant for the
Fund. In order for Prudential Securities (or any affiliate) to effect any
portfolio transactions for the Fund, the commissions, fees or other remuneration
received by Prudential Securities (or any affiliate) must be reasonable and fair
compared to the commissions, fees or other remuneration paid to other brokers or
futures commission merchants in connection with comparable transactions
involving similar securities or futures being purchased or sold on an exchange
during a comparable period of time. This standard would allow Prudential
Securities (or any affiliate) to receive no more than the remuneration which
would be expected to be received by an unaffiliated broker or futures commission
merchant in a commensurate arm's-length transaction. Furthermore, the Board of
Directors of the Fund, including a majority of the Directors who are not
``interested'' persons, has adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to Prudential
Securities (or any affiliate) are consistent with the foregoing standard. In
accordance with Section 11(a) under the Securities Exchange Act of 1934,
Prudential Securities may not retain compensation for effecting transactions on
a national securities exchange for the Fund unless the Fund has expressly
authorized the retention of such compensation. Prudential Securities must
furnish to the Fund at least annually a statement setting forth the total amount
of all compensation retained by Prudential Securities from transactions effected
for the Fund during the applicable period. Brokerage and futures transactions
with Prudential Securities are also subject to such fiduciary standards as may
be imposed by applicable law.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares) or
(ii) on a deferred basis (Class B or Class C shares). See ``Shareholder
Guide--How to Buy Shares of the Fund'' in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan, (except
that the Fund has agreed with the SEC in connection with the offering of a
conversion feature on Class B shares to submit any amendment of the Class A
distribution and service plan to both Class A and Class B shareholders) and
(iii) only Class B shares have a conversion feature. See ``Distributor.'' Each
class also has separate exchange privileges. See ``Shareholder Investment
Account--Exchange Privilege.''
B-16
<PAGE>
Specimen Price Make-up
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class B
and Class C shares are sold at net asset value*. Using the Fund's net asset
value at , the maximum offering price of the Fund's shares is as
follows:
<TABLE>
<S> <C>
Class A
Net asset value and redemption price per Class A share.................................... $
Maximum sales charge (5% of offering price)...............................................
-------
Offering price to public.................................................................. $
-------
-------
Class B
Net asset value, redemption price and offering price to public per Class B share*......... $
-------
-------
Class C
Net asset value, redemption price and offering price to public per Class C share*......... $
-------
-------
- ------------------
*Class B and Class C shares are subject to a contingent deferred sales charge on certain
redemptions. See ``Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges''
in the Prospectus.
</TABLE>
Reduction or Waiver of Initial Sales Charges--Class A Shares
Retirement and Group Plans. Class A shares are offered at net asset value
to participants in certain retirement, deferred compensation, affinity group and
group savings plans, provided the plan has existing assets of at least $[1]
million or [1,000] eligible employees or members. The term ``existing assets''
includes transferable cash, shares of Prudential Mutual Funds held at the
Transfer Agent and GICs maturing within three years. The retirement and group
plans eligible for this waiver of the initial sales charge include, but are not
limited to, pension, profit-sharing or stock bonus plans qualified or
non-qualified within the meaning of Section 401 of the Internal Revenue Code of
1986, as amended (the Internal Revenue Code), deferred compensation and annuity
plans within the meaning of Sections 403(b)(7) and 457 of the Internal Revenue
Code, certain affinity group plans such as plans of credit unions and trade
associations and certain group savings plans.
Combined Purchase and Cumulative Purchase Privilege. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of breakpoints under ``Shareholder
Guide--Alternative Purchase Plan'' in the Prospectus.
An eligible group of related Fund investors includes any combination of the
following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's and spouse's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a company will be
deemed to control the company, and a partnership will be deemed to be controlled
by each of its general partners);
(e) a trust created by the individual, the beneficiaries of which are the
individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by an
individual.
In addition, an eligible group of related Fund investors may include the
following:
(i) an employer (or group of related employers) and one or more qualified
retirement plans of such employer or employers (an employer controlling,
controlled by or under common control with another employer is deemed related to
that employer).
The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will be granted
subject to confirmation of the investor's holdings. The Combined Purchase and
Cumulative Purchase Privilege does not apply to individual participants in the
retirement and group plans described above under ``Retirement and Group Plans.''
Rights of Accumulation. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under ``Combined Purchase and Cumulative Purchase
Privilege,'' may aggregate
B-17
<PAGE>
the value of their existing holdings of the Class A shares of the Fund and Class
A shares of other Prudential Mutual Funds to determine the reduced sales charge.
However, the value of shares held directly with the Transfer Agent and through
Prudential Securities will not be aggregated to determine the reduced sales
charge. All shares must be held either directly with the Transfer Agent or
through Prudential Securities. The value of existing holdings for purposes of
determining the reduced sales charge is calculated using the maximum offering or
price (net asset value plus maximum sales charge) as of the previous business
day. See ``How the Fund Values Its Shares'' in the Prospectus. The Distributor
must be notified at the time of purchase that the investor is entitled to a
reduced sales charge. The reduced sales charges will be granted subject to
confirmation of the investor's holdings. Rights of Accumulation are not
available to individual participants in the retirement and group plans described
above under ``Retirement and Group Plans.''
Letters of Intent. Reduced sales charges are available to investors or an
eligible group of related investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares of
the Fund and Class A shares of other Prudential Mutual Funds. All Class A shares
of the Fund and Class A shares of other Prudential Mutual Funds which were
previously purchased and are still owned are also included in determining the
applicable reduction. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be aggregated to
determine the reduced sales charge. All shares must be held either directly with
the Transfer Agent or through Prudential Securities. The Distributor must be
notified at the time of purchase that the investor is entitled to a reduced
sales charge. The reduced sales charges will be granted subject to confirmation
of the investor's holdings. Letters of Intent are not available to individual
participants in retirement and group plans described above under ``Retirement
and Group Plans.''
A Letter of Intent permits a purchaser to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Escrowed shares totaling 5% of the dollar amount of the Letter of
Intent will be held by the Transfer Agent in the name of the purchaser. The
effective date of a Letter of Intent may be back-dated up to 90 days, in order
that any investments made during this 90-day period, valued at the purchaser's
cost, can be applied to the fulfillment of the Letter of Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the purchaser is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain such difference. If the goal is exceeded in
an amount which qualified for a lower sales charge, a price adjustment is made
by refunding to the purchaser the amount of excess sales charge, if any, paid
during the thirteen-month period. Investors electing to purchase shares of the
Fund pursuant to a Letter of Intent should carefully read such Letter of Intent.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account
established for each investor under which a record of the shares held is
maintained by the Transfer Agent. If a stock certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for full
shares and may be redeposited in the Account at any time. There is no charge to
the investor for issuance of a certificate. The Fund makes available to its
shareholders the following privileges and plans.
Automatic Reinvestment of Dividends and Distributions. For the convenience
of investors, all dividends and distributions are automatically reinvested in
full and fractional shares of the Fund. An investor may direct the Transfer
Agent in writing not less than five full business days prior to the record date
to have subsequent dividends or distributions sent in cash rather than
reinvested. In the case of recently purchased shares for which registration
instructions have not been received on the record date, cash payment will be
made directly to the dealer. Any shareholder who receives a cash payment
representing a dividend or distribution may reinvest such dividend or
distribution at net asset value by returning the check or the proceeds to the
Transfer Agent within 30 days after the payment date. Such investment will be
made at the net asset value per share next determined after receipt of the check
or proceeds by the Transfer Agent.
Exchange Privilege. The Fund makes available to its shareholders the
privilege of exchanging their shares of the Fund for shares of certain other
Prudential Mutual Funds, including one or more specified money market funds,
subject in each case to the minimum investment requirements of such funds.
Shares of such other Prudential Mutual Funds may also be exchanged for shares of
the Fund. All exchanges are made on the basis of relative net asset value next
determined after receipt of an order in proper form. An exchange will be treated
as a redemption and purchase for tax purposes. Shares may be exchanged for
shares of another fund only if shares of such fund may legally be sold under
applicable state laws. For retirement and group plans having a limited menu of
Prudential Mutual Funds, the Exchange Privilege is available for those funds
eligible for investment in the particular program.
It is contemplated that the Exchange Privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
B-18
<PAGE>
Class A. Shareholders of the Fund may exchange their Class A shares for
Class A shares, of certain other Prudential Mutual Funds, shares of Prudential
Government Securities Trust (Intermediate Term Series) and shares of the money
market funds specified below. No fee or sales load will be imposed upon the
exchange. Shareholders of money market funds who acquired such shares upon
exchange of Class A shares may use the Exchange Privilege only to acquire Class
A shares of the Prudential Mutual Funds participating in the Exchange Privilege.
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New York Money Market Series)
(New Jersey Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund
Class B and Class C. Shareholders of the Fund may exchange their Class B
and Class C shares for Class B and Class C shares, respectively, of certain
other Prudential Mutual Funds and shares of Prudential Special Money Market
Fund, a money market fund. No CDSC will be payable upon such exchange, but a
CDSC may be payable upon the redemption of the Class B and Class C shares
acquired as a result of the exchange. The applicable sales charge will be that
imposed by the fund in which shares were initially purchased and the purchase
date will be deemed to be the date of the initial purchase, rather than the date
of the exchange.
Class B and Class C shares of the Fund may also be exchanged for Class B
and Class C shares, respectively, of an eligible money market fund without
imposition of any CDSC at the time of exchange. Upon subsequent redemption from
such money market fund or after re-exchange into the Fund, such shares will be
subject to the CDSC calculated without regard to the time such shares were held
in the money market fund. In order to minimize the period of time in which
shares are subject to a CDSC, shares exchanged out of the money market fund will
be exchanged on the basis of their remaining holding periods, with the longest
remaining holding periods being transferred first. In measuring the time period
shares are held in a money market fund and ``tolled'' for purposes of
calculating the CDSC holding period, exchanges are deemed to have been made on
the last day of the month. Thus, if shares are exchanged into the Fund from a
money market fund during the month (and are held in the Fund at the end of the
month), the entire month will be included in the CDSC holding period.
Conversely, if shares are exchanged into a money market fund prior to the last
day of the month (and are held in the money market fund on the last day of the
month), the entire month will be excluded from the CDSC holding period.
At any time after acquiring shares of other funds participating in the
Class B or Class C exchange privilege, a shareholder may again exchange those
shares (and any reinvested dividends and distributions) for Class B or Class C
shares of the Fund, respectively, without subjecting such shares to any CDSC.
Shares of any fund participating in the Class B or Class C exchange privilege
that were acquired through reinvestment of dividends or distributions may be
exchanged for Class B or Class C shares of other funds, respectively, without
being subject to any CDSC.
Additional details about the Exchange Privilege and prospectuses for each
of the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on 60 days' notice, and any fund, including the Fund, or
the Distributor, has the right to reject any exchange application relating to
such fund's shares.
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The average cost
per share is lower than it would be if a constant number of shares were bought
at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $4,800 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2007, the cost of four years at a private
college could reach $163,000 and over $97,000 at a public university.(1)
B-19
<PAGE>
The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals.(2)
<TABLE>
<CAPTION>
Period of
Monthly Investments: $100,000 $150,000 $200,000 $250,000
- -------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 Years............ $ 110 $ 165 $ 220 $ 275
20 Years............ 176 264 352 440
15 Years............ 296 444 592 740
10 Years............ 555 833 1,110 1,388
5 Years............. 1,371 2,057 2,742 3,428
</TABLE>
See ``Automatic Savings Accumulation Plan.''
- ---------------
(1) Source information concerning the costs of education at public universities
is available from The College Board Annual Survey of Colleges, 1992.
Information about the costs of private colleges is from the Digest of
Education Statistics, 1992; The National Center for Educational Statistics;
and the U.S. Department of Education. Average costs for private institutions
include tuition, fees, room and board.
(2) The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of the Fund.
The investment return and principal value of an investment will fluctuate so
that an investor's shares when redeemed may be worth more or less than their
original cost.
Automatic Savings Accumulation Plan (ASAP). Under ASAP, an investor may
arrange to have a fixed amount automatically invested in shares of the Fund
monthly by authorizing his or her bank account or Prudential Securities Account
(including a Command Account) to be debited to invest specified dollar amounts
in shares of the Fund. The investor's bank must be a member of the Automatic
Clearing House System. Stock certificates are not issued to ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
Systematic Withdrawal Plan. A systematic withdrawal plan is available to
shareholders through Prudential Securities or the Transfer Agent. Such
withdrawal plan provides for monthly or quarterly checks in any amount, except
as provided below, up to the value of the shares in the shareholder's account.
Withdrawals of Class B or Class C shares be subject to a CDSC. See ``Shareholder
Guide-- How to Sell Your Shares--Contingent Deferred Sales Charge'' in the
Prospectus.
In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and (iii)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See ``Shareholder Investment
Account--Automatic Reinvestment of Dividends and/or Distributions.''
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may be
terminated at any time, and the Distributor reserves the right to initiate a fee
of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the sales charges applicable to (i) the purchase of Class
A shares and (ii) the withdrawal of Class B and Class C shares. Each shareholder
should consult his or her own tax adviser with regard to the tax consequences of
the plan, particularly if used in connection with a retirement plan.
Tax-Deferred Retirement Plans. Various qualified retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
``tax-deferred accounts'' under Section 403(b)(7) of the Internal Revenue Code
of 1986, as amended (the Internal Revenue Code) are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, and the administration, custodial fees an other
details are available fom Prudential Securities or the Transfer Agent.
Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.
B-20
<PAGE>
Tax-Deferred Retirement Accounts
Individual Retirement Accounts. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, an 8% rate of return and a 39.6% federal income tax bracket
and shows how much more retirement income can accumulate within an IRA as
opposed to a taxable individual savings account.
Tax-deferred compounding(1)
<TABLE>
<CAPTION>
Contributions Personal
Made Over: Savings IRA
-------------------------------------------------- -------- --------
<S> <C> <C>
10 years $ 26,165 $ 31,291
15 years 44,676 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
</TABLE>
- ---------------
(1) The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated.
Earnings in the IRA account will be subject to tax when withdrawn from the
account.
NET ASSET VALUE
Under the Investment Company Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Board of Directors, the value of
investments listed on a securities exchange is provided by a pricing service and
is based on the last sales prices on that exchange prior to the time assets are
valued or, if there was no sale on such day, the mean between the last bid and
asked prices quoted on such day. NASDAQ National Market System securities are
valued at the last sales price in the day of valuation, or, if there was no sale
on such day, the mean between the last bid and asked prices on such day, as
provided by a pricing service. Corporate bonds (other than convertible debt
securities) and U.S. Government securities that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed to be over the counter, are valued on the basis of valuations
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, agency ratings, market
transactions in comparable securities and various relationships between
securities in determining value. Convertible debt securities that are actively
traded in the over-the-counter market, including listed securities for which
the primary market is believed to be over-the-counter, are valued at the mean
between the last reported bid and asked prices provided by principal market
makers or independent pricing agents. Options traded on an exchange or board
of trade are valued at the average of the quoted bid and asked prices as of
the close of the respective exchange and futures contracts and options
thereof are valued at their last sales prices as of the close of the
commodities exchange or board of trade. Should an extraordinary event,
which is likely to affect the value of the security, occur after the
close of an exchange on which a portfolio security is traded,
such security will be valued at fair value considering factors determined
in good faith by the investment adviser under procedures established
by and under the general supervision of the Fund's Board of Directors.
Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
investment adviser under procedures described above. Short-term debt securities
are valued at cost, with interest accrued or discount amortized to the date of
maturity, if their original maturity was 60 days or less, unless this is
determined by the Board of Directors not to represent fair value. Short-term
securities with remaining maturities of 60 days or more, for which market
quotations are readily available, are valued at their current market quotations
as supplied by an independent pricing agent or principal market maker. The Fund
will compute its net asset value at 4:15 P.M., New York time on each day the New
York Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which changes
in the value of the Fund's portfolio securities do not affect net asset value.
Net asset value is calculated separately for each class. The net asset
value of Class B and Class C shares will generally be lower than the net asset
value of Class A shares as a result of the larger distribution-related fee to
which Class B and Class C shares are subject. It is expected, however, that the
net asset value per share of each class will tend to converge immediately after
the recording of dividends which will differ by approximately the amount of the
distribution expense accrual differential among the classes.
TAXES
The Fund intends to qualify and to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code. This
relieves the Fund (but not its shareholders) from paying federal income tax on
income which is distributed to shareholders and
B-21
<PAGE>
permits net long-term capital gains of the Fund (i.e., the excess of net
long-term capital gains over net short-term capital losses) to be treated as
long-term capital gains of the shareholders, regardless of how long shareholders
have held their shares in the Fund.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of the Fund's annual gross income (without
reduction for losses from the sale or other disposition of securities) be
derived from interest, dividends, payments with respect to securities loans, and
gains from the sale or other disposition of securities or options thereon or
foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such securities or currencies; (b) the Fund derive less than 30% of
its gross income from gains (without reduction for losses) from the sale or
other disposition of securities, options thereon, futures contracts, options
thereon, forward contracts and foreign currencies held for less than three
months (except for foreign currencies directly related to the Fund's business of
investing in foreign securities) (the short-short rule); (c) the Fund diversify
its holdings so that, at the end of each quarter of the taxable year (i) at
least 50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the market value of the Fund's assets and
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities); and (d) the Fund distribute to its
shareholders at least 90% of its net investment income (including short-term
capital gains) other than long-term capital gains in each year.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where the Fund acquires a put or
writes a call thereon or makes a short sale against-the-box. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as Section 1256 contracts). If an
option written by the Fund on securities lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will generally realize capital gain or loss. If securities are
sold by the Fund pursuant to the exercise of a call option written by it, the
Fund will include the premium received in the sale proceeds of the securities
delivered in determining the amount of gain or loss on the sale. Certain of the
Fund's transactions may be subject to wash sale, short sale and straddle
provisions of the Internal Revenue Code. In addition, debt securities acquired
by the Fund may be subject to original issue discount and market discount rules.
Special rules apply to most options on stock indices, futures contracts and
options thereon, and forward foreign currency exchange contracts in which the
Fund may invest. See ``Investment Objective and Policies.'' These investments
will generally constitute Section 1256 contracts and will be required to be
``marked to market'' for federal income tax purposes at the end of the Fund's
taxable year; that is, treated as having been sold at market value. Except with
respect to forward foreign currency exchange contracts, 60% of any gain or loss
recognized on such deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss.
Gain or loss on the sale, lapse or other termination of options on stock
and on narrowly-based stock indices will be capital gain or loss and will be
long-term or short-term depending upon the holding period of the option. In
addition, positions which are part of a straddle will be subject to certain wash
sale and short sale provisions of the Internal Revenue Code. In the case of a
straddle, the Fund may be required to defer the recognition of losses on
positions it holds to the extent of any unrecognized gain on offsetting
positions held by the Fund.
The Fund's ability to hold foreign currencies or engage in hedging
activities may be limited by the 30%-of-income qualification test discussed
above.
A ``passive foreign investment company'' (PFIC) is a foreign corporation
that, in general, meets either of the following tests: (a) at least 75% of its
gross income is passive or (b) an average of at least 50% of its assets produce,
or are held for the production of, passive income. If the Fund acquires and
holds stock in a PFIC beyond the end of the year of its acquisition, the Fund
will be subject to federal income tax on a portion of any ``excess
distribution'' received on the stock or of any gain from disposition of the
stock (collectively, PFIC income), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders. Proposed Treasury regulations provide
that the Fund may make a ``mark-to-market'' election with respect to any stock
it holds of a PFIC. If the election is in effect, at the end of the Fund's
taxable year, the Fund will recognize the amount of gains, if any, with respect
to PFIC stock. No loss will be recognized on PFIC stock. Alternatively, the Fund
may elect to treat any PFIC in which it invests as a ``qualified electing
fund,'' in which case, in lieu of the foregoing tax and interest obligation, the
Fund will be required to include in income each year its pro rata share of the
qualified electing fund's annual ordinary earnings and net capital gain, even if
they are not distributed to the Fund; those amounts would be subject to the
distribution requirements applicable to the Fund described above. It may be very
difficult, if not impossible, to make this election because of certain
requirements thereof. Proposed legislation in Congress could dramatically change
the manner in which U.S. shareholders of foreign corporations are taxed. There
can be no assurance that any such legislation will become law, or if so, what
its impact on U.S. shareholders of foreign corporations will be.
B-22
<PAGE>
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities are treated as ordinary income or ordinary
loss. Similarly, gains or losses on forward foreign currency exchange contracts
or dispositions of debt securities denominated in a foreign currency
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition also are treated
as ordinary gain or loss. These gains, referred to under the Internal Revenue
Code as ``Section 988'' gains or losses, increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. If Section 988 losses exceed other investment
company taxable income during a taxable year, the Fund would not be able to make
any ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as a return of capital to shareholders,
rather than as an ordinary dividend, reducing each shareholder's basis in his or
her Fund shares.
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
12 months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements,
the Fund will be subject to a nondeductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which the Fund pays income
tax is treated as distributed.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
Any loss realized on a sale, redemption or exchange of shares of the Fund
by a shareholder will be disallowed to the extent the shares are replaced within
a 61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
A shareholder who acquires shares of the Fund and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the Fund.
