<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box: [_] Confidential, For Use of the
[X] Preliminary Proxy Statement Commission Only (as permitted by
[_] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
The Prudential Investment Portfolios, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
------------------------------------------------------------------------------
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------------------------------------
(2) Form, Schedule, or Registration Statement no.:
---------------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------------
<PAGE>
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(800) 225-1852
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
AUGUST 6, 1998
----------------
To Our Shareholders:
Notice is hereby given that a Special Meeting of the Shareholders (Meeting)
of Prudential Active Balanced Fund (the Fund), a portfolio of The Prudential
Investment Portfolios, Inc. (formerly Prudential Jennison Series Fund, Inc.),
will be held on August 6, 1998, at 9:00 a.m., eastern time, at Prudential
Plaza, 751 Broad Street, Newark, New Jersey 07102-3777, for the purpose of
considering the following proposals:
(1) To approve a new Subadvisory Agreement with The Prudential Investment
Corporation;
(2) To approve a change in the Fund's investment objective;
(3) To approve certain changes to the Fund's fundamental investment
policies; and
(4) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Only holders of shares of common stock of the Fund of record at the close of
business on June 5, 1998, are entitled to notice of and to vote at this
Meeting or any adjournment thereof.
S. JANE ROSE
Secretary
June 30, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE. IN
ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND
----------------
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(800) 225-1852
----------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 6, 1998
----------------
This proxy statement is being furnished by the Board of Directors (the
Board) of The Prudential Investment Portfolios, Inc., formerly Prudential
Jennison Series Fund, Inc. (PIP), to holders of shares of common stock
(Shares) of Prudential Active Balanced Fund (the Fund), a portfolio of PIP, in
connection with its solicitation of proxies to be used at a Special Meeting of
the Fund's Shareholders (Meeting) to be held on August 6, 1998, at 9:00 a.m.,
eastern time, or any adjournment(s) thereof, at Prudential Plaza, 751 Broad
Street, Newark, New Jersey 07102-3777. This proxy statement first is being
mailed to shareholders on or about June 30, 1998.
A quorum of a majority of the Shares outstanding at the close of business on
June 5, 1998 (Record Date), represented in person or by proxy, must be present
for the transaction of business at the Meeting. In the absence of a quorum or
in the event that a quorum is present at the Meeting but sufficient votes to
approve any of the proposals are not received, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any adjournment will require the affirmative vote of
a majority of those Shares represented at the Meeting in person or by proxy.
If a quorum is present, the persons named as proxies will vote those proxies
that they are entitled to vote FOR any proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST any
proposal against such adjournment. A shareholder vote may be taken on one or
more of the proposals in this proxy statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate.
If a proxy that is properly executed and returned is accompanied by
instructions to withhold authority to vote (an abstention), the Shares
represented thereby will be considered present for purposes of determining a
quorum but will have the effect of a vote against such matters. If an
abstention represents a broker "non-vote" (that is, a proxy from a broker or
nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote shares on a particular
matter with respect to which the broker or nominee does not have discretionary
power), the shares represented thereby will be considered not to be present
for purposes of determining a quorum and be deemed not cast. Accordingly,
abstentions and broker "non-votes" effectively will be a vote against
adjournment and against each item in Proposals Nos. 1, 2 and 3, each of which
requires approval of a "majority of the outstanding voting securities" as
defined in the Investment Company Act of 1940, as amended (Investment Company
Act). Under the Investment Company Act, this means the lesser of (i) 67% of
the outstanding shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or represented by proxy, or (ii) more
than 50% of the Fund's outstanding voting securities.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon, if your proxy card is
received properly executed by you or by your duly appointed agent or attorney-
in-fact. If your card is properly executed and you give no voting
instructions, your Shares will be voted FOR the proposals described in this
proxy statement and referenced on the proxy card. You may revoke any proxy
card by giving another proxy or by letter or telegram revoking the initial
proxy. To be effective, your revocation must be received by the Fund prior to
the Meeting and must indicate your name and plan number or social security
number. In addition, if you attend the Meeting in person you may, if you wish,
vote by ballot at that Meeting, thereby canceling any proxy previously given.
<PAGE>
As of the Record Date, the Fund had [13,111,100] Shares issued and
outstanding (182,396 Class A Shares, 141,853 Class B Shares, 11,132 Class C
Shares and 12,775,719 Class Z Shares). The Record Date determines which
shareholders are entitled to notice of, and to vote at, the Meeting.
Information relating to shareholders who owned beneficially 5% or more of the
Shares of any class of the Fund as of May 29, 1998 is annexed as Exhibit C. To
the knowledge of management, the executive officers of PIP and the Board, as a
group, owned less than 1% of the outstanding Shares of the Fund as of June 5,
1998.
Copies of the Fund's most recent annual and semi-annual reports, including
financial statements, previously have been delivered to shareholders.
Additional copies of the Fund's annual and semi-annual reports are available
without charge upon request to the Fund at the address or toll-free number
shown on the previous page.
Each full Share of the Fund outstanding is entitled to one vote, and each
fractional Share of the Fund outstanding is entitled to a proportionate share
of one vote, with respect to each matter to be voted upon by the shareholders
of the Fund. Information about the vote necessary with respect to each
proposal is discussed below in connection with the proposal. Shareholders do
not vote by class.