The per share dividends on Class B and Class C shares will generally be
lower than the per share dividends on Class A shares as a result of the higher
distribution-related fee applicable to the Class B and Class C shares. The per
share capital gains distributions will be paid in the same amounts for Class A,
Class B and Class C shares. See ``Net Asset Value.''
Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a nominee
or fiduciary) who is a nonresident alien individual, a foreign corporation or a
foreign partnership (foreign shareholder) are subject to a 30% (or lower treaty
rate) withholding tax upon the gross amount of the dividends unless the
dividends are effectively connected with a U.S. trade or business conducted by
the foreign shareholder. Capital gain dividends paid to a foreign shareholder
are generally not subject to withholding tax. A foreign shareholder will,
however, be required to pay U.S. income tax on any dividends and capital gain
distributions which are effectively connected with a U.S. trade or business of
the foreign shareholder.
Dividends received by corporate shareholders are eligible for a
dividends-received deduction of 70% to the extent the Fund's income is derived
from qualified dividends received by the Fund from domestic corporations.
Interest income, capital gain net income, gain or loss from Section 1256
contracts (described above), dividend income from foreign corporations and
income from other sources will not constitute qualified dividends. Since the
Fund is likely to have a substantial portion of its assets invested in
securities of foreign issuers, the amount of the Fund's dividends eligible for
the corporate dividends-received deduction will be minimal. Individual
shareholders are not eligible for the dividends-received deduction.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries will vary.
If the Fund is liable for foreign income taxes, the Fund expects to meet
the requirements of the Internal Revenue Code for ``passing-through'' to its
shareholders foreign income taxes paid, but there can be no assurance that the
Fund will be able to, or will elect to do so. Shareholders would be required to:
(i) include in gross income (in addition to taxable dividends actually received)
their pro rata share of the foreign income taxes paid by the Fund; and (ii)
treat their pro rata share of foreign income taxes as paid by them. Shareholders
are then permitted either to deduct their pro rata share of foreign income taxes
in computing their taxable income or use it as a foreign tax credit against U.S.
income taxes. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize
B-23
<PAGE>
deductions. Foreign shareholders may not deduct or claim a credit for foreign
tax unless the dividends paid to them by the Fund are effectively connected with
a U.S. trade or business.
Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign taxes paid by the Fund will ``pass
through'' for that year and, if so, such notification will designate (a) the
shareholder's portion of the foreign taxes paid by the Fund and (b) the portion
of the dividend which represents income derived from foreign sources. The tax
consequences to a foreign shareholder entitled to claim the benefits of an
applicable tax treaty may be different from those described herein. Foreign
shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund.
The amount of foreign taxes for which a shareholder may claim a credit in
any year will generally be subject to a separate limitation for ``passive
income,'' which includes, among other things, dividends, interest and certain
foreign currency gains. Gain or loss from the sale of a security or from a
Section 988 transaction which is treated as ordinary income or loss (or would
have been so treated absent an election by the Fund) will be treated as derived
from sources within the United States, potentially reducing the amount allowable
as a credit under the limitation.
PERFORMANCE INFORMATION
Average Annual Total Return. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B and Class C shares. See ``How the Fund
Calculates Performance'' in the Prospectus.
Average annual total return is computed according to the following formula:
P ( 1 + T )n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at
the end of the 1, 5 or 10 year periods (or fractional portion thereof).
Average annual total return takes into account any applicable initial or
deferred sales charges but does not take into account any federal or state
income taxes that may be payable upon redemption.
Aggregate Total Return. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B and
Class C shares. See ``How the Fund Calculates Performance'' in the Prospectus.
Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:
ERV - P
P
Where: P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the
1, 5 or 10 year periods (or fractional portion thereof).
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.
Yield. The Fund may from time to time advertise its yield as calculated
over a 30-day period. Yield is calculated separately for Class A, Class B and
Class C shares. This yield will be computed by dividing the Fund's net
investment income per share earned during this 30-day period by the maximum
offering price per share on the last day of this period. Yield is calculated
according to the following formula:
<TABLE>
<C> <C> <S>
YIELD = 2 [ ( a - b +1)6-1]
cd
</TABLE>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
B-24
<PAGE>
Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period. Yields for the Fund will vary based on a number of factors
including changes in net asset value, market conditions, the level of interest
rates and the level of Fund income and expenses.
From time to time, the performance of the Fund may be measured against
various indices. Set forth below is a chart which compares the performance of
different types of investments over the long term and the rate of inflation.1
[Chart]
- ---------------
(1) Source: Ibbotson Associates, ``Stocks, Bonds, Bills and Inflation--1993
Yearbook'', (annually updates the work of Roger G. Ibbotson and Rex
A. Sinquefield). Common stock returns are based on the Standard &
Poor's 500 Stock Index, a market-weighted, unmanaged index of 500
common stocks in a variety of industry sectors. It is a commonly
used indicator of broad stock price movements. This chart is for
illustrative purposes only, and is not intended to represent the
performance of any particular investment or fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and in that capacity maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Subcustodians provide custodial
services for the Fund's foreign assets held outside the United States. See ``How
the Fund is Managed--Custodian and Transfer and Dividend Disbursing Agent'' in
the Prospectus.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison,
New Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the
Fund. PMFS is a wholly-owned subsidiary of PMF. PMFS provides customary transfer
agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and related
functions. For these services, PMFS receives an annual fee of $9.00 per
shareholder account, a new account set-up fee of $ for each manually
established account and a monthly inactive zero balance account fee of $ per
shareholder account. PMFS is also reimbursed for its out-of-pocket expenses,
including but not limited to postage, stationery, printing, allocable
communication expenses and other costs.
, serves as the
Fund's independent accountants, and in that capacity audits the Fund's annual
reports.
B-25
<PAGE>
DESCRIPTION OF SECURITY RATINGS
Moody's Investors Service
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
``gilt edge.'' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Commercial Paper
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months.
P-1: The designation ``Prime-1'' or ``P-1'' indicates the highest quality
repayment capacity of the rated issue.
P-2: The designation ``Prime-2'' or ``P-2'' indicates a strong capacity for
repayment.
Standard & Poor's Ratings Group
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rate BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC: Debt rated BB, B, CCC, and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. BB indicates the
lowest degree of speculation and CC the
B-26
<PAGE>
highest degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties of major
risk exposures to adverse conditions.
Commercial Paper
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more than
270 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated A-1.
B-27
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
(1) Financial Statements included in the Prospectus constituting
Part A of this Registration Statement:
None.
(B) EXHIBITS:
1. Articles of Incorporation.**
2. By-Laws.**
3. Not Applicable.
4. Instruments defining rights of shareholders.**
5. (a) Form of Management Agreement between the Registrant and
Prudential Mutual Fund Management, Inc.**
(b) Form of Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation.**
6. (a) Form of Distribution Agreement between the Registrant and
Prudential Mutual Fund Distributors, Inc. (Class A Shares).**
(b) Form of Distribution Agreement between the Registrant and
Prudential Securities Incorporated (Class B shares).**
(c) Form of Distribution Agreement between the Registrant and
Prudential Securities Incorporated (Class C shares).**
(d) Form of Subscription Offering Agreement among the Registrant,
Prudential Securities Incorporated and Prudential Mutual Fund
Distributors, Inc.**
(e) Form of Selected Dealer Agreement.*
C-1
<PAGE>
7. Not Applicable.
8. Custodian Contract between the Registrant and State Street Bank
and Trust Company.**
9. Form of Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services, Inc.**
10. Opinion of Shereff, Friedman, Hoffman & Goodman.*
11. Consent of Independent Accountants.*
12. Not Applicable.
13. Form of Purchase Agreement.*
14. Not Applicable.
15. (a) Form of Distribution and Service Plan for Class A Shares.**
(b) Form of Distribution and Service Plan for Class B Shares.**
(c) Form of Distribution and Service Plan for Class C Shares.**
16. Schedule of Computation of Performance Quotations.*
17. Copies of Powers of Attorney for Directors:*
- -------------
* To be filed by Amendment.
** Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Not Applicable.
C-2
<PAGE>
ITEM 27. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment Company Act of
1940 (the 1940 Act) and pursuant to Article VI of the Fund's By-Laws
(Exhibit 2 to the Registration Statement), officers, directors,
employees and agents of the Registrant will not be liable to the
Registrant, any shareholder, officer, director, employee, agent or other
person for any action or failure to act, except for bad faith, willful
misfeasance, gross negligence or reckless disregard of duties, and those
individuals may be indemnified against liabilities in connection with
the Registrant, subject to the same exceptions. Section 2-418 of the
Maryland General Corporation Law permits indemnification of directors
who acted in good faith and reasonably believed that the conduct was in
the best interests of the Registrant. As permitted by Section 17(i) of
the 1940 Act, pursuant to Section 10 of each Distribution Agreement
(Exhibit 6 to the Registration Statement), each Distributor of the
Registrant may be indemnified against liabilities which it may incur,
except liabilities arising from bad faith, gross negligence, willful
misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (Securities Act) may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1940 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection
with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the 1940 Act and will be governed by the final adjudication of such
issue.
The Registrant has purchased an insurance policy insuring its officers
and directors against liabilities, and certain costs of defending claims
against such officers and directors, to the extent such officers and
directors are not found to have committed conduct constituting willful
misfeasance, bad faith, gross negligence or reckless disregard in the
performance of their duties. The insurance policy also insures the
Registrant against the cost of indemnification payments to officers and
directors under certain circumstances.
C-3
<PAGE>
Section 9 of the Management Agreement (Exhibit 5(a) to the
Registration Statement) and Section 4 of the Subadvisory Agreement
(Exhibit 5(b) to the Registration Statement) limit the liability of
Prudential Mutual Fund Management, Inc. (PMF) and The Prudential
Investment Corporation (PIC), respectively, to liabilities arising from
willful misfeasance, bad faith or gross negligence in the performance of
their respective duties or from reckless disregard by them of their
respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its By-Laws and each Distribution
Agreement in a manner consistent with Release No. 11330 of the
Securities and Exchange Commission under the 1940 Act so long as the
interpretation of Section 17(h) and 17(i) of such Act remain in effect
and are consistently applied.
Under Section 17(h) of the 1940 Act, it is the position of the staff
of the Securities and Exchange Commission that if there is neither a
court determination on the merits that the defendant is not liable nor a
court determination that the defendant was not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of one's office, no indemnification will
be permitted unless an independent legal counsel (not including a
counsel who does work for either the Registrant, its investment adviser,
its principal underwriter or persons affiliated with these persons)
determines, based upon a review of the facts, that the person in
question was not guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office.
Under its Articles of Incorporation, the Registrant may advance funds
to provide for indemnification. Pursuant to the Securities and Exchange
Commission staff's position on Section 17(h) advances will be limited in
the following respect:
(1) Any advances must be limited to amounts used, or to be used, for
the preparation and/or presentation of a defense to the action
(including cost connected with preparation of a settlement);
(2) Any advances must be accompanied by a written promise by, or on
behalf of, the recipient to repay that amount of the advance which
exceeds the amount to which it is ultimately determined that he is
entitled to receive from the Registrant by reason of indemnification;
(3) Such promise must be secured by a surety bond or other suitable
insurance; and
(4) Such surety bond or other insurance must be paid for by the
recipient of such advance.
C-4
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Prudential Mutual Fund Management, Inc.
See "Management of the Fund-Manager" in the Prospectus constituting
Part A of this Registration Statement and "Manager" in the Statement of
Additional Information constituting Part B of this Registration
Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the
Securities and Exchange Commission, the text of which is hereby
incorporated by reference (File No. 801-31104, filed on November 13,
1987).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated,
the address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATION
- ---------------- ----------------- --------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice Executive Vice
President, Director President, PMF; Senior Vice
of Marketing President, Prudential Securities
Incorporated (Prudential Securities)
John D. Brookmeyer, Jr. Director Senior Vice President,
Two Gateway Center The Prudential Insurance
Newark, NJ 07102 Company of America (Prudential)
Susan C. Cote Senior Vice President Senior Vice President, PMF;
Senior Vice President, Prudential
Securities
Fred A. Fiandaca President, Chief President, Chief Operating
Raritan Plaza One Operating Officer and Officer and Director, PMF;
Edison, NJ 08847 Director Chief Executive Officer and
Director, Prudential Mutual Fund
Services, Inc.
Stephen P. Fisher Senior Vice President Senior Vice President, PMF;
Senior Vice President,
Prudential Securities
Frank W. Giordano Executive Vice Executive Vice President,
President, General General Counsel and
Counsel and Secretary Secretary, PMF; Senior Vice
President, Prudential Securities
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C> <C>
Robert F. Gunia Executive Vice Executive Vice President,
President, Chief Chief Financial and
Financial and Administrative Officer,
Administrative Officer, Treasurer and Director, PMF;
Treasurer and Director Senior Vice President,
Prudential Securities
Eugene B. Heimberg President, Director Senior Vice President,
Prudential Plaza and Chief Investment Prudential; President
Newark, NJ 07102 Officer Director and Chief Investment
Officer PIC
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President and
Director, Prudential
Securities; Director, PSG
Richard A. Redeker President, Chief President Chief Executive
Executive Officer Officer and Director, PMF;
and Director Executive Vice President,
Director and Member of the
Operating Committee, Prudential
Securities; Director PSG
S. Jane Rose Senior Vice President, Senior Vice President, Senior
Senior Counsel and Counsel, and Assistant
Assistant Secretary Secretary PMF; Senior Vice
President and Senior Counsel,
Prudential Securities
Donald G. Southwell Director Senior Vice President,
213 Washington Street Prudential; Director, PSG
Newark, NJ 07102
</TABLE>
(b) Prudential Investment Corporation
See "Management of the Fund--Subadviser" in the Prospectus constituting Part A
of this Registration Statement and "Subadviser" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of PIC's directors and executive officers
are as set forth below. Except as otherwise indicated, the address of each
person is Prudential Plaza, Newark, NJ 07101.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President, Senior Vice President,
Chief Financial Chief Financial and
and Compliance Compliance Officer, PIC;
Officer Vice President, Prudential
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C> <C>
William M. Bethke Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Eugene B. Heimberg President, Director President, Director, and
and Chief Investment Chief Investment Advisor, PIC;
Officer Senior Vice President,
Prudential
Garnett L. Keith, Jr. Director Vice Chairman and Director,
Prudential; Director, PIC
Harry E. Knapp Vice President Vice President, Prudential;
Four Gateway Center Vice President, PIC
Newark, NJ 07102
William P. Link Senior Vice President Executive Vice President,
Four Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Robert E. Riley Executive Vice Executive Vice President,
President President Prudential; Executive Vice
800 Boylston Avenue President, PIC; Director, PSG
Boston, MA 02199
James W. Stevens Executive Vice Executive Vice President,
Four Gateway Center President Prudential; Director, PSG
Newark, NJ 07102
Robert C. Winters Director Chairman of the Board and Chief
Executive Officer, Prudential;
Director, PIC; Chairman of the
Board, PSG
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential;
Executive Vice President, PIC
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a)(i) Prudential Securities Incorporated
Prudential Securities Incorporated is distributor for Prudential Government
Securities Trust (Intermediate Term Series) and for Class B shares of Prudential
Adjustable Rate Securities Fund, Inc., The BlackRock Government Income Trust,
Prudential California Municipal Fund (California Series), Prudential-Bache
Equity Fund, Inc., Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Global Fund, Inc., Prudential-Bache Global Genesis Fund,
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<PAGE>
Inc. (d/b/a Prudential Global Genesis Fund), Prudential-Bache Global Natural
Resources Fund, Inc. (d/b/a Prudential Global Natural Resources Fund),
Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund), Prudential-Bache
Government Plus Fund, Inc. (d/b/a Prudential Government Plus Fund), Prudential
Growth Fund, Inc., Prudential-Bache Growth Opportunity Fund, Inc. (d/b/a
Prudential Growth Opportunity Fund), Prudential-Bache High Yield Fund, Inc.
(d/b/a Prudential High Yield Fund), Prudential IncomeVertible(R) Fund, Inc.
Prudential Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund,
Inc., Prudential Municipal Bond Fund, Prudential Municipal Series Fund (except
Connecticut Money Market Series, Massachusetts Money Market Series, New York
Money Market Series, New Jersey Money Market Series and Florida Series),
Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential National
Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential Short-Term
Global Income Fund, Inc., Prudential-Bache Strategic Income Fund, Inc. (d/b/a
Prudential Strategic Income Fund), Prudential-Bache Structured Maturity Fund
(d/b/a Prudential Structured Maturity Fund), Prudential U.S. Government Fund,
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc. and Nicholas Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund). Prudential Securities is also a depositor for the following unit
investment trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(a)(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Inc. is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series, California Income
Series and Class A Shares of the California Series), Prudential Government
Securities Trust (Money Market Series and U.S. Treasury Money Market Series),
Prudential Institutional Liquidity Portfolio,Inc., Prudential-Bache MoneyMart
Assets Inc. (d/b/a Prudential MoneyMart Assets), Prudential Municipal Series
Fund (Connecticut Money Market Series, Massachusetts Money Market Series, New
York Money Market Series, New Jersey Money Market Series, and Florida Series),
Prudential-Bache Special Money Market Fund, Inc. (d/b/a Prudential Special Money
Market Fund), Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a Prudential
Tax-Free Money Fund), and for Class A shares of Prudential Adjustable Rate
Securities Fund, Inc. The BlackRock Government Income Trust, Prudential
California Municipal Fund (California Income Series), Prudential Equity Fund,
Inc., Prudential Equity Income Fund, Prudential FlexiFund, Prudential Global
Fund, Inc., Prudential-Bache Global Genesis Fund, Inc. (d/b/a Prudential Global
Genesis Fund), Prudential-Bache Global Natural
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<PAGE>
Resources Fund, Inc. (d/b/a Prudential Global Natural Resources Fund),
Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund), Prudential-Bache
Government Plus Fund, Inc. (d/b/a Prudential Government Plus Fund), Prudential
Growth Fund, Inc., Prudential-Bache Growth Opportunity Fund, Inc. (d/b/a
Prudential Growth Opportunity Fund), Prudential-Bache High Yield Fund, Inc.
(d/b/a Prudential High Yield Fund), Prudential IncomeVertible(R) Fund, Inc.,
Prudential Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund,
Inc., Prudential Municipal Bond Fund, Prudential Municipal Series Fund (Class A
shares of all other Series not mentioned above), Prudential-Bache National
Municipals Fund, Inc. (d/b/a Prudential National Municipals Fund), Prudential
Pacific Growth Fund, Inc., Prudential Short-Term Global Income Fund, Inc.,
Prudential-Bache Strategic Income Fund, Inc. (d/b/a Prudential Strategic Income
Fund), Prudential U.S. Government Fund, Prudential-Bache Utility Fund, Inc.
(d/b/a Prudential Utility Fund), Global Utility Fund, Inc., and
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund).
(b)(i) Information concerning the directors and officers of Prudential
Securities Incorporated is set forth below:
Positions and Positions and
Offices with Offices with
Name (1) Underwriter Registrant
-------- ------------- -------------
Alan D. Hogan............. Executive Vice President, None
Chief Administrative
Officer and Director
Howard A. Knight.......... Executive Vice President, None
Director, Corporate
Strategy and New Business
Development
George A. Murray.......... Executive Vice President None
and Director
John P. Murray............ Executive Vice President None
and Director of Risk
Management
Leland B. Paton........... Executive Vice President None
and Director
Richard A. Redeker........ Director Director
Hardwick Simmons.......... Chief Executive Officer, None
President and Director
Lee Spencer............... Interim General Counsel None
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<PAGE>
(b)(ii) Information concerning the directors and officers of Prudential
Mutual Fund Distributors, Inc. is set forth below:
Positions and Positions and
Offices with Offices with
Name (1) Underwriter Registrant
-------- ------------- -------------
Joanne Accurso-Soto....... Vice President None
Dennis Annarumma.......... Vice President, None
Assistant Treasurer
and Assistant
Comptroller
Phyllis J. Berman......... Vice President None
Fred A. Fiandaca.......... President, Chief None
Raritan Plaza One Executive Officer
Edison, NJ 08847 and Director
Stephen P. Fisher......... Vice President None
Frank W. Giordano......... Executive Vice None
President, General
Counsel, Secretary
and Director
Robert F. Gunia........... Executive Vice Vice President
President, Treasurer,
Comptroller and
Director
Andrew J. Varley.......... Vice President None
Anita L. Whelan........... Vice President and None
Assistant Secretary
(c) Registrant has no principal underwriter who is not an affiliated
person of the Registrant.
(1) The address of each person named is One Seaport Plaza, New York, New
York 10292 unless otherwise indicated.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and
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<PAGE>
Trust Company, One Heritage Drive, North Quincy, Massachusetts, The Prudential
Investment Corporation, Prudential Plaza, 745 Broad Street, Newark, New Jersey,
the Registrant, One Seaport Plaza, New York, New York, and Prudential Mutual
Fund Services, Inc., Raritan Plaza One, Edison, New Jersey. Documents required
by Rules 31a-1(b)(5), (6), (7), (9), (10) and (11) and 31a-1(f) will be kept at
Two Gateway Center, documents required by Rules 31a-1(b)(4) and (11) and
31a-1(d) at One Seaport Plaza and the remaining accounts, books and other
documents required by such other pertinent provisions of Section 31(a) and the
Rules promulgated thereunder will be kept by State Street Bank and Trust Company
and Prudential Mutual Fund Services, Inc.
ITEM 31. MANAGEMENT SERVICES
Other than as set forth under the captions "Management of the Fund-Manager"
and "Management of the Fund-Distributor" in the Prospectus and the captions
"Manager" and "Distributor" in the Statement of Additional Information,
constituting Parts A and B, respectively, of this Registration Statement,
Registrant is not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS
Registrant makes the following undertaking:
To file a post-effective amendment, using financial statements which may
not be certified, within four to six months from the effective date of this
Registration Statement.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 14th day of
April, 1994.
PRUDENTIAL EUROPE GROWTH FUND, INC.
By /s/ Lawrence C. McQuade
-----------------------
Lawrence C. McQuade
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Susan C. Cote Controller and April 14, 1994
----------------- Principal
Susan C. Cote Financial and
Accounting Officer
/s/ Ronald Amblard Director April 14, 1994
-----------------
Ronald Amblard
/s/ Lawrence C. McQuade President and April 14, 1994
---------------------- Director
Lawrence C. McQuade
/s/ S. Jane Rose Director April 14, 1994
-----------------------
S. Jane Rose
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
EXHIBIT INDEX
Sequential
Page
Description Number
----------- ----------
1 Articles of Incorporation.
2 By-Laws.
3 Instrument Defining Rights of Shareholders.
5(a) Management Agreement between the
Registrant and Prudential Mutual
Fund Management, Inc.
5(b) Subadvisory Agreement between
Prudential Mutual Fund Management,
Inc. and The Prudential Investment
Corporation.
6(a) Distribution Agreement between the
Registrant and Prudential Mutual
Fund Distributors, Inc. (Class A
Shares).
6(b) Distribution Agreement between the
Registrant and Prudential Securities
Incorporated (Class B
Shares).
6(c) Distribution Agreement between the
Registrant and Prudential Securities
Incorporated (Class C Shares).
6(d) Subscription Agreement among the
Registrant, Prudential Securities
Incorporated and Prudential Mutual Fund
Distributors, Inc.
8 Custodian Contract between the
Registrant and State Street Bank and
Trust Company.
9 Transfer Agency and Service
Agreement between Registrant and
Prudential Mutual Fund Services,
Inc.
15(a) Plan of Distribution pursuant to
Rule 12b-1 (Class A Shares).
15(b) Plan of Distribution pursuant to
Rule 12b-1 (Class B Shares).
15(c) Plan of Distribution pursuant to
Rule 12b-1 (Class C Shares).
ARTICLES OF INCORPORATION
OF
PRUDENTIAL EUROPE GROWTH FUND, INC.
I, the incorporator, Lori Elizabeth Bostrom, whose post office
address is 919 Third Avenue, New York, New York 10022 being at
least eighteen years of age, am, under and by virtue of the General
Laws of the State of Maryland authorizing the formation of
corporations, forming a corporation.
ARTICLE I.
The name of the corporation (hereinafter called the
"Corporation") is Prudential Europe Growth Fund, Inc.
ARTICLE II.
Purposes
The purpose for which the Corporation is formed is to act as
an open-end investment company of the management type registered as
such with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940, as amended (the Investment Company
Act) and to exercise and generally to enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereinafter in
force.
ARTICLE III.
Address in Maryland
The post office address of the place at which the principal
office of the Corporation in the State of Maryland is located is
c/o CT Corporation System, 32 South Street Baltimore, Maryland
21202.
<PAGE>
The name of the Corporation's resident agent is The
Corporation Trust Incorporated, and its post office address is 32
South Street, Baltimore Maryland 21202. Said resident agent is a
corporation of the State of Maryland.
ARTICLE IV.
Common Stock
Section 1. The total number of shares of capital stock
which the Corporation shall have authority to issue is
2,000,000,000 shares of the par value of $.001 per share and of the
aggregate par value of $2,000,000 to be divided initially into
three classes, consisting of 1,000,000,000 shares of Class A Common
Stock, 500,000,000 shares of Class B Common Stock and 500,000,000
shares of Class C Common Stock.
(a) Each share of Class A, Class B and Class C Common Stock
of the Corporation shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation and
other rights, except that (i) expenses related to the distribution
of each class of shares shall be borne solely by such class; (ii)
the bearing of such expenses solely by shares of each class shall
be appropriately reflected (in the manner determined by the Board
of Directors) in the net asset value, dividends, distribution and
liquidation rights of the shares of such class; (iii) the Class A
Common Stock shall be subject to a front-end sales load and a Rule
12b-1 distribution fee as determined by the Board of Directors from
time to time; (iv) the Class B Common Stock shall be subject to a
contingent deferred sales charge and a Rule 12b-1 distribution fee
2
<PAGE>
as determined by the Board of Directors from time to time; (v) the
Class C Common Stock shall not be subject to either an initial or
a contingent deferred sales charge but shall be subject to a Rule
12b-1 distribution fee as determined by the Board of Directors from
time to time. All shares of a particular class shall represent an
equal proportionate interest in that class, and each share of any
particular class shall be equal to each other share of that class.
(b) Each share of the Class B Common Stock of the Corporation
shall be converted automatically, and without any action or choice
on the part of the holder thereof, into shares (including fractions
thereof) of the Class A Common Stock of the Corporation (computed
in the manner hereinafter described), at the applicable net asset
value of each Class, at the time of the calculation of the net
asset value of such Class B Common Stock at such times, which may
vary between shares originally issued for cash and shares purchased
through the automatic reinvestment of dividends and distributions
with respect to Class B Common Stock (each a Conversion Date),
determined by the Board of Directors in accordance with applicable
laws, rules, regulations and interpretations of the Securities and
Exchange Commission and the National Association of Securities
Dealers, Inc. and pursuant to such procedures as may be established
from time to time by the Board of Directors and disclosed in the
Corporation's then current prospectus for such Class A and Class B
Common Stock.
(c) The number of shares of the Class A Common Stock of the
Corporation into which a share of the Class B Common Stock is
3
<PAGE>
converted pursuant to Paragraph (1)(b) hereof shall equal the
number (including for this purpose fractions of a share) obtained
by dividing the net asset value per share of the Class B Common
Stock for purposes of sales and redemptions thereof at the time of
the calculation of the net asset value on the Conversion Date by
the net asset value per share of the Class A Common Stock for
purposes of sales and redemptions thereof at the time of the
calculation of the net asset value on the Conversion Date.
(d) On the Conversion Date, the shares of the Class B Common
Stock of the Corporation converted into shares of the Class A
Common Stock will cease to accrue dividends and will no longer be
outstanding and the rights of the holders thereof will cease
(except the right to receive declared but unpaid dividends to the
Conversion Date).
(e) The Board of Directors shall have full power and
authority to adopt such other terms and conditions concerning the
conversion of shares of the Class B Common Stock to shares of the
Class A Common Stock as they deem appropriate; provided such terms
and conditions are not inconsistent with the terms contained in
this Section 1 and subject to any restrictions or requirements
under the Investment Company Act of 1940 and the rules, regulations
and interpretations thereof promulgated or issued by the Securities
and Exchange Commission, and conditions or limitations contained in
an order issued by the Securities and Exchange Commission
applicable to the Corporation, or any restrictions or requirements
under the Internal Revenue Code of 1986, as amended, and the rules,
4
<PAGE>
regulations and interpretations promulgated or issued thereunder.
Section 2. The Board of Directors may, in its discretion,
classify and reclassify any unissued shares of the capital stock of
the Corporation into one or more additional or other classes or
series by setting or changing in any one or more respects the
designations, conversion or other rights, restrictions, limitations
as to dividends, qualifications or terms or conditions of
redemption of such shares and pursuant to such classification or
reclassification to increase or decrease the number of authorized
shares of any existing class or series. If designated by the Board
of Directors, particular classes or series of capital stock may
relate to separate portfolios of investments.
Section 3. Unless otherwise expressly provided in the
charter of the Corporation, including any Articles Supplementary
creating any class or series of capital stock, the holders of each
class and series of capital stock of the Corporation shall be
entitled to dividends and distributions in such amounts and at such
times as may be determined by the Board of Directors, and the
dividends and distributions paid with respect to the various
classes or series of capital stock may vary among such classes or
series. Expenses related to the distribution of, and other
identified expenses that should properly be allocated to, the
shares of a particular class or series of capital stock may be
charged to and borne solely by such class or series and the bearing
of expenses solely by a class or series may be appropriately
reflected (in a manner determined by the Board of Directors) and
5
<PAGE>
cause differences in the net asset value attributable to, and the
dividend, redemption and liquidation rights of, the shares of each
such class or series of capital stock.
Section 4. Unless otherwise expressly provided in the
charter of the Corporation, including any Articles Supplementary
creating any class or series of capital stock, on each matter
submitted to a vote of stockholders, each holder of a share of
capital stock of the Corporation shall be entitled to one vote for
each share standing in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all
shares of all classes and series shall vote together as a single
class; provided, however, that (a) as to any matter with respect
to which a separate vote of any class or series is required by the
Investment Company Act of 1940, as amended, and in effect from time
to time, or any rules, regulations or orders issued thereunder, or
by the Maryland General Corporation Law, such requirement as to a
separate vote by that class or series shall apply in lieu of a
general vote of all classes and series as described above; (b) in
the event that the separate vote requirements referred to in (a)
above apply with respect to one or more classes or series, then
subject to paragraph (c) below, the shares of all other classes and
series not entitled to a separate vote shall vote together as a
single class; and (c) as to any matter which in the judgment of the
Board of Directors (which shall be conclusive) does not affect the
interest of a particular class or series, such class or series
shall not be entitled to any vote and only the holders of shares of
6
<PAGE>
the one or more affected classes and series shall be entitled to
vote.
Section 5. Unless otherwise expressly provided in the
charter of the Corporation, including any Articles Supplementary
creating any class or series of capital stock, in the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, holders of shares of capital stock of the
Corporation shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation (as
such liabilities may affect one or more of the classes of shares of
capital stock of the Corporation), to share ratably in the
remaining net assets of the Corporation; provided, however, that in
the event the capital stock of the Corporation shall be classified
or reclassified into series, holders of any shares of capital stock
within such series shall be entitled to share ratably out of assets
belonging to such series pursuant to the provisions of Section 7(c)
of this Article IV.
Section 6. Each share of any class of the capital stock of
the Corporation, and in the event the capital stock of the
Corporation shall be classified or reclassified into series, each
share of any class of capital stock of the Corporation within such
series shall be subject to the following provisions:
(a) The net asset value of each outstanding share
of capital stock of the Corporation (or of a class or
series, in the event the capital stock of the Corporation
shall be so classified or reclassified into series),
7
<PAGE>
subject to subsection (b) of this Section 6, shall be the
quotient obtained by dividing the value of the net assets
of the Corporation (or the net assets of the Corporation
attributable or belonging to that class or series as
designated by the Board of Directors pursuant to Articles
Supplementary) by the total number of outstanding shares
of capital stock of the Corporation (or of such class or
series, in the event the capital stock of the Corporation
shall be classified or reclassified into series).
Subject to subsection (b) of this Section 6, the value of
the net assets of the Corporation (or of such class or
series, in the event the capital stock of the Corporation
shall be classified or reclassified into series) shall be
determined pursuant to the procedures or methods (which
procedures or methods, in the event the capital stock of
the Corporation shall be classified or reclassified into
series, may differ from class to class or from series to
series) prescribed or approved by the Board of Directors
in its discretion, and shall be determined at the time or
times (which time or times may, in the event the capital
stock of the Corporation shall be classified into classes
or series, differ from series to series) prescribed or
approved by the Board of Directors in its discretion. In
addition, subject to subsection (b) of this Section 6,
the Board of Directors, in its discretion, may suspend
the daily determination of net asset value of any share
8
<PAGE>
of any series or class of capital stock of the
Corporation.
(b) The net asset value of each share of the
capital stock of the Corporation or any class or series
thereof shall be determined in accordance with any
applicable provision of the Investment Company Act, any
applicable rule, regulation or order of the Securities
and Exchange Commission thereunder, and any applicable
rule or regulation made or adopted by any securities
association registered under the Securities Exchange Act
of 1934.
(c) All shares now or hereafter authorized shall be
subject to redemption and redeemable at the option of the
stockholder pursuant to the applicable provisions of the
Investment Company Act and laws of the State of Maryland,
including any applicable rules and regulations
thereunder. Each holder of a share of any class or
series, upon request to the Corporation (if such holder's
shares are certificated, such request being accompanied
by surrender of the appropriate stock certificate or
certificates in proper form for transfer), shall be
entitled to require the Corporation to redeem all or any
part of such shares outstanding in the name of such
holder on the books of the Corporation (or as represented
by share certificates surrendered to the Corporation by
such redeeming holder) at a redemption price per share
9
<PAGE>
determined in accordance with subsection (a) of this
Section 6.
(d) Notwithstanding subsection (c) of this Section
6, the Board of Directors of the Corporation may suspend
the right of the holders of shares of any or all classes
or series of capital stock to require the Corporation to
redeem such shares or may suspend any purchase of such
shares:
(i) for any period (A) during which the New York
Stock Exchange is closed, other than customary weekend
and holiday closings, or (B) during which trading on the
New York Stock Exchange is restricted;
(ii) for any period during which an emergency, as
defined by the rules of the Securities and Exchange
Commission or any successor thereto, exists as a result
of which (A) disposal by the Corporation of securities
owned by it and belonging to the affected series of
capital stock (or the Corporation, if the shares of
capital stock of the Corporation have not been classified
or reclassified into series) is not reasonably
practicable, or (B) it is not reasonably practicable for
the Corporation fairly to determine the value of the net
assets of the affected series of capital stock; or
(iii) for such other periods as the Securities and
Exchange Commission or any successor thereto may by order
permit for the protection of the holders of shares of
10
<PAGE>
capital stock of the Corporation.
(e) All shares of the capital stock of the
Corporation now or hereafter authorized shall be subject
to redemption and redeemable at the option of the
Corporation. The Board of Directors may by resolution
from time to time authorize the Corporation to require
the redemption of all or any part of the outstanding
shares of any class or series upon the sending of written
notice thereof to each holder whose shares are to be
redeemed and upon such terms and conditions as the Board
of Directors, in its discretion, shall deem advisable,
out of funds legally available therefor, at the net asset
value per share of that class or series determined in
accordance with subsections (a) and (b) of this Section
6 and take all other steps deemed necessary or advisable
in connection therewith.
(f) The Board of Directors may by resolution from
time to time authorize the purchase by the Corporation,
either directly or through an agent, of shares of any
class or series of the capital stock of the Corporation
upon such terms and conditions and for such consideration
as the Board of Directors, in its discretion, shall deem
advisable out of funds legally available therefor at
prices per share not in excess of the net asset value per
share of that class or series determined in accordance
with subsections (a) and (b) of this Section 6 and to
11
<PAGE>
take all other steps deemed necessary or advisable in
connection therewith.
(g) Except as otherwise permitted by the Investment
Company Act, payment of the redemption price of shares of
any class or series of the capital stock of the
Corporation surrendered to the Corporation for redemption
pursuant to the provisions of subsection (c) of this
Section 6 or for purchase by the Corporation pursuant to
the provisions of subsection (e) or (f) of this Section
6 shall be made by the Corporation within seven days
after surrender of such shares to the Corporation for
such purpose. Any such payment may be made in whole or
in part in portfolio securities or in cash, as the Board
of Directors, in its discretion, shall deem advisable,
and no stockholder shall have the right, other than as
determined by the Board of Directors, to have his or her
shares redeemed in portfolio securities.
(h) In the absence of any specification as to the
purposes for which shares are redeemed or repurchased by
the Corporation, all shares so redeemed or repurchased
shall be deemed to be acquired for retirement in the
sense contemplated by the laws of the State of Maryland.
Shares of any class or series retired by repurchase or
redemption shall thereafter have the status of authorized
but unissued shares of such class or series.
Section 7. In the event the Board of Directors shall
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authorize the classification or reclassification of shares into
classes or series, the Board of Directors may (but shall not be
obligated to) provide that each class or series shall have the
following powers, preferences and voting or other special rights,
and the qualifications, restrictions and limitations thereof shall
be as follows:
(a) All consideration received by the Corporation
for the issue or sale of shares of capital stock of each
series, together with all income, earnings, profits, and
proceeds received thereon, including any proceeds derived
from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall
irrevocably belong to the series with respect to which
such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights
of creditors, and shall be so handled upon the books of
account of the Corporation. Such assets, payments and
funds, including any proceeds derived from the sale,
exchange or liquidation thereof, and any assets derived
from any reinvestment of such proceeds in whatever form
the same may be, are herein referred to as "assets
belonging to" such series.
(b) The Board of Directors may from time to time
declare and pay dividends or distributions, in additional
shares of capital stock of such series or in cash, on any
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or all series of capital stock, the amount of such
dividends and the means of payment being wholly in the
discretion of the Board of Directors.
(i) Dividends or distributions on shares of any
series shall be paid only out of earned surplus or other
lawfully available assets belonging to such series.
(ii) Inasmuch as one goal of the Corporation is to
qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, or any
successor or comparable statute thereto, and Regulations
promulgated thereunder, and inasmuch as the computation
of net income and gains for federal income tax purposes
may vary from the computation thereof on the books of the
Corporation, the Board of Directors shall have the power,
in its discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in
part as capital gains distributions, amounts sufficient,
in the opinion of the Board of Directors, to enable the
Corporation to qualify as a regulated investment company
and to avoid liability for the Corporation for federal
income tax in respect of that year. In furtherance, and
not in limitation of the foregoing, in the event that a
series has a net capital loss for a fiscal year, and to
the extent that the net capital loss offsets net capital
gains from such series, the amount to be deemed available
for distribution to that series with the net capital gain
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may be reduced by the amount offset.
(c) In the event of the liquidation or dissolution
of the Corporation, holders of shares of capital stock of
each series shall be entitled to receive, as a series,
out of the assets of the Corporation available for
distribution to such holders, but other than general
assets not belonging to any particular series, the assets
belonging to such series; and the assets so distributable
to the holders of shares of capital stock of any series
shall be distributed, subject to the provisions of
subsection (d) of this Section 7, among such stockholders
in proportion to the number of shares of such series held
by them and recorded on the books of the Corporation. In
the event that there are any general assets not belonging
to any particular series and available for distribution,
such distribution shall be made to the holders of all
series in proportion to the net asset value of the
respective series determined in accordance with the
charter of the Corporation.
(d) The assets belonging to any series shall be
charged with the liabilities in respect to such series,
and shall also be charged with its share of the general
liabilities of the Corporation, in proportion to the
asset value of the respective series determined in
accordance with the charter of the Corporation. The
determination of the Board of Directors shall be
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conclusive as to the amount of liabilities, including
accrued expenses and reserves, as to the allocation of
the same as to a given series, and as to whether the same
or general assets of the Corporation are allocable to one
or more classes.
Section 8. Any fractional shares shall carry
proportionately all the rights of a whole share, excepting any
right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the right
to receive dividends.
Section 9. No holder of shares of Common Stock of the
Corporation shall, as such holder, have any pre-emptive right to
purchase or subscribe for any shares of the Common Stock of the
Corporation of any class or series which it may issue or sell
(whether out of the number of shares authorized by the Articles of
Incorporation, or out of any shares of the Common Stock of the
Corporation acquired by it after the issue thereof, or otherwise).
Section 10. All persons who shall acquire any shares of
capital stock of the Corporation shall acquire the same subject to
the provisions of the charter and By-Laws of the Corporation.
Section 11. Notwithstanding any provisions of law requiring
action to be taken or authorized by the affirmative vote of the
holders of a designated proportion greater than a majority of the
outstanding shares of all classes or of the outstanding shares of
a particular class or classes, as the case may be, such action
shall be valid and effective if taken or authorized by the
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affirmative vote of the holders of a majority of the total number
of shares of all classes or series or of the total number of shares
of such class or classes or series, as the case may be, outstanding
and entitled to vote thereupon pursuant to the provisions of these
Articles of Incorporation.
ARTICLE V.
Directors
The initial number of directors of the Corporation shall be
three, and the names of those who shall act as such until the first
meeting of stockholders and until their successors are duly elected
and qualify are as follows:
Lawrence C. McQuade
S. Jane Rose
Ronald Amblard
The By-Laws of the Corporation may fix the number of directors at
no less than three and may authorize the Board of Directors, by
the vote of a majority of the entire Board of Directors, to
increase or decrease the number of directors within a limit
specified in the By-Laws (provided that, if there are no shares
outstanding, the number of directors may be less than three but
not less than one), and to fill the vacancies created by any such
increase in the number of directors. Unless otherwise provided
by the By-Laws of the Corporation, the directors of the
Corporation need not be stockholders.