GENERAL OVERVIEW
Jennison Associates LLC (Jennison) served as the Fund's subadviser from
January 23, 1998, when the Fund first offered its shares as a separate
portfolio of PIP, through May 31, 1998. Jennison also served as the investment
adviser to a predecessor investment company whose assets were acquired by the
Fund from January 1993 to January 1998. Jennison served as the Fund's
subadviser pursuant to the terms of a Subadvisory Agreement dated January 23,
1998 between Prudential Investments Fund Management LLC (PIFM), the Fund's
manager, and Jennison (the Jennison Agreement). Since the Fund's inception,
the Board and PIFM have monitored the performance of the Fund to determine how
it compares to the performance of comparable funds. As more fully described
below, that Board recently determined that the Fund's performance could be
improved and that it therefore would be in the Fund's best interest to replace
Jennison with a new subadviser. Accordingly, at a meeting held on May 14,
1998, the Board approved the termination of the Jennison Agreement and
approved the engagement of The Prudential Investment Corporation, doing
business as Prudential Investments (PI), as the new subadviser to the Fund
effective June 1, 1998 pursuant to the terms of a new Subadvisory Agreement
between PIFM and PI (the New Subadvisory Agreement).
Also in an effort to improve the Fund's performance, the Board has
determined that it would be in the Fund's best interest to modify the Fund's
investment objective and certain fundamental investment policies, as more
specifically set forth below.
Finally, in conjunction with the termination of Jennison as subadviser to
the Fund, the Board approved a change in the name of Prudential Jennison
Series Fund, Inc. to The Prudential Investment Portfolios, Inc., effective
June 1, 1998. For the same reason, the Board approved a change in the Fund's
name to Prudential Active Balanced Fund from Prudential Jennison Active
Balanced Fund. Shareholders of the Fund are not required to approve these name
changes, which have already become effective.
SHAREHOLDERS ARE REQUESTED TO APPROVE THOSE CHANGES THAT ARE DESCRIBED BELOW
IN PROPOSALS NOS. 1, 2 AND 3.
2
<PAGE>
INFORMATION ABOUT PIP'S BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH
** (AGE) PIP PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
---------------- -------------------- -----------------------------------------
<S> <C> <C>
Edward D. Beach (73).... Director President and Director of BMC Fund,
Inc., a closed-end investment company;
previously, Vice Chairman of Broyhill
Furniture Industries, Inc.; Certified
Public Accountant; Secretary and
Treasurer of Broyhill Family
Foundation, Inc.; Member of the Board
of Trustees of Mars Hill College;
Director of The High Yield Income
Fund, Inc.
Delayne Dedrick Gold Director Marketing and Management Consultant;
(59)................... Director of The High Yield Income
Fund, Inc.
*Robert F. Gunia (51)... Vice President and Vice President, Prudential Investments
Director (since May 1996); Executive Vice
President and Treasurer, PIFM; Senior
Vice President (since March 1987) of
Prudential Securities Incorporated
(Prudential Securities); formerly
Chief Administrative Officer (July
1990-September 1996), Director
(January 1989-September 1996) and
Executive Vice President, Treasurer
and Chief Financial Officer (June
1987-September 1996) of Prudential
Mutual Fund Management, Inc.; Vice
President and Director of The Asia
Pacific Fund, Inc. (since May 1989);
Director of The High Yield Income
Fund, Inc.
Douglas H. McCorkindale Director Vice Chairman (since March 1984) and
(58)................... President (since September 1997) of
Gannett Co. Inc. (publishing and
media); Director of Gannett Co. Inc.,
Frontier Corporation and Continental
Airlines, Inc.
*Mendel A. Melzer, CFA Director Chief Investment Officer (since
(38).. 751 Broad Street October 1996) of Prudential Mutual
Newark, NJ 07102 Funds & Annuities; formerly Chief
Financial Officer (November 1995-
September 1996) of Prudential
Investments, Senior Vice President and
Chief Financial Officer of Prudential
Preferred Financial Services (April
1993-November 1995), Managing Director
of Prudential Investment Advisors
(April 1991-April 1993) and Senior
Vice President of Prudential Capital
Corporation (July 1989-April 1991);
Chairman and Director of Prudential
Series Fund, Inc.; Director of The
High Yield Income Fund, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH
** (AGE) PIP PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
---------------- -------------------- -----------------------------------------
<S> <C> <C>
Thomas T. Mooney (56)... Director President of the Greater Rochester
Metro Chamber of Commerce; former
Rochester City Manager; Trustee of
Center for Governmental Research,
Inc.; Director of Blue Cross of
Rochester, Monroe County Water
Authority, Rochester Jobs, Inc.,
Executive Service Corps of Rochester,
Monroe County Industrial Development
Corporation, Northeast-Midwest
Institute, The Business Council of New
York State and The High Yield Income
Fund, President, Director and
Treasurer First Financial Fund, Inc.
and The High Yield Plus Fund, Inc.
Stephen P. Munn (55).... Director Chairman (since January 1994),
Director and President (since 1988)
and Chief Executive Officer (1988-
December 1993) of Carlisle Companies
Incorporated (manufacturer of
industrial products).
*Richard A. Redeker President and Employee of Prudential Investments;
(54)................... Director formerly President, Chief Executive
751 Broad Street Officer and Director (October 1993-
Newark, NJ 07102 September 1996) of Prudential Mutual
Fund Management, Inc., Executive Vice
President, Director and Member of the
Operating Committee (1993-September
1996), Prudential Securities, Director
(October 1993-September 1996) of
Prudential Securities Group, Inc.,
Executive Vice President, The
Prudential Investment Corporation
(January 1994-September 1996),
Director (January 1994-September
1996), Prudential Mutual Fund
Distributors, Inc. and Prudential
Mutual Fund Services, Inc., and Senior
Executive Vice President and Director
of Kemper Financial Services, Inc.