The By-Laws of the Corporation may divide the directors of the
Corporation into classes and prescribe the tenure of office of the
several classes; but no class shall be elected for a period shorter
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than one year or for a period longer than five years, and the term
of office of at least one class shall expire each year.
ARTICLE VI.
Indemnification of Directors and Officers
The Corporation shall indemnify to the fullest extent
permitted by law (including the Investment Company Act, as
currently in effect or as the same may hereafter be amended, any
person made or threatened to be made a party to any action, suit or
proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director or officer of
the Corporation or serves or served at the request of the
Corporation any other enterprise as a director or officer. To the
fullest extent permitted by law (including the Investment Company
Act), as currently in effect or as the same may hereafter be
amended, expenses incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the
Corporation promptly upon receipt by it of an undertaking of such
person to repay such expenses if it shall ultimately be determined
that such person is not entitled to be indemnified by the
Corporation. The rights provided to any person by this Article II
shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon it in serving or continuing
to serve as a director or officer as provided above. No amendment
of this Article VI shall impair the rights of any person arising at
any time with respect to events occurring prior to such amendment.
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For purposes of this Article VI, the term "Corporation" shall
include any predecessor of the Corporation and any constituent
corporation (including any constituent of a constituent) absorbed
by the Corporation in a consolidation or merger; the term "other
enterprise" shall include any corporation, partnership, joint
venture, trust or employee benefit plan; service "at the request of
the Corporation" shall include service as a director or officer of
the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; any excise taxes assessed on a
person with respect to an employee benefit plan shall be deemed to
be indemnifiable expenses; and action by a person with respect to
any employee benefit plan which such person reasonably believes to
be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action not opposed to the best interests
of the Corporation.
ARTICLE VII.
Miscellaneous
The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation,
and for creating, defining, limiting and regulating the powers of
the Corporation, the directors and the stockholders.
Section 1. The Board of Directors shall have the management
and control of the property, business and affairs of the
Corporation and is hereby vested with all the powers possessed by
the Corporation itself so far as is not inconsistent with law or
19
<PAGE>
these Articles of Incorporation. In furtherance and without
limitation of the foregoing provisions, it is expressly declared
that, subject to these Articles of Incorporation, the Board of
Directors shall have power:
(a) To make, alter, amend or repeal from time to time
the By-Laws of the Corporation except as such power may
otherwise be limited in the By-Laws.
(b) To issue shares of any class or series of the
capital stock of the Corporation.
(c) To authorize the purchase of shares of any class or
series in the open market or otherwise, at prices not in
excess of their net asset value for shares of that class,
series or class within such series determined in accordance
with subsections (a) and (b) of Section 6 of Article IV
hereof, provided that the Corporation has assets legally
available for such purpose, and to pay for such shares in
cash, securities or other assets then held or owned by the
Corporation.
(d) To declare and pay dividends and distributions from
funds legally available therefor on shares of such class or
series, in such amounts, if any, and in such manner (including
declaration by means of a formula or other similar method of
determination whether or not the amount of the dividend or
distribution so declared can be calculated at the time of such
declaration) and to the holders of record as of such date, as
the Board of Directors may determine.
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<PAGE>
(e) To take any and all action necessary or appropriate
to maintain a constant net asset value per share for shares of
any class, series or class within such series.
Section 2. Any determination made in good faith and, so far
as accounting matters are involved, in accordance with generally
accepted accounting principles applied by or pursuant to the
direction of the Board of Directors or as otherwise required or
permitted by the Securities and Exchange Commission, shall be final
and conclusive, and shall be binding upon the Corporation and all
holders of shares, past, present and future, of each class or
series, and shares are issued and sold on the condition and
undertaking, evidenced by acceptance of certificates for such
shares by, or confirmation of such shares being held for the
account of, any stockholder, that any and all such determinations
shall be binding as aforesaid.
Nothing in this Section 2 shall be construed to protect any
director or officer of the Corporation against liability to the
Corporation or its stockholders to which such director or officer
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Section 3. The directors of the Corporation may receive
compensation for their services, subject, however, to such
limitations with respect thereto as may be determined from time to
time by the holders of shares of capital stock of the Corporation.
Section 4. Except as required by law, the holders of shares
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<PAGE>
of capital stock of the Corporation shall have only such right to
inspect the records, documents, accounts and books of the
Corporation as may be granted by the Board of Directors of the
Corporation.
Section 5. Any vote of the holders of shares of capital stock
of the Corporation authorizing liquidation of the Corporation or
proceedings for its dissolution may authorize the Board of
Directors to determine, as provided herein, or if provision is not
made herein, in accordance with generally accepted accounting
principles, which assets are the assets belonging to the
Corporation or any series thereof available for distribution to the
holders of shares of capital stock of the Corporation or any series
thereof (pursuant to the provisions of Section 7 of Article IV
hereof) and may divide, or authorize the Board of Directors to
divide, such assets among the stockholders of the shares of capital
stock of the Corporation or any series thereof in such manner as to
ensure that each such holder receives an amount from the proceeds
of such liquidation or dissolution that such holder is entitled to,
as determined pursuant to the provisions of Sections 3 and 7 of
Article IV hereof.
ARTICLE VIII.
Amendments
The Corporation reserves the right from time to time to amend,
alter or repeal any of the provisions of these Articles of
Incorporation (including any amendment that changes the terms of
any of the outstanding shares by classification, reclassification
22
<PAGE>
or otherwise), and to add or insert any other provisions that may,
under the statutes of the State of Maryland at the time in force,
be lawfully contained in articles of incorporation, and all rights
at any time conferred upon the stockholders of the Corporation by
these Articles of Incorporation are subject to the provisions of
this Article VIII.
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<PAGE>
_____________________
I acknowledge this document to be my act, and state under the
penalties of perjury that with respect to all matters and facts
herein, to the best of my knowledge, information and belief such
matters and facts are true in all material respects and that this
statement is made under the penalties of perjury.
March 16, 1994
/s/ Lori Elizabeth Bostrom
______________________
Lori Elizabeth Bostrom
24
PRUDENTIAL EUROPE GROWTH FUND, INC.
By-Laws
ARTICLE I.
Stockholders
Section 1. Place of Meeting. All meetings of the
stockholders shall be held at the principal office of the
Corporation in the State of Maryland or at such other place within
the United States as may from time to time be designated by the
Board of Directors and stated in the notice of such meeting.
Section 2. Annual Meetings. The annual meeting of the
stockholders of the Corporation shall be held on a date and at such
hour as may from time to time be designated by the Board of
Directors and stated in the notice of such meeting, within the
month ending four months after the end of the Corporation's fiscal
year, for the transaction of such business as may properly be
brought before the meeting; provided, however, that an annual
meeting shall not be required to be held in any year in which the
election of directors is not required to be acted on by
stockholders under the Investment Company Act of 1940.
Section 3. Meetings. Meetings of the stockholders for any
purpose or purposes, including for purposes of voting on the
removal of one or more Directors, may be called by the Chairman of
the Board, the President or a majority of the Board of Directors,
and shall be called by the Secretary upon receipt of the request
in writing signed by stockholders holding not less than 10% of the
common stock issued and outstanding and entitled to vote thereat.
Such request shall state the purpose or purposes of the proposed
<PAGE>
meeting. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing such notice of
meeting and upon payment to the Corporation of such costs, the
Secretary shall give notice stating the purpose or purposes of the
meeting as required in this Article and by-law to all stockholders
entitled to notice of such meeting. No meeting need be called upon
the request of the holders of shares entitled to cast less than a
majority of all votes entitled to be cast at such meeting to
consider any matter which is substantially the same as a matter
voted upon at any meeting of stockholders held during the preceding
twelve months.
Section 4. Notice of Meetings of Stockholders. Not less
than ten days' and not more than ninety days' written or printed
notice of every meeting of stockholders, stating the time and place
thereof and the general nature of the business proposed to be
transacted thereat, shall be given to each stockholder entitled to
vote thereat by leaving the same with such stockholder or at such
stockholder's residence or usual place of business or by mailing
it, postage prepaid, and addressed to such stockholder at such
stockholder's address as it appears upon the books of the
Corporation. If mailed, notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder
as aforesaid.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person
or by proxy or to any stockholder who, in writing executed and
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<PAGE>
filed with the records of the meeting, either before or after the
holding thereof, waives such notice.
Section 5. Record Dates. The Board of Directors may fix, in
advance, a date not exceeding ninety days preceding the date of any
meeting of stockholders, any dividend payment date or any date for
the allotment of rights, as a record date for the determination of
the stockholders entitled to notice of and to vote at such meeting
or entitled to receive such dividends or rights, as the case may
be; and only stockholders of record on such date shall be entitled
to notice of and to vote at such meeting or to receive such
dividends or rights, as the case may be. In the case of a meeting
of stockholders, such date shall not be less than ten days prior to
the date fixed for such meeting.
Section 6. Quorum, Adjournment of Meetings. The presence in
person or by proxy of the holders of record of one-third of the
shares of the common stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a quorum
at all meetings of the stockholders except as otherwise provided in
the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the
holders of a majority of the stock present in person or by proxy
shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until stockholders
owning the requisite amount of stock entitled to vote at such
meeting shall be present. At such adjourned meeting at which
stockholders owning the requisite amount of stock entitled to vote
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<PAGE>
thereat shall be represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 7. Voting and Inspectors. At all meetings,
stockholders of record entitled to vote thereat shall have one vote
for each share of common stock standing in his name on the books of
the Corporation (and such stockholders of record holding fractional
shares, if any, shall have proportionate voting rights) on the date
for the determination of stockholders entitled to vote at such
meeting, either in person or by proxy appointed by instrument in
writing subscribed by such stockholder or his duly authorized
attorney.
All elections shall be had and all questions decided by a
majority of the votes cast at a duly constituted meeting, except as
otherwise provided by statute or by the Articles of Incorporation
or by these By-Laws.
At any election of directors, the Chairman of the meeting may,
and upon the request of the holders of ten percent (10%) of the
stock entitled to vote at such election shall, appoint two
inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at such
election with strict impartiality and according to the best of
their ability, and shall after the election make a certificate of
the result of the vote taken. No candidate for the office of
director shall be appointed such inspector.
Section 8. Conduct of Stockholders' Meetings. The meetings
of the stockholders shall be presided over by the Chairman of the
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Board, or if he or she is not present, by the President, or if he
or she is not present, by a Vice-President, or if none of them is
present, by a Chairman to be elected at the meeting. The Secretary
of the Corporation, if present, shall act as a Secretary of such
meetings, or if he or she is not present, an Assistant Secretary
shall so act; if neither the Secretary nor the Assistant Secretary
is present, then the meeting shall elect its Secretary.
Section 9. Concerning Validity of Proxies, Ballots, etc. At
every meeting of the stockholders, all proxies shall be received
and taken in charge of and all ballots shall be received and
canvassed by the Secretary of the meeting, who shall decide all
questions concerning the qualification of voters, the validity of
the proxies and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed by the Chairman of
the meeting, in which event such inspectors of election shall
decide all such questions.
ARTICLE II.
Board of Directors
Section 1. Number and Tenure of Office. The business and
affairs of the Corporation shall be conducted and managed by a
Board of Directors of not less than three nor more than twelve
directors, as may be determined from time to time by vote of a
majority of the directors then in office, provided that if there is
no stock outstanding the number of directors may be less than
three but not less than one. Directors need not be stockholders.
Section 2. Vacancies. In case of any vacancy in the Board
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<PAGE>
of Directors through death, resignation or other cause, other than
an increase in the number of directors, a majority of the remaining
directors, although a majority is less than a quorum, by an
affirmative vote, may elect a successor to hold office until the
next meeting of stockholders or until his successor is chosen and
qualifies.
Section 3. Increase or Decrease in Number of Directors. The
Board of Directors, by the vote of a majority of the entire Board,
may increase the number of directors and may elect directors to
fill the vacancies created by any such increase in the number of
directors until the next meeting of stockholders or until their
successors are duly chosen and qualified. The Board of Directors,
by the vote of a majority of the entire Board, may likewise
decrease the number of directors to a number not less than three.
Section 4. Place of Meeting. The directors may hold their
meetings, have one or more offices, and keep the books of the
Corporation, outside the State of Maryland, at any office or
offices of the Corporation or at any other place as they may from
time to time by resolution determine, or in the case of meetings,
as they may from time to time by resolution determine or as shall
be specified or fixed in the respective notices or waivers of
notice thereof.
Section 5. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such time and on such notice as the
directors may from time to time determine.
Section 6. Special Meetings. Special meetings of the Board
6
<PAGE>
of Directors may be held from time to time upon call of the
Chairman of the Board, the President, the Secretary or two or more
of the directors, by oral or telegraphic or written notice duly
served on or sent or mailed to each director not less than one day
before such meeting. No notice need be given to any director who
attends in person or to any director who, in writing executed and
filed with the records of the meeting either before or after the
holding thereof, waives such notice. Such notice or waiver of
notice need not state the purpose or purposes of such meeting.
Section 7. Quorum. One-third of the directors then in office
shall constitute a quorum for the transaction of business, provided
that a quorum shall in no case be less than two directors. If at
any meeting of the Board there shall be less than a quorum present,
a majority of those present may adjourn the meeting from time to
time until a quorum shall have been obtained. The act of the
majority of the directors present at any meeting at which there is
a quorum shall be the act of the directors, except as may be
otherwise specifically provided by statute or by the Articles of
Incorporation or by these By-Laws.
Section 8. Executive Committee. The Board of Directors may,
by the affirmative vote of a majority of the whole Board, appoint
from the directors an Executive Committee to consist of such number
of directors (not less than three) as the Board may from time to
time determine. The Chairman of the Committee shall be elected by
the Board of Directors. The Board of Directors by such affirmative
vote shall have power at any time to change the members of such
7
<PAGE>
Committee and may fill vacancies in the Committee by election from
the directors. When the Board of Directors is not in session, to
the extent permitted by law, the Executive Committee shall have and
may exercise any or all of the powers of the Board of Directors in
the management of the business and affairs of the Corporation. The
Executive Committee may fix its own rules of procedure, and may
meet when and as provided by such rules or by resolution of the
Board of Directors, but in every case the presence of a majority
shall be necessary to constitute a quorum. During the absence of
a member of the Executive Committee, the remaining members may
appoint a member of the Board of Directors to act in his place.
Section 9. Other Committees. The Board of Directors, by the
affirmative vote of a majority of the whole Board, may appoint from
the directors other committees which shall in each case consist of
such number of directors (not less than two) and shall have and may
exercise such powers as the Board may determine in the resolution
appointing them. A majority of all the members of any such
committee may determine its action and fix the time and place of
its meetings, unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power at any time to
change the members and powers of any such committee, to fill
vacancies and to discharge any such committee.
Section 10. Telephone Meetings. Members of the Board of
Directors or a committee of the Board of Directors may participate
in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the
8
<PAGE>
meeting can hear each other at the same time. Participation in a
meeting by these means constitutes presence in person at the
meeting unless otherwise provided by the Investment Company Act of
1940.
Section 11. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting, if a written
consent to such action is signed by all members of the Board or of
such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or such
committee, unless otherwise provided by the Investment Company Act
of 1940.
Section 12. Compensation of Directors. No director shall
receive any stated salary or fees from the Corporation for his
services as such if such director is, other than by reason of being
such director, an interested person (as such term is defined by the
Investment Company Act of 1940) of the Corporation or of its
investment adviser, administrator or principal underwriter. Except
as provided in the preceding sentence, directors shall be entitled
to receive such compensation from the Corporation for their
services as may from time to time be voted by the Board of
Directors.
Section 13. Removal of Directors. No director shall continue
to hold office after the holders of record of not less than
two-thirds of the Corporation's outstanding common stock of all
series have declared that that director be removed from office
9
<PAGE>
either by declaration in writing filed with the Corporation's
secretary or by votes cast in person or by proxy at a meeting
called for the purpose. The directors shall promptly call a
meeting of stockholders for the purpose of voting upon the question
of removal of any director or directors when requested in writing
to do so by the record holders of not less than 10 percent of the
Corporation's outstanding common stock of all series.
ARTICLE III.
Officers
Section 1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors. These may
include a Chairman of the Board of Directors (who shall be a
director) and shall include a President (who shall be a director),
one or more Vice-Presidents (the number thereof to be determined by
the Board of Directors), a Secretary and a Treasurer. The Board of
Directors or the Executive Committee may also in its discretion
appoint Assistant Secretaries, Assistant Treasurers and other
officers, agents and employees, who shall have such authority and
perform such duties as the Board or the Executive Committee may
determine. The Board of Directors may fill any vacancy which may
occur in any office. Any two offices, except those of President and
Vice-President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law or these
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<PAGE>
By-Laws to be executed, acknowledged or verified by two or more
officers.
Section 2. Term of Office. The term of office of all
officers shall be one year and until their respective successors
are chosen and qualified. Any officer may be removed from office
at any time with or without cause by the vote of a majority of the
whole Board of Directors.
Section 3. Powers and Duties. The officers of the
Corporation shall have such powers and duties as generally pertain
to their respective offices, as well as such powers and duties as
may from time to time be conferred by the Board of Directors or the
Executive Committee.
ARTICLE IV.
Capital Stock
Section 1. Certificates for Shares. Each stockholder of the
Corporation shall be entitled to a certificate or certificates for
the full shares of stock of the Corporation owned by him in such
form as the Board from time to time prescribe.
Section 2. Transfer of Shares. Shares of the Corporation
shall be transferable on the books of the Corporation by the holder
thereof in person or by his duly authorized attorney or legal
representative, upon surrender and cancellation of certificates, if
any, for the same number of shares, duly endorsed or accompanied by
proper instruments of assignment and transfer, with such proof of
the authenticity of the signature as the Corporation or its agents
may reasonably require; in the case of shares not represented by
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certificates, the same or similar requirements may be imposed by
the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the
Corporation, containing the names and addresses of the stockholders
and the number of shares held by them respectively, shall be kept
at the principal office of the Corporation or, if the Corporation
employs a Transfer Agent, at the office of the Transfer Agent of
the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. The Board
of Directors or the Executive Committee may determine the
conditions upon which a new certificate of stock of the Corporation
of any class may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in its
discretion, require the owner of such certificate or such owner's
legal representative to give bond, with sufficient surety, to the
Corporation and each Transfer Agent, if any, to indemnify it and
each such Transfer Agent against any and all loss or claims which
may arise by reason of the issue of a new certificate in the place
of the one so lost, stolen or destroyed.
ARTICLE V.
Corporate Seal
The Board of Directors may provide for a suitable corporate
seal, in such form and bearing such inscriptions as it may
determine.
12
<PAGE>
ARTICLE VI.
Fiscal Year
The fiscal year of the Corporation shall be fixed by the Board
of Directors.
ARTICLE VII.
Indemnification
Directors, officers, employees and agents of the Corporation
shall not be liable to the Corporation, any stockholder, officer,
director, employee or other person for any action or failure to act
except for willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their
office. The Corporation shall indemnify directors, officers,
employees and agents of the Corporation against judgments, fines,
settlements and expenses to the fullest extent authorized and in
the manner permitted by applicable federal and state law. The
Corporation may purchase insurance to protect itself and its
directors, officers, employees and agents against judgments, fines,
settlements and expenses to the fullest extent authorized and in
the manner permitted by applicable federal and state law. Nothing
contained in this Article VII shall be construed to indemnify
directors, officers, employees and agents of the Corporation
against, nor to permit the Corporation to purchase insurance that
purports to protect against, any liability to the Corporation or
any stockholder, officer, director, employee, agent or other person
to whom he or she would otherwise be subject by reason of willful
13
<PAGE>
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.
ARTICLE VIII.
Custodian
Section 1. The Corporation shall have as custodian or
custodians one or more trust companies or banks of good standing,
each having a capital, surplus and undivided profits aggregating
not less than fifty million dollars ($50,000,000), and, to the
extent required by the Investment Company Act of 1940, the funds
and securities held by the Corporation shall be kept in the custody
of one or more such custodians, provided such custodian or
custodians can be found ready and willing to act, and further
provided that the Corporation may use as subcustodians, for the
purpose of holding any foreign securities and related funds of the
Corporation, such foreign banks as the Board of Directors may
approve and as shall be permitted by law.
Section 2. The Corporation shall upon the resignation or
inability to serve of its custodian or upon change of the
custodian:
(a) in case of such resignation or inability to serve,
use its best efforts to obtain a successor custodian;
(b) require that the cash and securities owned by the
Corporation be delivered directly to the successor custodian;
and
(c) in the event that no successor custodian can be
found, submit to the stockholders before permitting delivery
14
<PAGE>
of the cash and securities owned by the Corporation otherwise
than to a successor custodian, the question whether or not
this Corporation shall be liquidated or shall function without
a custodian.
ARTICLE IX.
Amendment of By-Laws
The By-Laws of the Corporation may be altered, amended, added
to or repealed by the stockholders or by majority vote of the
entire Board of Directors; but any such alteration, amendment,
addition or repeal of the By-Laws by action of the Board of
Directors may be altered or repealed by stockholders.
15
EXHIBIT 4
PRUDENTIAL EUROPE GROWTH FUND, INC.