(September 1978-September 1993);
President and Director of The High
Yield Income Fund, Inc.
Robin B. Smith (58)..... Director Chairman (since August 1996) and Chief
Executive Officer (since January
1988), formerly President (September
1981-August 1996) and Chief Operating
Officer (September 1981-December 1988)
of Publishers Clearing House; Director
of BellSouth Corporation, Texaco Inc.,
Springs Industries Inc. and Kmart
Corporation.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH
** (AGE) PIP PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
---------------- -------------------- -----------------------------------------
<S> <C> <C>
Louis A. Weil, III (56). Director Publisher and Chief Executive Officer
(since January 1996) and Director
(since September 1991) of Central
Newspapers, Inc.; Chairman of the
Board (since January 1996), Publisher
and Chief Executive Officer (August
1991-December 1995) of Phoenix
Newspapers, Inc., formerly Publisher
of Time Magazine (May 1989-March
1991), President, Publisher & CEO of
The Detroit News (February 1986-August
1989) and member of the Advisory
Board, Chase Manhattan Bank-
Westchester; Director of The High
Yield Income Fund, Inc.
Clay T. Whitehead (59).. Director President (since May 1983) of National
Exchange Inc. (new business
development firm).
S. Jane Rose (52)....... Secretary Senior Vice President (since December
1996) of PIFM; Senior Vice President
and Senior Counsel of Prudential
Securities (since July 1992); formerly
Senior Vice President (January 1991-
September 1996) and Senior Counsel
(June 1987-September 1996) of
Prudential Mutual Fund Management,
Inc.
Grace C. Torres (38).... Treasurer and First Vice President (since December
Principal Financial 1996) of PIFM; First Vice President
and Accounting (since March 1994) of Prudential
Officer Securities; formerly First Vice
President (March 1994-September 1996)
of Prudential Mutual Fund Management,
Inc. and Vice President (July 1989-
March 1994) of Bankers Trust
Corporation.
Marguerite E.H. Morrison Assistant Secretary Vice President (since December 1996)
(41)................... of PIFM; Vice President and Associate
General Counsel of Prudential
Securities (since September 1987);
formerly Vice President and Associate
General Counsel (June 1991-September
1996) of Prudential Mutual Fund
Management, Inc.
Stephen M. Ungerman Assistant Treasurer Tax Director of Prudential Investments
(44)................... and the Private Asset Group of The
Prudential Insurance Company of
America (Prudential) (since March
1996); formerly First Vice President
of Prudential Mutual Fund Management,
Inc. (February 1993-September 1996)
and Senior Tax Manager of Price
Waterhouse (1981-January 1993).
</TABLE>
* "Interested" Director, as defined in the Investment Company Act, by reason
of his affiliation with Prudential, Prudential Securities or PIFM.
** Unless otherwise stated, the address is c/o Prudential Investments Fund
Management LLC, Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077.
5
<PAGE>
APPROVAL OF NEW SUBADVISORY AGREEMENT
PROPOSAL NO. 1
The Fund's current investment objective is to seek to achieve total returns
approaching equity returns, while accepting less risk than an all-equity
portfolio, through an actively-managed portfolio of equity securities, fixed-
income securities and money market instruments. The Board's expectation has
been that in seeking to achieve this objective, Jennison's management style
would enable the Fund to perform as well as or better than comparable funds.
Over time, however, Jennison's conservative outlook and large allocation of
Fund assets to debt securities has caused the Fund's performance to lag behind
that of comparable funds. After extensive review of the Fund's performance
(and that of its predecessor) while advised by Jennison, PIFM recommended to
the Board that Jennison be terminated as a subadviser to the Fund and that PI
be retained as the new subadviser. This recommendation was approved at a
meeting of the Board held on May 14, 1998, to take effect on June 1, 1998. At
that meeting, the Board, including a majority of those Directors who are not
parties to the contract or "interested persons" of any such parties within the
meaning of the Investment Company Act (Independent Directors), also approved
the New Subadvisory Agreement to take effect on June 1, 1998.
The terms of the New Subadvisory Agreement are substantially similar to the
terms of the Jennison Agreement, with the exception of the name of the
subadviser and the commencement and termination dates, and except that PI will
be reimbursed by PIFM for its reasonable costs and expenses in advising the
Fund, whereas Jennison had been compensated by PIFM as described below. The
form of the New Subsidiary Agreement is found in Exhibit A.
JENNISON AND THE TERMS OF THE JENNISON AGREEMENT
Pursuant to the Jennison Agreement with PIFM, Jennison, 466 Lexington
Avenue, New York, New York 10017, furnished investment advisory services in
connection with the management of the Fund and was compensated by PIFM for its
services at an annual rate of .30 of 1% of the Fund's average daily net assets
up to and including $300 million and .25 of 1% of the Fund's average daily net
assets in excess of $300 million. The Jennison Agreement was approved by the
Board, including a majority of the Independent Directors, on August 26, 1997
and was approved by the initial shareholder of the Fund on January 23, 1998.
On May 14, 1998, the Board, including a majority of the Independent Directors,
approved the termination of the Jennison Agreement and the replacement of
Jennison by PI under the terms of the New Subadvisory Agreement.
Pursuant to the Jennison Agreement, Jennison, subject to the supervision of
PIFM and the Board and in conformity with the stated policies of the Fund,
managed the investment operations of the Fund and the composition of the
Fund's portfolio, including the purchase, retention and disposition thereof.
Jennison provided supervision of the Fund's investments and determined from
time to time what investments and securities were purchased, retained or sold
by the Fund, and what portion of the assets were invested or held as cash. In
addition, Jennison maintained all books and records with respect to the Fund's
portfolio transactions required to be maintained pursuant to the Investment
Company Act.
PIFM has responsibility for all services provided to the Fund pursuant to a
Management Agreement with PIP (the Management Agreement) and oversaw and
reviewed Jennison's performance of its duties under the Jennison Agreement.
Under the Management Agreement, the Fund pays PIFM for its services at an
annual rate of .65 of 1% of the Fund's average daily net assets. The
Management Agreement was last approved by the Board, including a majority of
the Independent Directors, on May 14, 1998, and was approved by the initial
shareholder of the Fund on January 23, 1998. The Fund, as a portfolio of PIP,
had no shareholders until January 23, 1998, so it has not yet paid management
or subadvisory fees during a completed fiscal year. Further information on
PIFM and the Management Agreement is contained in Exhibit B.
Under the Jennison Agreement, PIFM paid Jennison for services provided and
the expenses assumed pursuant to the Jennison Agreement a fee at an annual
rate of .30 of 1% of the average daily net assets of the
6
<PAGE>
Fund up to and including $300 million and .25 of 1% of the Fund's average
daily net assets in excess of $300 million. This fee was computed daily and
paid monthly. The investment advisory services of Jennison to the Fund were
not exclusive under the terms of the Jennison Agreement and Jennison was free
to, and did, render investment advisory services to others.
The Jennison Agreement provided that Jennison not be liable for any error of
judgment or for any loss suffered by the Fund or PIFM in connection with the
matters to which the Jennison Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on Jennison's part in the
performance of its duties or from its reckless disregard of its obligations
and duties under the Jennison Agreement. The Jennison Agreement provided that
it terminated automatically if assigned or upon termination of the Management
Agreement and that it could be terminated by the Fund at any time without the
payment of any penalty by the Board or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act and
set forth above) of the Fund, or by PIFM or Jennison upon not more than 60
days' nor less than 30 days' written notice to the other party.
THE NEW SUBADVISORY AGREEMENT
The terms of the New Subadvisory Agreement that you are being asked to
approve are substantially similar to the terms of the Jennison Agreement, as
discussed above, with the primary exception that PI will not receive a stated
fee for its services. Instead, PIFM will reimburse PI for the reasonable costs
and expenses it incurs in providing subadvisory services to the Fund. The form
of the New Subadvisory Agreement is included in this Proxy Statement as
Exhibit A. The rate of fees paid by the Fund to PIFM under the Management
Agreement is unchanged.
INFORMATION ABOUT PI
PI was organized in June 1984 under the laws of the State of New Jersey. PI
currently serves as the investment adviser to substantially all of the other
Prudential Mutual Funds. PI is a wholly-owned subsidiary of The Prudential
Insurance Company of America (Prudential) with its principal place of business
at Prudential Plaza, 751 Broad Street, Newark, New Jersey 07102-3777. Certain
information regarding the directors and executive officers of PI is set forth
below. The address of each person is Prudential Plaza, Newark, New Jersey
07102.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PI PRINCIPAL OCCUPATION
---------------- ------------------------- -------------------------------------------
<S> <C> <C>
E. Michael Caulfield Chairman of the Board, Chief Executive Officer of Prudential
President and Chief Investments of Prudential
Executive Officer and
Director
Jonathan M. Greene Senior Vice President and President--Investment Management of
Director Prudential Investments of Prudential;
Senior Vice President and Director of PI
John R. Strangfeld, Jr. Vice President and President of Private Asset Management Group
Director of Prudential; Senior Vice President of
Prudential; Vice President and Director of
PI
</TABLE>
The following table sets forth information with respect to investment
companies having similar investment objectives and policies to the Fund, the
amount paid to PIFM as manager to these funds and the amount paid to PI as
reimbursement for its reasonable costs and expenses incurred in acting as
investment adviser to such funds for the fiscal years ended July 31, 1997 for
Prudential Balanced Fund and December 31, 1997 for Prudential Series Fund.
<TABLE>
<CAPTION>
AMOUNT
AMOUNT PAID REIMBURSED AVERAGE NET
NAME OF FUND TO PIFM TO PI ASSETS
- ------------ ---------------------- ----------- --------------
<S> <C> <C> <C>
Prudential Balanced Fund..... .65 of 1% ($5,475,097) $ 442,761 $ 842,323,000
Prudential Series Fund
Conservative Balanced Port-
folio..................... .55 of 1% (25,757,735) 2,723,523 4,683,877,509
Flexible Managed Portfolio. .60 of 1% (31,740,440) 3,791,681 5,290,216,147
</TABLE>
7
<PAGE>
BROKERAGE COMMISSIONS
Prudential Securities Incorporated (Prudential Securities), One Seaport
Plaza, New York, New York 10292, or other affiliated broker-dealers may act as
broker on behalf of the Fund in the purchase and sale of portfolio securities.
During the fiscal year ended September 30, 1997, the Fund did not pay any
brokerage commissions to Prudential Securities or any other affiliated broker-
dealer.
RECOMMENDATION OF THE BOARD
Section 15 of the Investment Company Act normally requires that before a
subadviser can render services to a fund, the fund's shareholders must approve
the subadviser's contract with the fund. However, Rule 15a-4 under the
Investment Company Act allows a subadviser to provide investment advisory
services to a fund as long as: (a) its contract with the fund has been
approved by the fund's board of directors, including a majority of the
independent directors, and (b) the contract is approved by the shareholders of
the fund within 120 days of its effective date.