INSTRUMENTS DEFINING RIGHTS OF SHAREHOLDERS
The following is a list of the provisions of the Articles of
Incorporation and By-Laws of Prudential Europe Growth Fund, Inc.
setting forth the rights of shareholders.
I. Relevant Provisions of Articles of Incorporation:
ARTICLE IV -- Common Stock
ARTICLE VI -- Indemnification of Directors and Officers
ARTICLE VII -- Miscellaneous
ARTICLE VIII -- Amendments
II. Relevant Provisions of By-Laws:
ARTICLE I -- Stockholders
ARTICLE IV -- Capital Stock
ARTICLE VII -- Indemnification
ARTICLE IX -- Amendment of By-Laws
PRUDENTIAL EUROPE GROWTH FUND, INC.
Management Agreement
Agreement made this __th day of ______, 1994 between
Prudential Europe Growth Fund, Inc., a Maryland corporation (the
Fund), and Prudential Mutual Fund Management, Inc., a Delaware
corporation (the Manager).
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management
investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act); and
WHEREAS, the Fund desires to retain the Manager to render
or contract to obtain as hereinafter provided investment advisory
services to the Fund and the Fund also desires to avail itself of
the facilities available to the Manager with respect to the
administration of its day to day corporate affairs, and the Manager
is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager
of the Fund 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 an agreement with The Prudential
Investment Corporation (PIC) pursuant to which PIC shall furnish
to the Fund the investment advisory services in connection with the
<PAGE>
management of the Fund (the Subadvisory Agreement). The Manager
will continue to have responsibility for all investment advisory
services furnished pursuant to the Subadvisory Agreement.
2. Subject to the supervision of the Board of Directors
of the Fund, 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
and the Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's
portfolio, including the purchase, retention and disposition
thereof, in accordance with 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 the Fund's
investments and determine from time to time what investments
or 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.
(b) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity with
the Articles of Incorporation, By-Laws and Prospectus
(hereinafter defined) of the Fund and with the instructions and
directions of the Board of Directors of the Fund and will
conform to and comply with the requirements of the 1940 Act and
all other applicable federal and state laws and regulations.
2
<PAGE>
(c) The Manager shall determine the securities and
futures contracts to be purchased or sold by the 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 Fund's Registration Statement and
Prospectus (hereinafter defined) or as the Board of Directors
may direct from time to time. In providing the Fund 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 Fund's
investment transaction business. It is also understood that
it is desirable for the Fund 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 Fund than may result when
3
<PAGE>
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 Fund to brokers or
futures commission merchants who provide such research and
analysis, subject to review by the Fund's Board of Directors
from time to time with respect to the extent and continuation
of this practice. It is understood that the 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 Fund 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 in the manner it considers to be
the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
(d) The Manager shall maintain all books and records with
respect to the Fund's portfolio transactions and shall render
4
<PAGE>
to the Fund's Board of Directors 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 Fund (including
those being maintained by the Fund's Custodian).
(f) The Manager shall provide the Fund's Custodian on
each business day with information relating to all transactions
concerning the Fund's assets.
(g) The investment management services of the Manager to
the Fund under this Agreement are not to be deemed exclusive,
and the Manager shall be free to render similar services to
others.
3. The Fund has delivered to the Manager copies of each
of the following documents and will deliver to it all future
amendments and supplements, if any:
(a) Articles of Incorporation of the Fund, as filed with
the Secretary of State of Maryland (such Articles of
Incorporation, as in effect on the date hereof and as amended
from time to time, are herein called the "Articles of
Incorporation");
(b) By-Laws of the Fund (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 Board of Directors of
the Fund authorizing the appointment of the Manager and
approving the form of this agreement;
5
<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 Fund and
shares of the Fund's Common Stock and all amendments thereto;
(e) Notification of Registration of the Fund under the
1940 Act on Form N-8A as filed with the Commission and all
amendments thereto; and
(f) Prospectus of the Fund (such Prospectus and Statement
of Additional Information, as currently in effect and as
amended or supplemented from time to time, being herein called
the "Prospectus").
4. The Manager shall authorize and permit any of its
directors, officers and employees who may be elected as directors
or officers of the Fund to serve in the capacities in which they
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 Fund'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 Fund
are the property of the Fund and it will surrender promptly to the
Fund any such records upon the Fund'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
6
<PAGE>
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 Fund
and the Manager except the fees and expenses of directors who
are not affiliated persons of the Manager or the Fund's
investment adviser,
(ii) all expenses incurred by the Manager or by the Fund
in connection with managing the ordinary course of the Fund's
business other than those assumed by the Fund herein, and
(iii) the costs and expenses payable to PIC pursuant to
the Subadvisory Agreement.
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in
connection with the management of the investment and
reinvestment of the Fund's assets,
(b) the fees and expenses of directors who are not
affiliated persons of the Manager or the Fund's investment
adviser,
(c) the fees and 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 Fund 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
Fund pursuant to Section 31 of the 1940 Act and the rules
7
<PAGE>
promulgated thereunder, (iii) the pricing of the shares of the
Fund, including the cost of any pricing service or services
which may be retained pursuant to the authorization of the
Board of Directors of the Fund, and (iv) for both mail and wire
orders, the cashiering function in connection with the issuance
and redemption of the Fund's securities,
(d) the fees and expenses of the Fund'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 Fund,
(f) brokers' commissions and any issue or transfer taxes
chargeable to the Fund in connection with its securities and
futures transactions,
(g) all taxes and corporate fees payable by the Fund to
federal, state or other governmental agencies,
(h) the fees of any trade associations of which the Fund
may be a member,
(i) the cost of stock certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of the
Fund,
(j) the cost of fidelity, directors and officers and
errors and omissions insurance,
(k) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the
Securities and Exchange Commission, registering the Fund as a
8
<PAGE>
broker or dealer and qualifying its shares under state
securities laws, including the preparation and printing of the
Fund'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
directors' meetings and of preparing, printing and mailing
reports to shareholders in the amount necessary for
distribution to the shareholders,
(m) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of
the Fund'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 Fund 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 Fund'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 Fund 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
9
<PAGE>
the compensation payable to the Manager, the Manager will pay to
the Fund 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 Fund will pay to the Manager as
full compensation therefor a fee at an annual rate of .75 of 1% of
the Fund's average daily net assets. This fee will be computed
daily and will be paid to the Manager monthly. Any reduction in
the fee payable and any payment by the Manager to the Fund pursuant
to paragraph 7 shall be made monthly. Any such reductions or
payments are subject to readjustment during the year.
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.
10. 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
10
<PAGE>
time, without the payment of any penalty, by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the 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).
11. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Manager who may
also be a director, officer or employee of the Fund 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.
12. Except as otherwise provided herein or authorized by
the Board of Directors of the Fund 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
Fund in any way or otherwise be deemed an agent of the Fund.
13. During the term of this Agreement, the Fund 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
Fund or the public, which refer in any way to the Manager, prior
11
<PAGE>
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 Fund will 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 Fund shall
furnish or otherwise make available to the Manager such other
information relating to the business affairs of the Fund as the
Manager at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
14. 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.
15. 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, N.Y. 10292, Attention:
Secretary; or (2) to the Fund at One Seaport Plaza, New York, N.Y.
10292, Attention: President.
16. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. The Fund may use the name "Prudential Europe Growth
Fund, Inc." or any name including the word "Prudential" only for so
long as this Agreement or any extension, renewal or amendment
12
<PAGE>
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 Fund 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 Fund use the name "Prudential Europe Growth
Fund, Inc." 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.
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 EUROPE GROWTH FUND, INC.
By____________________________________
Lawrence C. McQuade
President
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By____________________________________
Richard A. Redeker
President
13
PRUDENTIAL EUROPE GROWTH FUND, INC.
Subadvisory Agreement
Agreement made as of this __th day of ________, 1994 between
Prudential Mutual Fund Management Inc., a Delaware Corporation (PMF
or the Manager), and The Prudential Investment Corporation, a New
Jersey Corporation (the Subadviser).
WHEREAS, the Manager has entered into a Management Agreement,
dated ___________ __, 1994 (the Management Agreement), with
Prudential Europe Growth Fund, Inc. (the Fund), a Maryland
corporation 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 Fund.
WHEREAS, PMF desires to retain the Subadviser to provide
investment advisory services to the Fund in connection with the
management of the Fund 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
Board of Directors of the Fund, the Subadviser shall manage
the investment operations of the Fund and the composition of
the Fund's portfolio, 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 herein 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 Articles of Incorporation,
By-Laws and Prospectus of the Fund and with the
instructions and directions of the Manager and of the
Board of Directors of the Fund 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.
<PAGE>
(iii) 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 Fund's Registration
Statement and Prospectus or as the Board of Directors
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 Fund'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 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
Fund's Board of Directors 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
2
<PAGE>
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 and to such other clients.
(iv) 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 Fund's Board of
Directors such periodic and special reports as the
Directors may reasonably request.
(v) The Subadviser shall provide the Fund'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.
(vi) 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
directors or officers of the Fund to serve in the capacities
in which they are elected. Services to be furnished by the
Subadviser under this Agreement may be furnished through the
medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Fund's books and records
required to be maintained by the Subadviser pursuant to
paragraph 1(a) 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 Fund required by Rule 31a-1 under the 1940
Act. The Subadviser agrees that all records which it
maintains for the Fund are the property of the Fund and the
Subadviser will surrender promptly to the Fund any of such
records upon the Fund'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) hereof.
2. The Manager shall continue to have responsibility for
all services to be provided to the Fund pursuant to the
Management Agreement and shall oversee and review the
Subadviser's performance of its duties under this Agreement.
3
<PAGE>
3. The Manager shall reimburse the Subadviser for
reasonable costs and expenses incurred by the Subadviser
determined in a manner acceptable to the Manager in
furnishing the services described in paragraph 1 hereof.
4. The Subadviser 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 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 Board
of Directors of the Fund 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 director, officer or employee of
the Fund 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 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 stockholders 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.
4
<PAGE>
8. 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.
9. This Agreement shall be governed by the laws of the
State of New York.
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 _______________________________________
Richard A. Redeker
President
THE PRUDENTIAL INVESTMENT CORPORATION
BY _______________________________________
Harry E. Knapp, Jr.
Vice President
5
Draft 3/28/94
PRUDENTIAL EUROPE GROWTH FUND, INC.
Distribution Agreement
(Class A Shares)
Agreement made as of _____________ 1994, between
Prudential Europe Growth Fund, Inc., a Maryland corporation (the
Fund), and Prudential Mutual Fund Distributors, Inc., a Delaware
corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class A shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class A shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class A shares; and
WHEREAS, upon approval by the Class A shareholders of the
Fund it is contemplated that the Fund will adopt a plan of
distribution pursuant to Rule 12b-1 under the Investment Company
Act (the Plan) authorizing payments by the Fund to the Distributor
with respect to the distribution of Class A shares of the Fund and
the maintenance of Class A shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class A shares of the Fund to
sell Class A shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class A
shares of the Fund to the Distributor on the terms and conditions
set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class A shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class A shares from the Fund shall not apply to Class A
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class A
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class A
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the Fund's
Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933,
as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class A Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund the Class A shares needed, but not more than the Class A
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class A shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class A shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class A shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
2
<PAGE>
hereof, to investors at the offering price as set forth in the
Prospectus.
3.3 The Fund shall have the right to suspend the sale of
its Class A shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class A shares if a
banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class A shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class A shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class A Shares by the Fund
4.1 Any of the outstanding Class A shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class A shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class A shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh calendar
day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class A shares
shall be paid by the Fund to or for the account of the redeeming
shareholder, in each case in accordance with applicable provisions
of the Prospectus.
4.3 Redemption of Class A shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
3
<PAGE>
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of
Class A shares as provided herein, the Fund agrees to sell its
Class A shares so long as it has Class A shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class A shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class A shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such number of Class A shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time
to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements
therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
A shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class A shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class A shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 9.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
4
<PAGE>
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class A shares of the Fund, but shall not
be obligated to sell any specific number of Class A shares. Sales
of the Class A shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with
other investment companies. The Distributor shall compensate the
selected dealers as set forth in the Prospectus.
6.2 In selling the Class A shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class A shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class A shares only to such selected dealers
as are members in good standing of the NASD. Class A shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
The Distributor shall receive and may retain any portion
of any front-end sales charge which is imposed on sales of Class A
shares and not reallocated to selected dealers as set forth in the
Prospectus, subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice. Payment of these amounts to
the Distributor is not contingent upon the adoption or continuation
of the Plan.
5
<PAGE>
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
and this Agreement a fee of .30 of 1% (including an asset-based
sales charge of .05 of 1% and a service fee of .25 of 1%) per annum
of the average daily net assets of the Class A shares of the Fund.
Amounts payable under the Plan shall be accrued daily and paid
monthly or at such other intervals as the Board of Directors may
determine. Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and financial institutions which have dealer
agreements with the Distributor. So long as the Plan (or any
amendment thereto) is in effect, at the request of the Board of
Directors or any agent or representative of the Fund, the
Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
8.3 Expenses of distribution with respect to the Class
A shares of the Fund include, among others:
(a) amounts paid to Prudential Securities for
performing services under a selected dealer
agreement between Prudential Securities and
the Distributor for sale of Class A shares of
the Fund, including sales commissions and
trailer commissions paid to, or on account of,
account executives and indirect and overhead
costs associated with distribution activities,
including central office and branch expenses;
(b) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class A
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(c) sales commissions and trailer commissions paid
to, or on account of, broker-dealers and
financial institutions (other than Prudential
6
<PAGE>
Securities and Prusec) which have entered into
selected dealer agreements with the
Distributor with respect to Class A shares of
the Fund.
(d) amounts paid to, or an account of, account
executives of Prudential Securities, Prusec,
or of other broker-dealers or financial
institutions for personal service and/or the
maintenance of shareholder accounts; and
(e) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (a)
and (b) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class A shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class A shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class
A shares, so long as the Plan is in effect.
7
<PAGE>
Section 10. Indemnification
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and directors and any person who controls
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor
to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, director, trustee or controlling
person unless a court of competent jurisdiction shall determine in
a final decision on the merits, that the person to be indemnified
was not liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement
(disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of directors or
trustees who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor
parties to the proceeding, or (b) an independent legal counsel in
a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors or trustees and any such
controlling person as aforesaid is expressly conditioned upon the
Fund's being promptly notified of any action brought against the
Distributor, its officers or directors or trustees, or any such
controlling person, such notification to be given by letter or
telegram addressed to the Fund at its principal business office.
The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of
its officers or directors in connection with the issue and sale of
any Class A shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
8
<PAGE>
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against
the Fund, its officers and Directors or any such controlling
person, such notification being given to the Distributor at its
principal business office.
Section 11. Duration and Termination of this Agreement
11.1 This Agreement shall become effective as of the date
first above written and shall remain in force for two years from
the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Class A shares of the Fund,
and (b) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Plan or in any
agreement related thereto (Rule 12b-1 Directors), cast in person at
a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities", when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
9
<PAGE>
Section 12. Amendments to this Agreement
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Directors cast in person at a
meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: ________________________
_______________________
(Title)
Prudential Europe Growth Fund, Inc.
By: _______________________
(Name)
(Title)
10
Draft 3/28/94
PRUDENTIAL EUROPE GROWTH FUND, INC.
Distribution Agreement
(Class B Shares)
Agreement made as of ______ __, 1994, between Prudential
Europe Growth Fund, Inc. a Maryland corporation (the Fund), and
Prudential Securities Incorporated, a Delaware corporation (the
Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class B shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class B shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service
plan pursuant to Rule 12b-1 under the Investment Company Act (the
Plan) authorizing payments by the Fund to the Distributor with
respect to the distribution of Class B shares of the Fund and the
maintenance of Class B shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class B shares of the Fund to
sell Class B shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class B
shares of the Fund to the Distributor on the terms and conditions
set forth below.
1
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class B shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class B shares from the Fund shall not apply to Class B
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class B
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class B
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the Fund's
Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933,
as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class B Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund the Class B shares needed, but not more than the Class B
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class B shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class B shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class B shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of
its Class B shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class B shares if a
banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class B shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class B shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class B shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund
4.1 Any of the outstanding Class B shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class B shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class B shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh day
subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class B shares
shall be paid by the Fund as follows: (a) any applicable
contingent deferred sales charge shall be paid to the Distributor
and (b) the balance shall be paid to or for the account of the
redeeming shareholder, in each case in accordance with applicable
provisions of the Prospectus.
4.3 Redemption of Class B shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
3
<PAGE>
reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of
Class B shares as provided herein, the Fund agrees to sell its
Class B shares so long as it has Class B shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class B shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class B shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such number of Class B shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time
to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements
therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
B shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class B shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class B shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 9.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and
4
<PAGE>
activities as may be required by the Fund in connection with such
qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class B shares of the Fund, but shall not
be obligated to sell any specific number of Class B shares. Sales
of the Class B shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with
other investment companies. The Distributor shall compensate the
selected dealers as set forth in the Prospectus.
6.2 In selling the Class B shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class B shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class B shares only to such selected dealers
as are members in good standing of the NASD. Class B shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
The Distributor shall receive and may retain any
contingent deferred sales charge which is imposed with respect to
repurchases and redemptions of Class B shares as set forth in the
Prospectus, subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of
the Plan.
5
<PAGE>
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
and this Agreement a fee of 1% (including an asset-based sales
charge of .75 of 1% and a service fee of .25 of 1%) per annum of
the average daily net assets of the Class B shares of the Fund.
Amounts payable under the Plan shall be accrued daily and paid
monthly or at such other intervals as the Board of Directors may
determine. Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions (including trailer commissions) and account servicing
fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which
have selected dealer agreements with the Distributor. So long as
the Plan (or any amendment thereto) is in effect, at the request of
the Board of Directors or any agent or representative of the Fund,
the Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
8.3 Expenses of distribution with respect to the Class
B shares of the Fund include, among others:
(a) sales commissions (including trailer
commissions) paid to, or on account of,
account executives of the Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of distribution
activities, including central office and
branch expenses;
(c) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class B
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(d) sales commissions (including trailer
commissions) paid to, or on account of,
broker-dealers and financial institutions
(other than Prusec) which have entered into
6
<PAGE>
selected dealer agreements with the
Distributor with respect to Class B shares of
the Fund;
(e) amounts paid to, or an account of, account
executives of the Distributor or of other
broker-dealers or financial institutions for
personal service and/or the maintenance of
shareholder accounts; and
(f) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (b)
and (c) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class B shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class B shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class
B shares, so long as the Plan is in effect.
Section 10. Indemnification
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and Directors and any person who controls
7
<PAGE>
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, Directors or any such controlling person
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor
to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, Director or controlling person
unless a court of competent jurisdiction shall determine in a final
decision on the merits, that the person to be indemnified was not
liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement
(disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of Directors who
are neither "interested persons" of the Fund as defined in Section
2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its
officers and Directors and any such controlling person as aforesaid
is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or
Directors, or any such controlling person, such notification to be
given in writing addressed to the Fund at its principal business
office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of
its officers or Directors in connection with the issue and sale of
any Class B shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
8
<PAGE>
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against
the Fund, its officers and Directors or any such controlling
person, such notification to be given to the Distributor in writing
at its principal business office.
Section 11. Duration and Termination of this Agreement
11.1 This Agreement shall become effective as of the
date first above written and shall remain in force for two years
from the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Class B shares of the Fund,
and (b) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Plan or in any
agreement related thereto (Rule 12b-1 Directors), cast in person at
a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, and (b) by the vote
9
<PAGE>
of a majority of the Rule 12b-1 Board of Directors cast in person
at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential Europe Growth Fund, Inc.
By: _______________________
(Name)
(Title)
10
Draft 3/28/94
PRUDENTIAL EUROPE GROWTH FUND, INC.
Distribution Agreement
(Class C Shares)
Agreement made as of ______ __, 1994, between Prudential
Europe Growth Fund, Inc., a Maryland corporation (the Fund), and
Prudential Securities Incorporated, a Delaware corporation (the
Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class C shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class C shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class C shares; and
WHEREAS, upon approval by the Class C shareholders of the
Fund, it is contemplated that the Fund will adopt a distribution
and service plan pursuant to Rule 12b-1 under the Investment
Company Act (the Plan) authorizing payments by the Fund to the
Distributor with respect to the distribution of Class C shares of
the Fund and the maintenance of Class C shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class C shares of the Fund to
sell Class C shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class C
shares of the Fund to the Distributor on the terms and conditions
set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class C shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class C shares from the Fund shall not apply to Class C
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class C
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class C
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the Fund's
Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933,
as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class C Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund the Class C shares needed, but not more than the Class C
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class C shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class C shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class C shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of
its Class C shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class C shares if a
banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class C shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class C shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class C Shares by the
Fund
4.1 Any of the outstanding Class C shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class C shares so tendered in accordance
with its Articles of Incorporation, as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class C shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh day
subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class C shares
shall be paid by the Fund to or for the account of the redeeming
shareholder, in each case in accordance with applicable provisions
of the Prospectus.