The New Subadvisory Agreement was approved by the Board, including the
Independent Directors, on May 14, 1998 and became effective on June 1, 1998.
If approved by the shareholders of the Fund, the New Subadvisory Agreement
will continue in effect for a period of two years, unless terminated earlier
in accordance with its terms. Thereafter, the New Subadvisory Agreement will
continue automatically for successive annual periods, provided that it is
specifically approved at least annually by (a) the Board or a majority of the
outstanding Shares of the Fund and (b) a vote of a majority of the Independent
Directors.
The Board, including its Independent Directors, recommends that shareholders
approve the New Subadvisory Agreement.
If shareholders of the Fund do not approve the New Subadvisory Agreement,
the Board would seek to obtain the interim advisory services at cost from PI
or from another investment adviser. Thereafter, the Board would either
negotiate a new investment advisory agreement with another investment advisory
organization or make other appropriate arrangements, in either event subject
to approval by the shareholders of the Fund.
REQUIRED VOTE
Adoption of Proposal No. 1 will require the approval of a majority of the
outstanding voting securities of the Fund, as defined in the Investment
Company Act. Under the Investment Company Act, a majority of the outstanding
voting securities of the Fund is defined as the lesser of (i) 67% of the
Fund's outstanding shares represented at a meeting at which more than 50% of
the outstanding shares are present in person or represented by proxy, or (ii)
more than 50% of the Fund's outstanding shares.
THE BOARD, INCLUDING ITS INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 1.
----------------
APPROVAL OF CHANGE IN INVESTMENT OBJECTIVE
PROPOSAL NO. 2
On May 14, 1998, at PIFM's request, the Board considered and adopted a new
investment objective for the Fund, subject to shareholder approval of this
change. The Board is recommending that you approve the new investment
objective. The Fund's current investment objective is "to seek to achieve
total returns approaching equity returns, while accepting less risk than an
all-equity portfolio, through an actively-managed portfolio of
8
<PAGE>
equity securities, fixed-income securities and money market instruments." The
Board has approved that the Fund's investment objective be restated as
follows:
The Fund's investment objective is to seek income and long-term growth of
capital by investing in a portfolio of equity, fixed-income and money
market securities which is actively managed to capitalize on opportunities
created by perceived misvaluation.
The Board believes that this modification, combined with the Fund's change
in subadviser, may help the Fund's performance. Although the Fund will
continue to invest primarily in equity, fixed-income and money market
instruments, the proposed investment objective will specifically allow PI to
focus its investments on those securities which PI believes have been
undervalued. PIFM and PI believe that the flexibility to invest in undervalued
securities will enable PI to better pursue long-term growth of capital for the
Fund. The new objective will be followed upon approval of shareholders of the
Fund.
REQUIRED VOTE
Approval of Proposal No. 2 requires the approval of a majority of the
outstanding voting securities of the Fund, as defined in Proposal No. 1.
THE BOARD, INCLUDING ITS INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
----------------
APPROVAL OF CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES
PROPOSAL NO. 3
Pursuant to the Investment Company Act, the Fund has adopted certain
fundamental investment restrictions and policies (fundamental policies) which
are set forth in its prospectus and statement of additional information. These
fundamental policies may be changed only with approval of the Fund's
shareholders. Restrictions and policies that the Fund has not specifically
designated as being fundamental are considered "non-fundamental" and may be
changed by the Board without shareholder approval.
PIFM has proposed two changes to the Fund's fundamental policies that are
consistent with the Fund's proposed new investment objective and new
investment adviser. The Board has approved these revisions to the Fund's
fundamental policies, subject to shareholder approval. The Board believes that
the proposed changes will allow the Fund greater investment flexibility to
respond to future investment opportunities.
ITEM 3(A). APPROVAL OF AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS TO PERMIT AN INCREASE IN THE BORROWING CAPABILITIES OF THE FUND.
The Fund currently may borrow money only "from banks or through forward
rolls, dollar rolls or reverse repurchase agreements in an amount up to 20% of
the value of its total assets (calculated when the loan is made) to take
advantage of investment opportunities, 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." If this
Item 3(a) is approved, this 20% limit would be increased to 30% in each
instance.
The Fund occasionally borrows money to fund substantial shareholder
redemptions or exchange requests or for the clearance of transactions when
available cash is not sufficient for these needs. Although the Fund has not
experienced difficulties under its current policies, PIFM and PI believe that
the proposed change would enhance management flexibility. The modification
would afford the Fund a greater capacity to satisfy net redemptions of
9
<PAGE>
its shares on a temporary basis, without having to resort to forced sales of
portfolio securities at possibly disadvantageous prices, to borrow money on a
temporary basis for the clearance of transactions and to borrow money to take
advantage of investment opportunities.
Borrowing to invest an increased percentage of its total assets in
securities would involve additional risk to the Fund since interest expenses
may be greater than the income from or appreciation of the securities financed
and the value of securities financed may decline below the amount borrowed. If
the Fund were to borrow to invest in securities, even for only temporary
purposes, any investment gains made on the securities in excess of interest
paid on the borrowing would cause the net asset value of the Fund to rise
faster than would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased failed to cover their cost
(including any interest accrued on the money borrowed) to the Fund, the net
asset value would decrease faster than would otherwise be the case. This is
the speculative factor known as "leverage."