4.3 Redemption of Class C shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the
3
<PAGE>
Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of
Class C shares as provided herein, the Fund agrees to sell its
Class C shares so long as it has Class C shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class C shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class C shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such number of Class C shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time
to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements
therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
C shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class C shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class C shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 8.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and
4
<PAGE>
activities as may be required by the Fund in connection with such
qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class C shares of the Fund, but shall not
be obligated to sell any specific number of Class C shares. Sales
of the Class C shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with
other investment companies. The Distributor shall compensate the
selected dealers as set forth in the Prospectus.
6.2 In selling the Class C shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class C shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class C shares only to such selected dealers
as are members in good standing of the NASD. Class C shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payment of the Distributor under the Plan
7.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
and this Agreement a fee of 1% (including an asset-based sales
charge of .75 of 1% and a service fee of .25 of 1%) per annum of
the average daily net assets of the Class C shares of the Fund.
Amounts payable under the Plan shall be accrued daily and paid
monthly or at such other intervals as the Board of Directors may
determine. Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
5
<PAGE>
7.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions (including trailer commissions) and account servicing
fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which
have selected dealer agreements with the Distributor. So long as
the Plan (or any amendment thereto) is in effect, at the request of
the Board of Directors or any agent or representative of the Fund,
the Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
7.3 Expenses of distribution with respect to the Class
C shares of the Fund include, among others:
(a) sales commissions (including trailer
commissions) paid to, or on account of,
account executives of the Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of distribution
activities, including central office and
branch expenses;
(c) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class C
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(d) sales commissions (including trailer
commissions) paid to, or on account of,
broker-dealers and financial institutions
(other than Prusec) which have entered into
selected dealer agreements with the
Distributor with respect to Class C shares of
the Fund;
(e) amounts paid to, or an account of, account
executives of the Distributor or of other
broker-dealers or financial institutions for
personal service and/or the maintenance of
shareholder accounts; and
(f) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
6
<PAGE>
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (b)
and (c) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 8. Allocation of Expenses
8.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class C shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class C shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 7 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class
C shares, so long as the Plan is in effect.
Section 9. Indemnification
9.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and Directors and any person who controls
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, Directors or any such controlling person
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out
7
<PAGE>
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor
to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, Director or controlling person
unless a court of competent jurisdiction shall determine in a final
decision on the merits, that the person to be indemnified was not
liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement
(disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of Directors who
are neither "interested persons" of the Fund as defined in Section
2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its
officers and Directors and any such controlling person as aforesaid
is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or
Directors, or any such controlling person, such notification to be
given in writing addressed to the Fund at its principal business
office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of
its officers or Directors in connection with the issue and sale of
any Class C shares.
9.2 The Distributor agrees to indemnify, defend and hold
the Fund, its officers and Directors and any person who controls
the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against
8
<PAGE>
the Fund, its officers and Directors or any such controlling
person, such notification to be given to the Distributor in writing
at its principal business office.
Section 10. Duration and Termination of this Agreement
10.1 This Agreement shall become effective as of the date
first above written and shall remain in force for two years from
the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Class C shares of the Fund,
and (b) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Plan or in any
agreement related thereto (Rule 12b-1 Directors), cast in person at
a meeting called for the purpose of voting upon such approval.
10.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
10.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 11. Amendments to this Agreement
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Board of Directors cast in person
at a meeting called for the purpose of voting on such amendment.
Section 12. Governing Law
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Securities Incorporated
By: ______________________________
(Name)
______________________________
(Title)
Prudential Europe Growth Fund, Inc.
By: ______________________________
(Name)
______________________________
(Title)
10
PRUDENTIAL EUROPE GROWTH FUND, INC.
Subscription Offering Agreement
AGREEMENT made as of the __th day of _____, 1994, between
PRUDENTIAL EUROPE GROWTH FUND, INC., a Maryland corporation (the
Fund), PRUDENTIAL SECURITIES INCORPORATED, a Delaware corporation
(Prudential Securities), and PRUDENTIAL MUTUAL FUND DISTRIBUTORS,
INC., a Delaware corporation (PMFD and, together with Prudential
Securities, the Subscription Agents).
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as a diversified, open-end
management investment company and it is in the interest of the Fund
to offer its shares for sale to the public; and
WHEREAS, the Fund and the Subscription Agents wish to enter
into an agreement with each other with respect to the initial
offering of the Fund's shares of Common Stock, $.001 par value, of
Class A, Class B and Class C (Common Stock).
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Subscription Agents. The Fund
hereby appoints the Subscription Agents its exclusive agents to
solicit, and to arrange for the solicitation of, subscriptions for
shares of its Common Stock, on the terms and for the period set
forth in this Agreement, and the Subscription Agents hereby accept
such appointment and agree to act hereunder. PMFD is hereby
appointed the Subscription Agent with respect to the Fund's Class A
Common Stock. Prudential Securities is hereby appointed the
Subscription Agent with respect to the Fund's Class B and Class C
<PAGE>
Common Stock.
Section 2. Services and Duties of the Subscription Agents.
(a) The Subscription Agents agree to solicit, as agents
for the Fund, during the Subscription Period (as defined herein),
subscriptions for shares of the Fund's Common Stock upon the terms
described in the Prospectus. As used in this Agreement, the term
"Prospectus" shall mean the prospectus and statement of additional
information included as part of the Fund's Registration Statement,
as such prospectus may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement most recently filed from time to time by the
Fund with the Securities and Exchange Commission and effective
under the Securities Act of 1933, as amended (the 1933 Act), and
the 1940 Act, as such Registration Statement is amended by any
amendments thereto at the time in effect.
(b) The Subscription Period shall commence on ______,
1994 and shall end on _______, 1994 provided, however, that any
party hereto may change the commencement or termination date by not
less than two days' written notice to the other parties and any
such change shall not be deemed an amendment for purposes of
Section 9 hereof. During the Subscription Period, each
Subscription Agent will hold itself available to receive
subscriptions, satisfactory to the Subscription Agent, for the
purchase of the Fund's Common Stock and will accept such
subscriptions on behalf of the Fund.
(c) Each Subscription Agent may in its discretion enter
2
<PAGE>
into agreements with such registered and qualified retail dealers
as it may select authorizing such dealers to solicit subscriptions
for shares of Common Stock. In making agreements with such
dealers, the Subscription Agent shall act only as principal and not
as agent for the Fund.
(d) The maximum public offering price of Class A shares
of Common Stock subscribed for during the Subscription Period shall
be [$10.55] per share and the public offering price of shares of
Class B and Class C Common Stock subscribed for during the
Subscription Period shall be [$10.00] per share, or such other
price or prices as the Fund shall specify by written notice to each
Subscription Agent prior to the commencement of the Subscription
Period. Shares of Class A Common Stock subscribed for during the
Subscription Period shall be issued with a maximum sales charge of
5.00%, and the Subscription Agents shall be entitled to payments
pursuant to any Plan of Distribution adopted by the Fund pursuant
to Rule 12b-1 under the 1940 Act which provides for such payments
with respect to such shares of Common Stock.
(e) The Subscription Agents shall not be obligated to
solicit subscriptions for any certain number of shares of Common
Stock, and nothing herein contained shall prevent each Subscription
Agent from entering into like distribution or solicitation
arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
Section 3. Notification Time; Closing Date; Payment for and
Issuance of Shares.
3
<PAGE>
(a) Each Subscription Agent shall, on the first business
day subsequent to the last day of the Subscription Period (the
Notification Time), advise the Fund by written notice of the number
of shares of Common Stock for which it has received subscriptions,
including the number of shares of Common Stock which have been
subscribed for through dealers with whom the Subscription Agent has
entered into agreements pursuant to Section 2(c) hereof. Such
shares of Common Stock are hereinafter referred to as the "Closing
Shares."
(b) The "Closing Date" shall be the fifth business day
subsequent to the last day of the Subscription Period, or such
other date as shall be agreed in writing between the Subscription
Agents and the Fund. Each Subscription Agent shall use its best
efforts to obtain payment from subscribers for the Closing Shares
on or prior to the Closing Date. In the event that a Subscription
Agent has not received payment for any portion of the Closing
Shares on or prior to the Closing Date, the Subscription Agent may
at its option cancel the subscription or subscriptions to which the
unpaid Closing Shares relate and advise the Fund by written notice
on the Closing Date of the resulting reduction of the number of
Closing Shares.
(c) The Fund shall cause its transfer and dividend
disbursing agent to register shares of Common Stock evidencing the
Closing Shares in such names and amounts as the Subscription Agents
shall have requested in writing, against payment of the purchase
price therefor by wire transfer of federal funds to the account of
4
<PAGE>
the Fund at State Street Bank and Trust Company by the close of
business on the next business day following the Closing Date.
Section 4. Duties of the Fund.
(a) The Fund shall keep the Subscription Agents fully
informed with regard to its affairs and shall furnish to the
Subscription Agents copies of all information, financial statements
and other papers which the Subscription Agents may reasonably
request for use in connection with the solicitation of
subscriptions for shares of Common Stock of the Fund, including one
certified copy, upon request by a Subscription Agent, of all
financial statements prepared for the Fund by independent
accountants and such reasonable number of copies of its most
current Prospectus as each Subscription Agent may request, and the
Fund shall cooperate fully in the efforts of the Subscription
Agents to solicit and arrange for the solicitation of the
subscriptions for shares of the Fund's Common Stock and in the
performance of the Subscription Agents under this Agreement.
(b) The Fund shall take, from time to time, all
necessary action to fix the number of authorized shares and such
steps, including payment of the related filing fee, as may be
necessary to register the same under the 1933 Act to the end that
there will be available for sale such number of shares of Common
Stock as to which the Subscription Agents may be expected to
solicit subscriptions. The Fund agrees to file from time to time
such amendments, reports and other documents as may be necessary in
order that there will be no untrue statement of a material fact
5
<PAGE>
in the Registration Statement or Prospectus, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement or Prospectus which omission would make the
statements therein misleading.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its shares
of Common Stock for sale under the securities laws of such states
as the Subscription Agents and the Fund may approve and, if
necessary or appropriate in connection therewith, to qualify and
maintain the qualification of the Fund as a broker or dealer in
such states; provided that the Fund shall not be required to amend
its Articles of Incorporation or By-Laws to comply with the laws of
any state, to maintain an office in any state, to change the
terms of the offering of its shares of Common Stock in any state
from the terms set forth in its Registration Statement and
Prospectus, to qualify as a foreign corporation in any state or to
consent to service of process in any state other than with respect
to claims arising out of the offering of its Common Stock. Each
Subscription Agent shall furnish such information and other
material relating to its affairs and activities as may be required
by the Fund in connection with such qualifications.
Section 5. Expenses.
(a) The Fund shall bear all costs and expenses of the
initial offering of its shares in connection with: (i) fees and
disbursements of its counsel and independent accountants, (ii) the
preparation, filing and printing of any registration statements
6
<PAGE>
and/or prospectuses required by and under the federal securities
laws and (iii) the qualifications of shares of Common Stock for
sale and of the Fund as a broker or dealer under the securities
laws of such states or other jurisdictions as shall be selected by
the Fund and the Subscription Agents pursuant to Section 4(c)
hereof and the cost and expenses payable to each such state for
continuing qualification therein.
(b) Each Subscription Agent shall bear (i) the costs and
expenses of preparing, printing and distributing any materials not
prepared by the Fund and other materials used by the Subscription
Agent in connection with its solicitation of subscriptions for
shares of Common Stock from the public, including the additional
cost of printing copies of the Prospectus other than copies thereof
required for filing with any federal securities authorities,
(ii) any expenses of advertising incurred by the Subscription Agent
in connection with such solicitation, (iii) the expenses of
registration or qualification of the Subscription Agent as a dealer
or broker under federal or state laws and the expenses of
continuing such registration or qualification and (iv) the expenses
of any sales commissions for sale of the Fund's shares (except such
expenses as are specifically undertaken herein by the Fund or are
paid by a purchaser of the Fund's shares). It is understood and
agreed that, so long as the Fund's Plans of Distribution pursuant
to Rule 12b-1 under the 1940 Act continue in effect, any expenses
incurred by a Subscription Agent hereunder may be paid from amounts
received by it from the Fund under such Plans.
7
<PAGE>
Section 6. Indemnification. The Fund agrees to indemnify,
defend and hold each Subscription Agent, its officers and directors
and any person who controls the Subscription Agent within the
meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Subscription Agent, its officers, directors or
any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any untrue
statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged
omission to state a material fact required to be stated in either
thereof or necessary to make the statements in either thereof not
misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in
writing by the Subscription Agent to the Fund for use in the
Registration Statement or Prospectus; provided, however, that this
indemnity agreement shall not inure to the benefit of such officer,
director or controlling person unless a court of competent
jurisdiction shall determine, in a final decision on the merits,
that the person to be indemnified was not liable, by reason of
willful misfeasance, bad faith or gross negligence in the
performance of his duties, or by reason of his reckless disregard
8
<PAGE>
of his obligations under this Agreement (disabling conduct), or, in
the absence of such a decision, a reasonable determination, based
upon a review of the facts, that the indemnified person was
not liable by reason of disabling conduct by (a) the vote of a
majority of a quorum of directors who are neither "interested
persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act
nor parties to the proceeding or (b) an independent legal counsel
in a written opinion. The Fund's agreement to indemnify each
Subscription Agent, its officers and directors and any such
controlling person as aforesaid is expressly conditioned upon the
Fund's being promptly notified of any action brought against the
Subscription Agent, its officers or directors, or any such
controlling person, such notification to be given by letter or
telegram addressed to the Fund at its principal business office.
The Fund agrees promptly to notify each Subscription Agent of the
commencement of any litigation or proceedings against it or any of
its officers or directors in connection with the issue and sale of
any shares of its Common Stock.
Each Subscription Agent agrees to indemnify, defend and hold
the Fund, its officers and directors and any person who controls
the Fund, if any, within the meaning of Section 15 of the 1933 Act,
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its
directors or officers or any such controlling person may incur
9
<PAGE>
under the 1933 Act or under common law or otherwise, but only to
the extent that such liability or expense incurred by the Fund, its
directors or officers or such controlling person resulting from
such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in
information furnished in writing by the Subscription Agent to the
Fund for use in the Registration Statement or Prospectus or shall
arise out of or be based upon any alleged omission to state a
material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. Each Subscription Agent's
agreement to indemnify the Fund, its directors and officers and any
such controlling person as aforesaid is expressly conditioned upon
the Subscription Agent's being promptly notified of any action
brought against the Fund, its officers or directors or any such
controlling person, such notification being given to the
Subscription Agent at its principal business office.
Section 7. Compliance with Securities Laws. The Fund
represents that it is registered as a diversified, open-end
management investment company under the 1940 Act, and agrees that
it will comply with all of the provisions of the 1940 Act and of
the rules and regulations thereunder. The Fund and each
Subscription Agent each agree to comply with all of the applicable
terms and provisions of the 1940 Act, the 1933 Act and, subject to
the provisions of Section 4(c) hereof, all applicable state "Blue
Sky" laws. Each Subscription Agent agrees to comply with all of
10
<PAGE>
the applicable provisions of the Securities Exchange Act of 1934.
Section 8. Effective Date of Agreement; Termination. This
Agreement shall become effective at 9:00 a.m., New York time, on
______, 1994 or on such other commencement date established
pursuant to Section 2(b) hereof.
The Fund may at any time prior to the Closing Date elect to
terminate the initial offering of the Common Stock. In such event,
this Agreement will be terminated, without payment of any penalty,
and the Subscription Agents shall return to subscribers, without
interest or deduction, any amounts paid by such subscribers
pursuant to Section 3 hereof.
This Agreement may be terminated at any time without the
payment of any penalty by the Board of Directors of the Fund, by
a majority of the directors of the Fund who are not interested
persons of the Fund and who have no direct or indirect financial
interest in this Agreement or in any agreement related to the
Fund's Plans of Distribution pursuant to Rule 12b-1 under the 1940
Act, or by vote of a majority of the outstanding voting securities
of the Fund, or by a Subscription Agent, on not more than sixty
days' nor less than thirty days' written notice to the other
parties. This Agreement shall automatically terminate in the event
of its assignment.
Section 9. Amendments of this Agreement. This Agreement may
be amended by the parties only if such amendment is specifically
approved by (i) the Board of Directors of the Fund, or by the vote
11
<PAGE>
of a majority of outstanding voting securities of the Fund, and
(ii) a majority of those directors of the Fund who are not parties
to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agreement or
in any Agreement related to the Fund's Plans of Distribution
pursuant to Rule 12b-1 under the 1940 Act, cast in person at a
meeting called for the purpose of voting on such approval.
Section 10. Notices. Any notice required to be given
pursuant to this Agreement shall be deemed duly given if delivered
or mailed by registered mail, postage prepaid, (i) to the
Subscription Agents at One Seaport Plaza, New York, New York 10292,
Attention: Prudential Mutual Fund Distributors, Inc. or Prudential
Securities Incorporated, or (ii) to the Fund at One Seaport Plaza,
New York, New York 10292, Attention: President.
Section 11. Entire Agreement. This Agreement contains the
entire agreement between the parties hereto and supersedes all
prior agreements with respect to the subject matter hereof.
Section 12. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
PRUDENTIAL EUROPE GROWTH FUND, INC.
By:___________________________
Title: President
PRUDENTIAL MUTUAL FUND
DISTRIBUTORS, INC.
By:____________________________
Title: Vice President
PRUDENTIAL SECURITIES
INCORPORATED
By:____________________________
Title:_________________________
13
FORM OF
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES INDICATED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It .. -1-
2. Duties to the Custodian with Respect to Property of The
Fund Held By the Custodian in the United States ........ -2-
2.1 Holding Securities ............................... -2-
2.2 Delivery of Securities ........................... -2-
2.3 Registration of Securities ....................... -6-
2.4 Bank Accounts .................................... -7-
2.5 Availability of Federal Funds .................... -7-
2.6 Collection of Income ............................. -8-
2.7 Payment of Fund Monies ........................... -8-
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased ............................. -11-
2.9 Appointment of Agents ............................ -11-
2.10 Deposit of Securities in Securities Systems ...... -11-
2.10A Fund Assets Held in the Custodian's Direct Paper
System ........................................... -13-
2.11 Segregated Account ............................... -14-
2.12 Ownership Certificates for Tax Purposes .......... -15-
2.13 Proxies .......................................... -16-
2.14 Communications Relating to Fund Portfolio
Securities ....................................... -16-
2.15 Reports to Fund by Independent Public Accountants -16-
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States ................. -17-
3.1 Appointment of Foreign Sub-Custodians ............ -17-
3.2 Assets to be Held ................................ -17-
3.3 Foreign Securities Depositories .................. -18-
3.4 Segregation of Securities ........................ -18-
3.5 Agreements with Foreign Banking Institutions ..... -18-
3.6 Access of Independent Accountants of the Fund .... -19-
3.7 Reports by Custodian ............................. -19-
3.8 Transactions in Foreign Custody Account........... -20-
3.9 Liability of Foreign Sub-Custodians .............. -20-
3.10 Liability of Custodian ........................... -21-
3.11 Reimbursements for Advances ...................... -21-
3.12 Monitoring Responsibilities ...................... -22-
3.13 Branches of U.S. Banks ........................... -22-
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund ..................................... -23-
-i-
<PAGE>
5. Proper Instructions .................................... -24-
6. Actions Permitted without Express Authority ............ -24-
7. Evidence of Authority .................................. -25-
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income ...... -26-
9. Records ................................................ -26-
10. Opinion of Fund's Independent Accountant ............... -27-
11. Compensation of Custodian .............................. -27-
12. Responsibility of Custodian ............................ -27-
13. Effective Period, Termination and Amendment ............ -29-
14. Successor Custodian .................................... -30-
15. Interpretative and Additional Provisions ............... -32-
16. Massachusetts Law to Apply ............................. -32-
17. Prior Contracts ........................................ -32-
18. The Parties ............................................ -32-
19. Limitation of Liability ................................ -33-
-ii-
<PAGE>
CUSTODIAN CONTRACT
This Contract between State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at
225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called
the "Custodian", and each Fund listed on Appendix A which evidences its
agreement to be bound hereby by executing a copy of this Contract (each
such Fund individually hereinafter referred to as the "Fund").
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United
States ("domestic securities") and securities it desires to be held
outside the United States ("foreign securities") pursuant to the
provisions of the Articles of Incorporation/Declaration of Trust. The
Fund agrees to deliver to the Custodian all securities and cash owned by
it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Fund from time to time, and the cash consideration received by it for
such new or treasury shares of capital stock, ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held or received by the Fund
and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Article 5), the Custodian shall from time to time employ one or more
sub-custodians located in the United States, but only in accordance with
an applicable vote by the Board of Directors/Trustees of the Fund, and
<PAGE>
provided that the Custodian shall have the same responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed as any such sub-custodian has to the
Custodian, provided that the Custodian agreement with any such domestic
sub-custodian shall impose on such sub-custodian responsibilities and
liabilities similar in nature and scope to those imposed by this
Agreement with respect to the functions to be performed by such
sub-custodian. The Custodian may employ as sub-custodians for the
Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto but
only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of The Fund Held
By the Custodian in the United States.
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to be held
by it in the United States, including all domestic securities owned by
the Fund, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of Treasury,
collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book-entry system account ("Direct Paper System") only upon
-2-
<PAGE>
receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of the Fund
and receipt of payment therefor;
(2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Fund;
(3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;
(4) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
(5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or
other consideration is to be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into
the name of the Fund or into the name of any nominee or
nominees of the Custodian or into the name or nominee
name of any agent appointed pursuant to Section 2.9 or
into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
-3-
<PAGE>
(7) Upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
(8) For exchange or conversation pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants,
rights or similar securities or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(10) For delivery in connection with any loans of securities
made by the Fund, but only against receipt of adequate
collateral as agreed upon from time to time by the
Custodian and the Fund, which may be in the form of cash
or obligations issued by the United States government,
its agencies or
-4-
<PAGE>
instrumentalities, except that in connection with any
loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery
of securities owned by the Fund prior to the receipt
of such collateral;
(11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by
the Fund, but only against receipt of amounts borrowed;
(12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
(13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding
account deposits in connection with transactions by the
Fund;
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<PAGE>
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from
time to time in the Fund's currently effective prospectus
and statement of additional information ("prospectus"),
in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(15) For any other proper business purpose, but only upon
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors/Trustees
or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper
business purpose, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name
of the Fund or in the name of any nominees of the Fund or of any nominee
of the Custodian which nominee shall be assigned exclusively to the
Fund, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies
having the same investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section 2.9 or in the
name or nominee name of any sub-custodian appointed pursuant to Article
1. All securities accepted by the Custodian on behalf of the Fund under
the terms of this Contract shall
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be in "street name" or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts to timely collect income due
the Fund on such securities and to notify the Fund on a best efforts
basis of relevant corporate actions including, without limitation,
pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of
the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Fund, other than cash maintained by the
Fund in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be approved by
vote of a majority of the Board of Directors/Trustees of the Fund. Such
funds shall be deposited by the Custodian in its capacity as Custodian
and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the
Fund and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the
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Custodian in the amount of checks received in payment for Shares of the
Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by
the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other
income items requiring presentation as and when they become due and shall
collect interest when due on securities held hereunder. Income due the
Fund on securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Fund. The Custodian will have no duty
or responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of the Fund in the following cases
only:
(1) Upon the purchase of securities held domestically, options,
futures contracts or options on futures contracts for the
account of the Fund but only (a) against the delivery of such
securities, or evidence of title to such
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<PAGE>
options, futures contracts or options on futures
contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System,
in accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth
in Section 2.10A; (d) in the case of repurchase agreements
entered into between the Fund and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate
form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the
Fund of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic
or foreign; such transfer may be effected prior to receipt
of a confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined in
Article 5;
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<PAGE>
(2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares issued by the
Fund as set forth in Article 4 hereof;
(4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
(6) For payment of the amount of dividends received in respect
of securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of Board of Directors/Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
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2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund
to so pay in advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company Act
of 1940, as amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian may from time
to time direct; provided, however, that the appointment of any agent
shall not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
(1) The Custodian may keep domestic securities of the Fund in
a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not
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<PAGE>
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Fund;
(3) The Custodian shall pay for domestic securities purchased
for the account of the Fund upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (i.) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the
account of the Fund upon (i) receipt of advice from
the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System of
transfers of domestic securities for the account of the
Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice and shall
furnish promptly to the Fund copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Fund.
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<PAGE>
(4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have
against the Securities System; at the election of the Fund,
it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have
as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such
loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the Fund in the
Direct Paper System of the Custodian subject to the following provisions:
(1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
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<PAGE>
(2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
(3) The records of the Custodian with respect to securities of
the Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
(4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
(5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of
a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's
transaction in the Direct Paper System for the account of the
Fund;
(6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time;
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2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Fund, (ii) for purposes of segregating cash, government securities or
liquid, high-grade debt obligations in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options
thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other
proper corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors/Trustees or of the Executive
Committee signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
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<PAGE>
2.12 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it and
in connection with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are registered
otherwise than in the name of the Fund or a nominee of the Fund, all
proxies, without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities. Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund all written information (including, without limitation, pendency
of calls and maturities of securities held domestically and expirations
of rights in connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers of
the securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least three
business days prior to the date of which the Custodian is to take such
action.
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<PAGE>
2.15 Reports to Fund by Independent Public Accountants. The Custodian
shall provide the Fund, at such times as the Fund may reasonably require,
with reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports
shall be of sufficient scope and in sufficient detail, as may reasonably
be required by the Fund to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are no
such inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes
and instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of
Directors/Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Fund's assets.
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3.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine to
be reasonably necessary to effect the Fund's foreign securities
transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Fund shall
be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.5 hereof.
3.4 Segregation of Securities. The Custodian shall identify on its
books as belonging to the Fund, the foreign securities of the Fund held
by each foreign sub-custodian. Each agreement pursuant to which the
Custodian employs a foreign banking institution shall require that such
institution establish a custody account for the Custodian on behalf of
the Fund and physically segregate in that account, securities and other
assets of the Fund, and, in the event that such institution deposits the
Fund's securities in a foreign securities depository, that it shall
identify on its books as belonging to the Custodian, as agent for the
Fund, the securities so deposited.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit I hereto and shall provide that (a) the Fund's assets will not
be subject to any right, charge, security interest, lien
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or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of the Fund's assets will be
freely transferable without the payment of money or value other than for
custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) officers of or
auditors employed by, or other representatives of the Custodian,
including to the extent permitted under applicable law the independent
public accountants for the Fund, will be given access to the books and
records of the foreign banking institution relating to its actions under
its agreement with the Custodian; and (e) assets of the Fund held by the
foreign sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the performance
of such foreign banking institution under its agreement with the
Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of the Fund indicating, as to securities acquired for the Fund,
the identity of the entity having physical possession of such securities.
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3.8 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this
Section 3.8, the provision of Sections 2.2 and 2.7 of this Contract shall
apply, in their entirety to the foreign securities of the Fund held
outside the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the account
of the Fund and delivery of securities maintained for the account of the
Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to
a dealer therefore (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of
such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall
be entitled to be subrogated to the rights of the
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Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the
acts or omissions of a foreign banking institution to the same extent as
set forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or (b)
other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident
or other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian
to advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in the
event that the Custodian or its nominees shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection
with the
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performance of this Contract, except such as amy arise from its or its
nominee's own negligent action, negligent failure to act or wilful
misconduct, any property at any time held for the account of the Fund
shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually
to the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the
provisions of Article 3 shall not apply where the custody of the Fund
assets are maintained in a foreign branch of a banking institution which
is a "bank" as defined by Section 2(a)(5) of the Investment Company Act
of 1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
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(b) Cash held for the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
4. Payments for Repurchases or Redemptions and Sales of Shares of the
Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation/Declaration of Trust and any
applicable votes of the Board of Directors/Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from the
Transfer Agent, make funds available for payment to holders of Shares who
have delivered to the Transfer Agent a request for redemption or
repurchase of their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a holder of
Shares, which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Fund's Shares
or from the Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the Fund issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of
payments for Shares of the Fund.
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<PAGE>
5. Proper Instructions.
Proper Instructions as used herein means a writing signed or initialled
by one or more person or persons as the officers of the Fund shall have
from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested.
Oral instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in writing. It is
understood and agreed that the Board of Directors/Directors/Trustees has
authorized (i) Prudential Mutual Fund Management, Inc., as Manager of the
Fund, and (ii) The Prudential Investment Corporation (or Prudential-Bache
Securities Inc.), as Subadviser to the Fund, to deliver proper
instructions with respect to all matters for which proper instructions
are required by this Article 5. The Custodian may rely upon the
certificate of an officer of the Manager or Subadviser, as the case may
be, with respect to the person or persons authorized on behalf of the
Manager and Subadviser, respectively, to sign, initial or give proper
instructions for the purpose of this Article 5. Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices provided that the Fund and the Custodian are satisfied
that such procedures afford adequate safeguards for the Fund's assets.
For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.11.
6. Actions Permitted without Express Authority.
The Custodian may in its discretion, without express authority from
the Fund:
-24-
<PAGE>
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted for to
the Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund except as
otherwise directed by the Board of Directors/Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it
to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of
the Board of Directors/Trustees of the Fund as conclusive evidence (a) of
the authority of any person to act in accordance with such vote or (b) of
any determination or of any action by the Board of Directors/Trustees
pursuant to the Articles of Incorporation/Declaration of Trust as
described in such vote, and such vote may be considered as in full force
and effect until receipt by the Custodian of written notice to the
contrary.
-25-
<PAGE>
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors/Trustees of
the Fund to keep the books of account of the Fund and/or compute the net
asset value per share of the outstanding shares of the Fund or, if
directed in writing to do so by the Fund, shall itself keep such books of
account and/or compute such net asset value per share. If so directed,
the Custodian shall also calculate daily the net income of the Fund as
described in the Fund's currently effective prospectus and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an office of the Fund to do so,
shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset
value per share and the daily income of the Fund shall be made at the
time or times described from time to time in the Fund's currently
effective prospectus.
9. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Fund under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of
the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by the Fund and held by the
Custodian and shall, when
-26-
<PAGE>
requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate
numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder
in connection with the preparation of the Fund's Form N-1A, Form N-2 (in
the case of a closed end Fund) and Form N-SAR or other periodic reports
to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Fund and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it
or delivered by it pursuant to this Contract and shall be held harmless
in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by
the proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of reasonable
care in carrying out the provisions of this Contract but shall be kept
indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and
-27-
<PAGE>
may act upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by
check shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to
the same extent as set forth in Article 1 hereof with respect to
sub-custodians located in the United States and, regardless of whether
assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank as contemplated
by paragraph 3.11 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action
may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund being liable for the payment of money or
incurring liability of some other form, the Fund, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses,
-28-
<PAGE>
assessments, claims or liabilities in connection with the performance of
this Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or wilful misconduct, any
property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of
the Fund assets to the extent necessary to obtain reimbursement provided,
however that, prior to disposing of Fund assets hereunder, the Custodian
shall give the Fund notice of its intention to dispose of assets
identifying such assets and the Fund shall have one business day from
receipt of such notice to notify the Custodian if the Fund wishes the
Custodian to dispose of Fund assets of equal value other than those
identified in such notice.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take
effect not sooner than sixty (60) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under Section
2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors/Trustees
of the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors/Trustees has reviewed the
use by the Fund of such Securities System, as required in each case by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that
the Custodian shall not act
-29-
<PAGE>
under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors/Trustees has approved the initial use of the Direct Paper
System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors/Trustees has reviewed the
use by the Fund of the Direct Paper System; provided further, however,
that the Fund shall not amend or terminate this Contract in contravention
of any applicable federal or state regulations, or any provision of the
Articles of Incorporation/Declaration of Trust, and further, provided,
that the Fund may at any time by action of its Board of
Directors/Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
14. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors/Trustees of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities then held by it
hereunder and shall transfer to an account of the successor custodian all
of the Fund's securities held in a Securities System.
-30-
<PAGE>
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board
of Directors/Trustees of the Fund, deliver at the office of the Custodian
and transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors/Trustees shall have
been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as defined
in the Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of
not less than $25,000,000, all securities, funds and other properties
held by the Custodian and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's
securities held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to
or of the Board of Directors/Trustees to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
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<PAGE>
15. Interpretative and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion
be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, provided that no such
interpretative or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of
Incorporation/ Declaration of Trust of the Fund. No interpretative or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
16. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
17. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
18. The Parties
All references herein to the "Fund" are to each of the Funds listed on
Appendix A individually, as if this Contract were between such individual
Fund and the Custodian. With respect to any Fund listed on Appendix A
which is organized as a Massachusetts Business Trust, references to Board
of Directors and Articles of Incorporation shall be deemed a reference to
Board of Directors/Trustees and Articles of Incorporation/Declaration of
Trust respectively and reference to shares of capital stock shall be
deemed a reference to shares of beneficial interest.
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<PAGE>
19. Limitation of Liability
Each Fund listed on Appendix A that is referenced as a Massachusetts
Business Trust is the designation of the Directors/Trustees under a
Articles of Incorporation/Declaration of Trust, dated (see Appendix A)
and all persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the Directors/Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the dates set forth on Appendix A.
ATTEST STATE STREET BANK AND TRUST COMPANY
____________________________ By_______________________________________
Assistant Secretary
ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A
____________________________ By_______________________________________
Secretary
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TRANSFER AGENCY AND SERVICE AGREEMENT
between
PRUDENTIAL EUROPE GROWTH FUND, INC.
and
PRUDENTIAL MUTUAL FUND SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
Article 1 Terms of Appointment; Duties of the Agent ......... 1
Article 2 Fees and Expenses.................................. 7
Article 3 Representations and Warranties of the Agent........ 7
Article 4 Representations of Warranties of the Fund.......... 8
Article 5 Duty of Care and Indemnification................... 9
Article 6 Documents and Covenants of the Fund and the Agent.. 12
Article 7 Termination of Agreement........................... 14
Article 8 Assignment......................................... 14
Article 9 Affiliations....................................... 15
Article 10 Amendment.......................................... 16
Article 11 Applicable Law..................................... 16
Article 12 Miscellaneous...................................... 16
Article 13 Merger of Agreement................................ 17
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the __th day of ______, 1994 by and
between PRUDENTIAL EUROPE GROWTH FUND, INC., a Maryland
corporation, having its principal office and place of business at
One Seaport Plaza, New York, New York 10292 (the Fund), and
PRUDENTIAL MUTUAL FUND SERVICES, INC., a New Jersey corporation,
having its principal office and place of business at Raritan Plaza
One, Edison, New Jersey 08837 (the Agent or PMFS).
WHEREAS, the Fund desires to appoint PMFS as its transfer
agent, dividend disbursing agent and shareholder servicing agent in
connection with certain other activities, and PMFS desires to
accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of PMFS
1.01 Subject to the terms and conditions set forth
in this Agreement, the Fund hereby employs and appoints PMFS to act
as, and PMFS agrees to act as, the transfer agent for the
authorized and issued shares of the common stock of each series of
the Fund, $.001 par value (Shares), dividend disbursing agent and
shareholder servicing agent in connection with any accumulation,
open-account or similar plans provided to the shareholders of the
Fund or any series thereof (Shareholders) and set out in the
currently effective prospectus and statement of additional
<PAGE>
information (prospectus) of the Fund, including without limitation
any periodic investment plan or periodic withdrawal program.
1.02 PMFS agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and PMFS, PMFS shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate documentation
therefor to the Custodian of the Fund authorized pursuant to the
Articles of Incorporation of the Fund (the Custodian);
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation
therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such monies
as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges
2
<PAGE>
may be reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of
1934 (1934 Act) a record of the total number of Shares of the Fund
which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. PMFS shall also provide to the Fund
on a regular basis the total number of Shares which are authorized,
issued and outstanding and shall notify the Fund in case any
proposed issue of Shares by the Fund would result in an overissue.
In case any issue of Shares would result in an overissue, PMFS
shall refuse to issue such Shares and shall not countersign and
issue any certificates requested for such Shares. When recording
the issuance of Shares, PMFS shall have no obligation to take
cognizance of any Blue Sky laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of
the Fund.
(b) In addition to and not in lieu of the services set forth
in the above paragraph (a), PMFS shall: (i) perform all of the
customary services of a transfer agent, dividend disbursing agent
and, as relevant, shareholder servicing agent in connection with
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to, maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing
3
<PAGE>
proxies, receiving and tabulating proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding taxes
on non-resident alien accounts, preparing and filing appropriate
forms required with respect to dividends and distributions by
federal tax authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders and providing Shareholder
account information and (ii) provide a system which will enable
the Fund to monitor the total number of Shares sold in each State
or other jurisdiction.
(c) In addition, the Fund shall (i) identify to PMFS in
writing those transactions and assets to be treated as exempt from
Blue Sky reporting for each State and (ii) verify the establishment
of transactions for each State on the system prior to activation
and thereafter monitor the daily activity for each State. The
responsibility of PMFS for the Fund's registration status under the
Blue Sky or securities laws of any State or other jurisdiction is
solely limited to the initial establishment of transactions subject
to Blue Sky compliance by the Fund and the reporting of such
transactions to the Fund as provided above and as agreed from time
to time by the Fund and PMFS.
PMFS may also provide such additional services and functions
not specifically described herein as may be mutually agreed between
PMFS and the Fund and set forth in Schedule B hereto.
4
<PAGE>
Procedures applicable to certain of these services may be
established from time to time by agreement between the Fund and
PMFS.
Article 2 Fees and Expenses
2.01 For performance by PMFS pursuant to this Agreement,
the Fund agrees to pay PMFS an annual maintenance fee for each
Shareholder account and certain transactional fees as set out in
the fee schedule attached hereto as Schedule A. Such fees and
out-of-pocket expenses and advances identified under Section 2.02
below may be changed from time to time subject to mutual written
agreement between the Fund and PMFS.
2.02 In addition to the fees paid under Section 2.01
above, the Fund agrees to reimburse PMFS for out-of-pocket expenses
or advances incurred by PMFS for the items set out in Schedule A
attached hereto. In addition, any other expenses incurred by PMFS
at the request or with the consent of the Fund will be reimbursed
by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable
expenses within a reasonable period of time following the mailing
of the respective billing notice. Postage for mailing of
dividends, proxies, Fund reports and other mailings to all
Shareholder accounts shall be advanced to PMFS by the Fund upon
request prior to the mailing date of such materials.
Article 3 Representations and Warranties of PMFS
PMFS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing
5
<PAGE>
and in good standing under the laws of New Jersey and it is duly
qualified to carry on its business in New Jersey.
3.02 It is and will remain registered with the U.S.
Securities and Exchange Commission (SEC) as a Transfer Agent
pursuant to the requirements of Section 17A of the 1934 Act.
3.03 It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken
to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to PMFS that:
4.01 It is a corporation duly organized and existing and
in good standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform
this Agreement.
4.03 All corporate proceedings required by said
Articles of Incorporation and By-Laws have been taken to authorize
it to enter into and perform this Agreement.
4.04 It is an investment company registered with the
SEC under the Investment Company Act of 1940, as amended (the 1940
Act).
4.05 A registration statement under the Securities Act
6
<PAGE>
of 1933 (the 1933 Act) is currently effective and will remain
effective, and appropriate state securities law filings have been
made and will continue to be made, with respect to all Shares of
the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
5.01 PMFS shall not be responsible for, and the Fund
shall indemnify and hold PMFS harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of PMFS or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct.
(b) The Fund's refusal or failure to comply with the terms
of this Agreement, or which arise out of the Fund's lack of good
faith, negligence or willful misconduct or which arise out of the
breach of any representation or warranty of the Fund hereunder.
(c) The reliance on or use by PMFS or its agents or
subcontractors of information, records and documents which (i) are
received by PMFS or its agents or subcontractors and furnished to
it by or on behalf of the Fund, and (ii) have been prepared and/or
maintained by the Fund or any other person or firm on behalf of the
Fund.
(d) The reliance on, or the carrying out by PMFS or its
agents or subcontractors of, any instructions or requests of the
Fund.
7
<PAGE>
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the
securities or Blue Sky laws of any State or other jurisdiction that
such Shares be registered in such State or other jurisdiction or in
violation of any stop order or other determination or ruling by any
federal agency or any State or other jurisdiction with respect to
the offer or sale of such Shares in such State or other
jurisdiction.
5.02 PMFS shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or
attributable to any action or failure or omission to act by PMFS as
a result of PMFS' lack of good faith, negligence or willful
misconduct.
5.03 At any time PMFS may apply to any officer of the Fund
for instructions, and may consult with legal counsel, with respect
to any matter arising in connection with the services to be
performed by PMFS under this Agreement, and PMFS and its agents or
subcontractors shall not be liable and shall be indemnified by the
Fund for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. PMFS, its agents
and subcontractors shall be protected and indemnified in acting
upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information,
data, records or documents provided to PMFS or its agents or
8
<PAGE>
subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. PMFS, its agents
and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signature of the officers of
the Fund, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond
its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or
otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained
in this Article 5 shall apply, upon the assertion of a claim for
which either party may be required to indemnify the other, the
party seeking indemnification shall promptly notify the other party
of such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party who
may be required to indemnify shall have the option to participate
9
<PAGE>
with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess
any claim or make any compromise in any case in which the other
party may be required to indemnify it except with the other party's
prior written consent.
Article 6 Documents and Covenants of the Fund and PMFS
6.01 The Fund shall promptly furnish to PMFS the following:
(a) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of PMFS and the
execution and delivery of this Agreement;
(b) A certified copy of the Articles of Incorporation and
By-Laws of the Fund and all amendments thereto;
(c) The current registration statements and any amendments
and supplements thereto filed with the SEC pursuant to the
requirements of the 1933 Act and the 1940 Act;
(d) A specimen of the certificate for Shares of the Fund
in the form approved by the Board of Directors, with a certificate
of the Secretary of the Fund as to such approval;
(e) All account application forms or other documents
relating to Shareholder accounts and/or relating to any plan
program or service offered or to be offered by the Fund; and
(f) Such other certificates, documents or opinions as the
Agent deems to be appropriate or necessary for the proper
performance of its duties.