ITEM 3(B). APPROVAL OF AMENDMENT OF THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS TO ALLOW INVESTMENTS IN SHARES OF AFFILIATED PRIVATE INVESTMENT
COMPANIES.
Currently, the Fund is prohibited from investing in securities of other non-
affiliated 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." If this Item 3(b) is approved, the
existing fundamental policy will be modified to allow the Fund to invest in
non-publicly offered registered investment companies (private funds). The
Board has authorized the Fund to file an exemptive application with the
Securities and Exchange Commission that, if granted, would allow the Fund and
other Prudential Mutual Funds to engage in a comprehensive securities lending
program. If the order is granted, the Fund would be permitted, together with
other Prudential Mutual Funds, to invest cash collateral generated through the
securities lending program in private funds, to invest in private funds for
cash management purposes, and to invest jointly with non-mutual fund accounts
in private funds.
PI has identified significant benefits from the ability to invest in private
funds. The only investors in the private funds would be the Prudential Mutual
Funds and non-investment company accounts privately managed by PI. This
investment would allow the Fund more efficiently to manage short-term assets
by creating larger investment pools to acquire short-term securities. In order
to permit the Fund to invest in private funds, it is proposed that the
investment restriction be revised to read as follows:
The Fund may not invest in securities of other investment companies,
except: (i) 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, (ii) as part of a merger,
consolidation or other acquisition, or (iii) purchases of affiliated
investment company shares pursuant to and subject to such limits as the
Securities and Exchange Commission may impose by rule or order.
The Board believes the proposed amendment would provide PI with additional
flexibility to take advantage of investment opportunities. However, because
any shares that the Fund holds in another investment company will be subject
to the management fees and expenses of such investment company, investment by
the Fund in other investment companies, including private funds, may result,
in effect, in payment by the Fund's shareholders of duplicate fees and
expenses.
REQUIRED VOTE
Approval of each Item under Proposal No. 3 requires the approval of a
majority of the outstanding voting securities of the Fund, as defined under
Proposal No. 1.
10
<PAGE>
THE BOARD, INCLUDING ITS INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 3(A) AND 3(B).
----------------
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the Fund,
will be made primarily by mail but also may include telephone or oral
communications by regular employees of Prudential Securities or PIFM or other
affiliates of Prudential, who will not receive any compensation therefor from
the Fund, or by Shareholder Communications Corporation, a proxy solicitation
firm retained by the Fund, whose estimated fees and expenses are not expected
to exceed $ . Proxies may be recorded pursuant to (i) electronically
transmitted instructions or (ii) telephone instructions obtained through
procedures reasonably designed to verify that the instructions have been
authorized.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal to be considered at the
Fund's next meeting of shareholders should send the proposal to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, so
as to be received within a reasonable time before the Board makes the
solicitation relating to such meeting, in order to be included in the proxy
statement and form of proxy relating to such meeting. Shareholder proposals
that are submitted in a timely manner will not necessarily be included in the
Fund's proxy materials. Inclusion of such proposals is subject to limitations
under the federal securities laws.
The Fund's By-Laws provide that the Fund will not be required to hold annual
meetings of shareholders if the election of Board Members is not required
under the Investment Company Act. It is the present intention of the Board of
the Fund not to hold annual meetings of shareholders unless such shareholder
action is required.
OTHER BUSINESS
Management knows of no business to be presented at the Meeting other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of shareholders arise, the proxies will vote according to
their best judgment in the interest of the Fund.
By order of the Board of Directors,
S. JANE ROSE
Secretary
June 30, 1998
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN YOUR PROXY PROMPTLY.
11
<PAGE>
EXHIBIT A
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
(PRUDENTIAL ACTIVE BALANCED FUND)
SUBADVISORY AGREEMENT
Agreement made as of this 1st day of June, 1998 between Prudential
Investments Fund Management LLC, a New York limited liability company (PIFM or
the Manager), and The Prudential Investment Corporation, a New Jersey
Corporation (the Subadviser).
WHEREAS, the Manager has entered into a Management Agreement, dated January
23, 1998 (the Management Agreement), with The Prudential Investment
Portfolios, Inc., formerly Prudential Jennison Series 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 PIFM acts as Manager of the Prudential Active Balanced Fund
(the Series).
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to the Series in connection with the management of the
Series 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 Series and the composition of the Series' portfolio,
including the purchase, retention and disposition thereof, in accordance
with the Series' 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 Series'
investments and determine from time to time what investments and
securities will be purchased, retained, sold or loaned by the Series,
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 and By-Laws of the Fund and Prospectus of the Series 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.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by the Series 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 the Series' Prospectus
or as the Board of Directors may direct from time to time. In providing
the Series 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 Series' investment transaction business. It is also
understood that it is desirable for the Series 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 Series
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
A-1
<PAGE>
and sale of securities and futures contracts for the Series 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 Series
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities or futures contracts
to be sold or purchased in order to obtain the most favorable price or
lower brokerage commissions and efficient execution. In such event,
allocation of the securities or futures contracts so purchased or sold,
as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to the Series
and to such other clients.
(iv) The Subadviser shall maintain all books and records with respect
to the Series' 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 Series' 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 trustees,
officers and employees who may be elected as trustees 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 trustees, 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. 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 no more than
120 days unless approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of the Series, and thereafter 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
A-2
<PAGE>
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
Series, 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 Series or the public, which refer to
the Subadviser in any way, prior to use thereof and not to use material if
the Subadviser reasonably objects in writing five business days (or such
other time as may be mutually agreed) after receipt thereof. Sales
literature may be furnished to the Subadviser hereunder by first-class or
overnight mail, facsimile transmission equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of
the Series 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 Investments Fund
Management LLC
/s/ Robert F. Gunia
By: _________________________________
ROBERT F. GUNIA
Executive Vice President
The Prudential Investment
Corporation
/s/ Mendel A. Melzer
By: _________________________________
MENDEL A. MELZER
Senior Vice President
A-3
<PAGE>
EXHIBIT B
MANAGEMENT OF THE FUND
THE MANAGER
Prudential Investments Fund Management LLC (PIFM or the Manager), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, serves as
the Fund's Manager under a management agreement dated as of January 23, 1998
(the Management Agreement).
TERMS OF THE MANAGEMENT AGREEMENT
Pursuant to the Management Agreement, PIFM, subject to the supervision of
the 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 and disposition thereof.
The Manager is authorized to enter into a subadvisory agreement for investment
advisory services in connection with the management of the Fund. The Manager
will continue to have responsibility for all investment advisory services
furnished pursuant to such subadvisory agreement.
Pursuant to the Management Agreement, PIFM, subject to the supervision of
PIP'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. In connection therewith, PIFM is obligated to keep
certain books and records of the Fund. PIFM also administers the Fund's
business affairs and, in connection therewith, furnishes the Fund with office
facilities, together with those ordinary clerical and bookkeeping services
which are not being furnished by State Street Bank and Trust Company, the
Fund's custodian, and Prudential Mutual Fund Services LLC (PMFS), the Fund's
transfer and dividend disbursing agent. The management services of PIFM for
the Fund are not exclusive under the terms of the Management Agreement and
PIFM is free to, and does, render management services to others.
PIFM has authorized any of its directors, officers and employees who have
been elected as Directors or officers of the Fund to serve in the capacities
in which they have been elected. All services furnished by PIFM under the
Management Agreement may be furnished by any such directors, officers or
employees of PIFM.
In connection with its management of the business affairs of the Fund, PIFM
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
PIFM or the Fund's subadviser;
(b) all expenses incurred by PIFM 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 the subadviser pursuant to the
subadvisory agreement between PIFM and the subadviser.
For its services, PIFM is compensated by the Fund at the rate of .65% of the
average daily net assets of the Fund.
The Management Agreement also provides that, in the event the expenses of
the Fund (including the fees of PIFM, 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 PIFM will be reduced by the amount of such excess.
Reductions in excess of the total compensation payable to PIFM will be paid by
PIFM to the Fund. No jurisdiction currently limits the Fund's expenses.
B-1
<PAGE>
Except as indicated above, the Fund is responsible under the Management
Agreement for the payment of its expenses, including (a) the fees payable to
PIFM, (b) the fees and expenses of Directors who are not affiliated persons of
PIFM or the subadviser, (c) the fees and certain expenses of the Fund's
custodian and transfer and dividend disbursing agent, including the cost of
providing records of the Fund and of pricing Fund shares, (d) the charges and
expenses of the Fund's legal counsel and independent accountants, (e)
brokerage commissions and any issue or transfer taxes chargeable to the Fund
in connection with its securities transactions, (f) all taxes and corporate
fees payable by the Fund to governmental agencies, (g) the fees of any trade
association of which the Fund may be a member, (h) the cost of any stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the Securities and
Exchange Commission and making notice filings with the states, 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) expenses assumed pursuant to any Plan of Distribution adopted
in conformity with Rule 12b-1 under the Investment Company Act.
The Management Agreement provides that PIFM 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 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 also provides that it will terminate
automatically if assigned and that it may be terminated without penalty by the
Directors of the Fund, by vote of a majority of the Fund's outstanding voting
securities (as defined in the Investment Company Act) or by the Manager, upon
not more than 60 days' nor less than 30 days' written notice.
INFORMATION ABOUT PIFM
PIFM is a subsidiary of Prudential Securities Incorporated (Prudential
Securities) and an indirect, wholly-owned subsidiary of The Prudential
Insurance Company of America (Prudential), a major, diversified insurance and
financial services company. Prudential's address is Prudential Plaza, Newark,
New Jersey 07102-4077. PIFM is organized in New York as a limited liability
company.
PIFM acts as manager for the following investment companies:
Open-End Management Investment Companies: Command Government Fund,
Command Money Fund, Command Tax-Free Fund, The Global Total Return Fund,
Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-
Applegate Growth Equity Fund), Prudential Balanced Fund, Prudential
California Municipal Fund, Prudential Distressed Securities Fund, Inc.,
Prudential Diversified Bond Fund, Inc., Prudential Emerging Growth Fund,
Inc., Prudential Equity Fund, Inc., Prudential Equity Income Fund,
Prudential Europe Growth Fund, Inc., Prudential Global Genesis Fund, Inc.,
Prudential Global Limited Maturity Fund, Inc., Prudential Government Income
Fund, Inc., Prudential Government Securities Trust, Prudential High Yield
Fund, Inc., Prudential High Yield Total Return Fund, Inc., Prudential Index
Series Fund, Prudential Institutional Liquidity Portfolio, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential International Bond Fund,
Inc., Prudential Mid-Cap Value Fund, Prudential MoneyMart Assets, Inc.,
Prudential Mortgage Income Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential National Municipals Fund,
Inc., Prudential Natural Resources Fund, Inc., Prudential Pacific Growth
Fund, Inc., Prudential Real Estate Securities Fund, Prudential Small-Cap
Quantum Fund, Inc., Prudential Small Company Value Fund, Inc., Prudential
Special Money Market Fund, Inc., Prudential Structured Maturity Fund, Inc.,
Prudential Tax-Free Money Fund, Inc., Prudential 20/20 Focus Fund,
Prudential Utility Fund, Inc., Prudential World Fund, Inc., The Prudential
Investment Portfolios, Inc. and The Target Portfolio Trust.