6.02 PMFS hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for
10
<PAGE>
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
6.03 PMFS shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it
may deem advisable. To the extent required by Section 31 of the
1940 Act, and the Rules and Regulations thereunder, PMFS agrees
that all such records prepared or maintained by PMFS relating to
the services to be performed by PMFS hereunder are the property of
the Fund and will be preserved, maintained and made available in
accordance with such Section 31 of the 1940 Act, and the Rules and
Regulations thereunder, and will be surrendered promptly to the
Fund on and in accordance with its request.
6.04 PMFS and the Fund agree that all books, records,
information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential and shall
not be voluntarily disclosed to any other person except as may be
required by law or with the prior consent of PMFS and the Fund.
6.05 In case of any requests or demands for the inspection
of the Shareholder records of the Fund, PMFS will endeavor to
notify the Fund and to secure instructions from an authorized
officer of the Fund as to such inspection. PMFS reserves the
right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable
11
<PAGE>
for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon
one hundred twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
other materials will be borne by the Fund. Additionally, PMFS
reserves the right to charge for any other reasonable fees and
expenses associated with such termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither
this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other
party.
8.02 This Agreement shall inure to the benefit of and
be binding upon the parties and their respective permitted
successors and assigns.
8.03 PMFS may, in its sole discretion and without
further consent by the Fund, subcontract, in whole or in part, for
the performance of its obligations and duties hereunder with any
person or entity including but not limited to: (i) Prudential
Securities Incorporated (Prudential Securities), a registered
broker-dealer, (ii) The Prudential Insurance Company of America
(Prudential), (iii) Pruco Securities Corporation, a registered
broker-dealer, (iv) any Prudential Securities or Prudential
subsidiary or affiliate duly registered as a broker-dealer and/or
12
<PAGE>
a transfer agent pursuant to the 1934 Act or (vi) any other
Prudential Securities or Prudential affiliate or subsidiary;
provided, however, that PMFS shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor as it
is for its own acts and omissions.
Article 9 Affiliations
9.01 PMFS may now or hereafter, without the consent of
or notice to the Fund, function as Transfer Agent and/or
Shareholder Servicing Agent for any other investment company
registered with the SEC under the 1940 Act, including without
limitation any investment company whose adviser, administrator,
sponsor or principal underwriter is or may become affiliated with
Prudential Securities and/or Prudential or any of its or their
direct or indirect subsidiaries or affiliates.
9.02 It is understood and agreed that the directors,
officers, employees, agents and Shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the
Fund's investment adviser and/or distributor, are or may be
interested in the Agent as directors, officers, employees, agents,
shareholders or otherwise, and that the directors, officers,
employees, agents or shareholders of the Agent may be interested
in the Fund as directors, officers, employees, agents, Shareholders
or otherwise, or in the investment adviser and/or distributor as
officers, directors, employees, agents, shareholders or otherwise.
Article 10 Amendment
10.01 This Agreement may be amended or modified by a
13
<PAGE>
written agreement executed by both parties and authorized or
approved by a resolution of the Board of Directors of the Fund.
Article 11 Applicable Law
11.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the
laws of the State of New Jersey.
Article 12 Miscellaneous
12.01 In the event of an alleged loss or destruction
of any Share certificate, no new certificate shall be issued in
lieu thereof, unless there shall first be furnished to PMFS an
affidavit of loss or non-receipt by the holder of Shares with
respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to PMFS and the Fund
issued by a surety company satisfactory to PMFS, except that PMFS
may accept an affidavit of loss and indemnity agreement executed
by the registered holder (or legal representative) without surety
in such form as PMFS deems appropriate indemnifying PMFS and the
Fund for the issuance of a replacement certificate, in cases where
the alleged loss is in the amount of $1000 or less.
12.02 In the event that any check or other order for
payment of money on the account of any Shareholder or new investor
is returned unpaid for any reason, PMFS will (a) give prompt
notification to the Fund's distributor (Distributor) of such
non-payment; and (b) take such other action, including imposition
of a reasonable processing or handling fee, as PMFS may, in its
sole discretion, deem appropriate or as the Fund and the
14
<PAGE>
Distributor may instruct PMFS.
12.03 Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund or
to PMFS shall be sufficiently given if addressed to that party and
received by it at its office set forth below or at such other place
as it may from time to time designate in writing.
To the Fund:
Prudential Europe Growth Fund, Inc.
One Seaport Plaza
New York, NY 10292
Attention: President
To PMFS:
Prudential Mutual Fund Services, Inc.
Raritan Plaza One
Edison, NJ 08837
Attention: President
Article 13 Merger of Agreement
13.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers, as of
the day and year first above written.
PRUDENTIAL EUROPE GROWTH FUND, INC.
BY:_______________________________
ATTEST:
_______________________________
PRUDENTIAL MUTUAL FUND
SERVICES, INC.
BY:_______________________________
ATTEST:
_______________________________
16
<PAGE>
Schedule A
Prudential Mutual Fund Services, Inc.
Fee Schedule
Fee Information for Services as
Transfer Agent, Dividend Disbursing Agent
and Shareholder Servicing Agent
PRUDENTIAL EUROPE GROWTH FUND, INC.
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses. In
addition, there is a one time set-up charge per account for
manually established accounts and a monthly charge for inactive
zero balance accounts. The effective period of this fee schedule
is June , 1994 through December 31, 1994 and shall continue
thereafter from year to year, unless otherwise amended.
Annual Maintenance Charges - The annual maintenance charge includes
the processing of all transactions and correspondence. The fee is
billable on a monthly basis at the rate of 1/12 of the annual fee.
A charge is made for an account in the month that an account opens
or closes.
Annual Maintenance Per Account Fee $ 9.00
Other Charges
New Account Set-up Fee for Manually $ 2.00
Established Accounts
Monthly Inactive Zero Balance Account Fee $ .20
Out-of-Pocket Expenses - Out-of-pocket expenses include but are not
limited to: postage, stationery and printing, allocable
communication costs, microfilm, microfiche, and expenses incurred
at the specific direction of the Fund.
Payment - An invoice will be presented to the Fund on a monthly
basis assessing the Fund the appropriate fee and out-of-pocket
expenses.
PRUDENTIAL EUROPE PRUDENTIAL MUTUAL FUND
GROWTH FUND, INC. SERVICES, INC.
NAME: ______________________ NAME: ______________________
TITLE: Treasurer TITLE: ______________________
______________________
DATE: , 1994 DATE: , 1994
______________________ ______________________
Draft 3/29/94
PRUDENTIAL EUROPE GROWTH FUND, INC.
Distribution and Service Plan
(Class A Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below
which is designed to conform to the requirements of Rule 12b-1
under the Investment Company Act of 1940 (the Investment Company
Act) and Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (NASD) has
been adopted by Prudential Europe Growth Fund, Inc. (the Fund)
and by Prudential Mutual Fund Distributors, Inc., the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement (the
Distribution Agreement) pursuant to which the Fund will employ
the Distributor to distribute Class A shares issued by the Fund
(Class A shares). Under the Distribution Agreement, the
Distributor will be entitled to receive payments from investors
of front-end sales charges with respect to the sale of Class A
shares. Under the Plan, the Fund intends to pay to the
Distributor, as compensation for its services, a distribution and
service fee with respect to Class A shares.
A majority of the Board of Directors of the Fund, including
a majority of those Directors who are not "interested persons" of
the Fund (as defined in the Investment Company Act) and who have
no direct or indirect financial interest in the operation of this
<PAGE>
Plan or any agreements related to it (the Rule 12b-1 Directors),
have determined by votes cast in person at a meeting called for
the purpose of voting on this Plan that there is a reasonable
likelihood that adoption of this Plan will benefit the Fund and
its shareholders. Expenditures under this Plan by the Fund for
Distribution Activities (defined below) are primarily intended to
result in the sale of Class A shares of the Fund within the
meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the
Investment Company Act.
The purpose of the Plan is to create incentives to the
Distributor and/or other qualified broker-dealers and their
account executives to provide distribution assistance to their
customers who are investors in the Fund, to defray the costs and
expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other
promotional and distribution activities and to provide for the
servicing and maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class A
shares of the Fund and to service shareholder accounts using all
of the facilities of the distribution networks of Prudential
Securities Incorporated (Prudential Securities) and Pruco
Securities Corporation (Prusec), including sales personnel and
branch office and central support systems, and also using such
other qualified broker-dealers and financial institutions as the
2
<PAGE>
Distributor may select. Services provided and activities
undertaken to distribute Class A shares of the Fund are referred
to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder
accounts a service fee of .25 of 1% per annum of the average
daily net assets of the Class A shares (service fee). The Fund
shall calculate and accrue daily amounts payable by the Class A
shares of the Fund hereunder and shall pay such amounts monthly
or at such other intervals as the Board of Directors may
determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for
its services a distribution fee, together with the service fee
(described in Section 2 hereof), of .30 of 1% per annum of the
average daily net assets of the Class A shares of the Fund for
the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class A shares
of the Fund hereunder and shall pay such amounts monthly or at
such other intervals as the Board of Directors may determine.
Amounts payable under the Plan shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
Amounts paid to the Distributor by the Class A shares of the
Fund will not be used to pay the distribution expenses incurred
with respect to any other class of shares of the Fund except that
3
<PAGE>
distribution expenses attributable to the Fund as a whole will be
allocated to the Class A shares according to the ratio of the
sales of Class A shares to the total sales of the Fund's shares
over the Fund's fiscal year or such other allocation method
approved by the Board of Directors. The allocation of
distribution expenses among classes will be subject to the review
of the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among
others:
(a) amounts paid to Prudential Securities for
performing services under a selected dealer
agreement between Prudential Securities and
the Distributor for sale of Class A shares of
the Fund, including sales commissions and
trailer commissions paid to, or on account
of, account executives and indirect and
overhead costs associated with Distribution
Activities, including central office and
branch expenses;
(b) amounts paid to Prusec for performing
services under a selected dealer agreement
between Prusec and the Distributor for sale
of Class A shares of the Fund, including
sales commissions, trailer commissions paid
to, or on account of, agents and indirect and
overhead costs associated with Distribution
Activities;
(c) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
prospectuses, statements of additional
information and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund; and
(d) sales commissions (including trailer
commissions) paid to, or on account of,
broker-dealers and financial institutions
(other than Prudential Securities and Prusec)
4
<PAGE>
which have entered into selected dealer
agreements with the Distributor with respect
to Class A shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board
of Directors of the Fund for review, at least quarterly, a
written report specifying in reasonable detail the amounts
expended for Distribution Activities (including payment of the
service fee) and the purposes for which such expenditures were
made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors of the Fund
such additional information as the Board shall from time to time
reasonably request, including information about Distribution
Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors of the
Fund of the commissions and account servicing fees to be paid by
the Distributor to account executives of the Distributor and to
broker-dealers and financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by
a vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class A shares of
the Fund.
If approved by a vote of a majority of the outstanding
voting securities of the Class A shares of the Fund, the Plan
shall, unless earlier terminated in accordance with its terms,
continue in full force and effect thereafter for so long as such
5
<PAGE>
continuance is specifically approved at least annually by a
majority of the Board of Directors of the Fund and a majority of
the Rule 12b-1 Directors by votes cast in person at a meeting
called for the purpose of voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service
and distribution expenses to be paid as provided for in Sections
2 and 3 hereof so as to increase materially the amounts payable
under this Plan unless such amendment shall be approved by the
vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class A shares of
the Fund. All material amendments of the Plan shall be approved
by a majority of the Board of Directors of the Fund and a
majority of the Rule 12b-1 Directors by votes cast in person at a
meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of
the Directors shall be committed to the discretion of the
Rule 12b-1 Directors.
9. Records
The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for
6
<PAGE>
a period of not less than six years from the date of
effectiveness of the Plan, such agreements or reports, and for at
least the first two years in an easily accessible place.
Dated:
7
Draft 3/29/94
PRUDENTIAL EUROPE GROWTH FUND, INC.
Distribution and Service Plan
(Class B Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth
below which is designed to conform to the requirements of Rule 12b-
1 under the Investment Company Act of 1940 (the Investment Company
Act) and Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (NASD) has
been adopted by Prudential Europe Growth Fund, Inc. (the Fund) and
by Prudential Securities Incorporated (Prudential Securities), the
Fund's distributor (the Distributor).
The Fund has entered into a distribution agreement
pursuant to which the Fund will employ the Distributor to distribute
Class B shares issued by the Fund (Class B shares). Under the Plan,
the Fund wishes to pay to the Distributor, as compensation for its
services, a distribution and service fee with respect to
Class B shares.
A majority of the Board of Directors of the Fund including a
majority who are not "interested persons" of the Fund (as defined
in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of this Plan or any agreements
<PAGE>
related to it (the Rule 12b-1 Directors), have determined by votes
cast in person at a meeting called for the purpose of voting on
this Plan that there is a reasonable likelihood that adoption of
this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of Class B
shares of the Fund within the meaning of paragraph (a)(2) of Rule
12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the
Distributor and/or other qualified broker-dealers and their account
executives to provide distribution assistance to their customers
who are investors in the Fund, to defray the costs and expenses
associated with the preparation, printing and distribution of
prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and
maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class B
shares of the Fund and to service shareholder accounts using all of
the facilities of the Prudential Securities distribution network
including sales personnel and branch office and central support
systems, and also using such other qualified broker-dealers and
financial institutions as the Distributor may select, including
Pruco Securities Corporation (Prusec). Services provided and
2
<PAGE>
activities undertaken to distribute Class B shares of the Fund are
referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder accounts
a service fee of .25 of 1% per annum of the average daily net
assets of the Class B shares (service fee). The Fund shall
calculate and accrue daily amounts payable by the Class B shares of
the Fund hereunder and shall pay such amounts monthly or at such
other intervals as the Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its
services a distribution fee of .75 of 1% per annum of the average
daily net assets of the Class B shares of the Fund for the
performance of Distribution Activities. The Fund shall calculate
and accrue daily amounts payable by the Class B shares of the Fund
hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors may determine. Amounts payable
under the Plan shall be subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice.
Amounts paid to the Distributor by the Class B shares of the
Fund will not be used to pay the distribution expenses incurred
with respect to any other class of shares of the Fund except that
distribution expenses attributable to the Fund as a whole will be
allocated to the Class B shares according to the ratio of the sale
of Class B shares to the total sales of the Fund's shares over the
3
<PAGE>
Fund's fiscal year or such other allocation method approved by the
Board of Directors. The allocation of distribution expenses among
classes will be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions)
paid to, or on account of, account executives of the
Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of Distribution Activities
including central office and branch expenses;
(c) amounts paid to Prusec for performing services under
a selected dealer agreement between Prusec and the
Distributor for sale of Class B shares of the Fund,
including sales commissions and trailer commissions paid
to, or on account of, agents and indirect and overhead
costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through
any available medium, including the cost of printing and
mailing Fund prospectuses, statements of additional
information and periodic financial reports and sales
literature to persons other than current shareholders of
the Fund; and
(e) sales commissions (including trailer commissions)
paid to, or on account of, broker-dealers and other
financial institutions (other than Prusec) which have
entered into selected dealer agreements with the
Distributor with respect to Class B shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board
of Directors of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for
Distribution Activities (including payment of the service fee) and
the purposes for which such expenditures were made in compliance
with the requirements of Rule 12b-1. The Distributor will provide
4
<PAGE>
to the Board of Directors of the Fund such additional information
as they shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be
undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund
of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and other financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by
a vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class B shares of the
Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, the Plan shall,
unless earlier terminated in accordance with its terms, continue in
full force and effect thereafter for so long as such continuance is
specifically approved at least annually by a majority of the Board
of Directors of the Fund and a majority of the Rule 12b-1 Directors
by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority
of the Rule 12b-1 Directors, or by vote of a majority of the
5
<PAGE>
outstanding voting securities (as defined in the Investment Company
Act) of the Class B shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and
3 hereof so as to increase materially the amounts payable under
this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class B shares of the Fund. All
material amendments of the Plan shall be approved by a majority of
the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of
the Rule 12b-1 Directors shall be committed to the discretion of
the Rule 12b-1 Directors.
9. Records
The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for
a period of not less than six years from the date of effectiveness
of the Plan, such agreements or reports, and for at least the first
two years in an easily accessible place.
Dated:
6
Draft 3/29/94
PRUDENTIAL EUROPE GROWTH FUND, INC.
Distribution and Service Plan
(Class C Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below
which is designed to conform to the requirements of Rule 12b-1
under the Investment Company Act of 1940 (the Investment Company
Act) and Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (NASD) has
been adopted by Prudential Europe Growth Fund, Inc. (the Fund) and
by Prudential Securities Incorporated (Prudential Securities), the
Fund's distributor (the Distributor) and will become effective upon
the approval of the Plan by the sole shareholder of the Class C
shares.
The Fund has entered into a distribution agreement
pursuant to which the Fund will employ the Distributor to
distribute Class C shares issued by the Fund (Class C shares).
Under the Plan, the Fund wishes to pay to the Distributor,
as compensation for its services, a distribution and service
fee with respect to Class C shares.
A majority of the Board of Directors of the Fund, including a
majority who are not "interested persons" of the Fund (as defined
in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of this Plan or any agreements
related to it (the Rule 12b-1 Directors), have determined by votes
<PAGE>
cast in person at a meeting called for the purpose of voting on
this Plan that there is a reasonable likelihood that adoption of
this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of Class C
shares of the Fund within the meaning of paragraph (a)(2) of Rule
12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the
Distributor and/or other qualified broker-dealers and their account
executives to provide distribution assistance to their customers
who are investors in the Fund, to defray the costs and expenses
associated with the preparation, printing and distribution of
prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and
maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class C
shares of the Fund and to service shareholder accounts using all of
the facilities of the Prudential Securities distribution network
including sales personnel and branch office and central support
systems, and also using such other qualified broker-dealers and
financial institutions as the Distributor may select, including
Pruco Securities Corporation (Prusec). Services provided and
2
<PAGE>
activities undertaken to distribute Class C shares of the Fund are
referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder accounts
a service fee of .25 of 1% per annum of the average daily net
assets of the Class C shares (service fee). The Fund shall
calculate and accrue daily amounts payable by the Class C shares of
the Fund hereunder and shall pay such amounts monthly or at such
other intervals as the Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its
services a distribution fee of .75 of 1% per annum of the average
daily net assets of the Class C shares of the Fund for the
performance of Distribution Activities. The Fund shall calculate
and accrue daily amounts payable by the Class C shares of the Fund
hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors may determine. Amounts payable
under the Plan shall be subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice.
Amounts paid to the Distributor by the Class C shares of the
Fund will not be used to pay the distribution expenses incurred
with respect to any other class of shares of the Fund except that
distribution expenses attributable to the Fund as a whole will be
allocated to the Class C shares according to the ratio of the sale
of Class C shares to the total sales of the Fund's shares over the
3
<PAGE>
Fund's fiscal year or such other allocation method approved by the
Board of Directors. The allocation of distribution expenses among
classes will be subject to the review of the Board of Directors.
Payments hereunder will be applied to distribution expenses in the
order in which they are incurred, unless otherwise determined by
the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions)
paid to, or on account of, account executives of the
Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of Distribution Activities
including central office and branch expenses;
(c) amounts paid to Prusec for performing services under
a selected dealer agreement between Prusec and the
Distributor for sale of Class C shares of the Fund,
including sales commissions and trailer commissions paid
to, or on account of, agents and indirect and overhead
costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through
any available medium, including the cost of printing and
mailing Fund prospectuses, statements of additional
information and periodic financial reports and sales
literature to persons other than current shareholders of
the Fund; and
(e) sales commissions (including trailer commissions)
paid to, or on account of, broker-dealers and other
financial institutions (other than Prusec) which have
entered into selected dealer agreements with the
Distributor with respect to Class C shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board
of Directors of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for
4
<PAGE>
Distribution Activities (including payment of the service fee) and
the purposes for which such expenditures were made in compliance
with the requirements of Rule 12b-1. The Distributor will provide
to the Board of Directors of the Fund such additional information
as they shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be
undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund
of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and other financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by
a vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class C shares of the
Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, the Plan shall,
unless earlier terminated in accordance with its terms, continue in
full force and effect thereafter for so long as such continuance is
specifically approved at least annually by a majority of the Board
of Directors of the Fund and a majority of the Rule 12b-1 Directors
by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.
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6. Termination
This Plan may be terminated at any time by vote of a majority
of the Rule 12b-1 Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company
Act) of the Class C shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and
3 hereof so as to increase materially the amounts payable under
this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class C shares of the Fund. All
material amendments of the Plan shall be approved by a majority of
the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of
the Rule 12b-1 Directors shall be committed to the discretion of
the Rule 12b-1 Directors.
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9. Records
The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for
a period of not less than six years from the date of effectiveness
of the Plan, such agreements or reports, and for at least the first
two years in an easily accessible place.
Dated:
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