B-2
<PAGE>
Closed-End Management Investment Company: The High Yield Income Fund, Inc.
PIFM'S DIRECTORS AND OFFICERS
The business and other connections of PIFM's directors and principal
executive officers are set forth below. The address of each person is Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
<TABLE>
<CAPTION>
NAME POSITION WITH PIFM PRINCIPAL OCCUPATIONS
- ---- ------------------ ---------------------
<S> <C> <C>
Frank W. Giordano....... Executive Vice President, Executive Vice President, Secretary
Secretary and General and General Counsel, PIFM;
Counsel Senior Vice President, Prudential
Securities
Robert F. Gunia......... Executive Vice President Vice President, Prudential
and Treasurer Investments; Executive Vice
President and Treasurer, PIFM;
Senior Vice President, Prudential
Securities
Neil A. McGuinness...... Executive Vice President Executive Vice President and
Director of Marketing, Prudential
Mutual Funds & Annuities
(PMF&A); Executive Vice President, PIFM
Brian Storms............ Officer-in-Charge, President, President, PMF&A; Officer-in-
Chief Executive Officer Charge, President, Chief
and Chief Operating Officer Executive Officer and Chief
Operating Officer, PIFM
Robert J. Sullivan...... Executive Vice President Executive Vice President, PMF&A;
Executive Vice President, PIFM
</TABLE>
THE TRANSFER AGENT
The Fund's transfer agent is PMFS, Raritan Plaza One, Edison, New Jersey
08837. PMFS is a wholly-owned subsidiary of PIFM. PMFS receives an annual fee
per shareholder account of $9.50, a new account set-up fee for each manually
established account of $2.00 and a monthly inactive zero balance account fee
per shareholder account of $.20.
B-3
<PAGE>
EXHIBIT C
FIVE PERCENT SHAREHOLDER REPORT
As of May 29, 1998, the beneficial owners, directly or indirectly, of more
than 5% of the outstanding shares of any class of the Fund are listed below.
<TABLE>
<CAPTION>
FUND NAME AND CLASS REGISTRATION SHARES (PERCENT)
---------------------------------------- ------------------------ --------- ---------
<C> <S> <C> <C>
Prudential Active Balanced Fund--Class A Prudential Securities 12,925 (7%)
Incorporated
C/F Mr. C. Reed Neilsen
IRA Rollover DTD
12/29/97
1566 Highland Drive
North Logan, UT 84341-
2142
Prudential Defined 65,179 (35.7%)
Contribution Services
FBO Prudential Bank &
Trust Company
Attn: J. Surdy
30 Scranton Office Park
Moosic, PA 18507-1755
Prudential Active Balanced Fund--Class C Leonora J. Stevenson 2,161 (19%)
10241 SW Picks Ct.
Tigard, OR 97224
Profile Concrete Corp. 1,466 (13%)
Jeffrey Dandrea
6980 Rapids Road
Lockport, NY 14094-7945
Francis L. White 778 (6.9%)
1103 E. Main St.
Greenfield, IN 46140
Roger K. Hendrickson and 573 (5.1%)
Kathryn K. Hendrickson
JTTen
3005 Bayside Drive
Mandan, ND 58554
Prudential Defined 1,078 (9.6%)
Contribution Services
FBO Prudential Bank &
Trust Company
Attn: J. Surdy
30 Scranton Office Park
Moosic, PA 18507-1755
Prudential Active Balanced Fund--Class Z Prudential Defined 8,248,612 (64.5%)
Contribution Services
FBO Pru-DC Qualified
Clients
Attn: J. Surdy
30 Scranton Office Park
Moosic, PA 18507-1755
Prudential Trust Company 4,112,687 (32.1%)
FBO Pru-DC Clients
Attn: J. Surdy
30 Scranton Office Park
Moosic, PA 18507-1755
</TABLE>
C-1
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS.
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND The undersigned hereby appoints Grace
GATEWAY CENTER THREE C. Torres, S. Jane Rose and Marguerite
100 MULBERRY STREET E. H. Morrison as Proxies, each with
NEWARK, NEW JERSEY 07102-4077 the power of substitution, and hereby
authorizes each of them to represent
and to vote, as designated below, all
the shares of Prudential Active
Balanced Fund (the "Fund") held of
record by the undersigned on June 5,
1998, at the Special Meeting of
Shareholders to be held on August 6,
1998, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING
PROPOSALS:
<TABLE>
<S> <C> <C> <C>
1. Approval of a New Subadvisory Agreement with [_] For [_] Against [_] Abstain
The Prudential Investment Corporation
2. Approval of a change in the Fund's investment objective [_] For [_] Against [_] Abstain
3. Approval of a change to the Fund's
fundamental investment policies, as outlined
below:
a. Increasing the borrowing capabilities of the Fund. [_] For [_] Against [_] Abstain
b. Allowing investment in shares of affiliated private investment companies. [_] For [_] Against [_] Abstain
</TABLE>
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
(continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DESCRIBED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S).
IF EXECUTED AND NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2 AND 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian,
please give full title as
such. If a corporation,
please sign in full corpo-
rate name by president or
other authorized officer.
If a partnership, please
sign in partnership name
by authorized person.
Dated: ____________________ , 1998
----------------------------------
Signature
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Signature, if held jointly
