As filed with the Securities and Exchange Commission on March 27, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1 [X]
(Check appropriate box or boxes)
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STRATEGIC PARTNERS SERIES
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (973) 367-1495
David F. Connor
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102-4077
(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 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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
Title of Securities Being Registered . . . . Shares of beneficial interest, par value $.001 per share. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- |
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Strategic Partners/SM/
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PROSPECTUS
MARCH 27, 2000
FUND TYPE Stock
OBJECTIVE Long-term growth of capital
[GRAPHIC]
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved the Fund's shares, nor has the
SEC determined that this prospectus is
complete or accurate. It is a criminal
offense to state otherwise.
1 Risk/Return Summary
1 Investment Objective and Principal Strategies
2 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 How the Fund Invests
5 Investment Objective and Policies
6 Other Investments and Strategies
10 Investment Risks
13 How the Fund is Managed
13 Board of Trustees
13 Manager
13 Sub-Manager
13 Investment Advisers
14 Portfolio Managers
14 Distributor
15 Fund Distributions and Tax Issues
15 Distributions
16 Tax Issues
17 If You Sell or Exchange Your Shares
19 How to Buy, Sell and Exchange Shares of the Fund
19 Initial Offering of Shares
20 How to Buy Shares
26 How to Sell Your Shares
30 How to Exchange Your Shares
31 Telephone Redemptions or Exchanges
For More Information (Back Cover)
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The Fund's Distributor will solicit subscriptions for the Fund's shares during a subscription period expected to last from April 12, 2000 to May 26, 2000. The Fund expects to begin a continuous offering of its shares on June 12, 2000.
Strategic Partners Focused Growth Fund (800) 225-1852
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This section highlights key information about the Strategic Partners Focused Growth Fund, which we refer to as "the Fund." The Fund is a separate series of Strategic Partners Series ("the Company"). Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is long-term growth of capital. This means we seek investments whose price will increase over several years. We normally invest at least 65% of total assets in equity-related securities of U.S. companies that we believe have strong capital appreciation potential. The Fund's strategy is to combine the efforts of two investment advisers and to invest in the favorite stock selection ideas of three portfolio managers (two of whom invest as a team). Each investment adviser to the Fund utilizes a growth style to select approximately 20 securities. The portfolio managers build a portfolio with stocks in which they have the highest confidence and may invest more than 5% of the Fund's assets in any one issuer. The Fund may actively and frequently trade its portfolio securities.
While we make every effort to achieve our objective, we can't guarantee success.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests primarily in equity-related securities, there is the risk that the
price of a particular stock we own could go down, or the value of the equity
markets or a sector of them could go down. Stock markets are volatile. The
Fund's holdings can vary significantly from broad market indexes, and
performance of the Fund can deviate from the performance of such indexes.
The Fund is nondiversified, meaning we can invest more than 5% of our assets in the securities of any one issuer. Investing in a nondiversified mutual fund, particularly a fund investing in approximately 40 equity-related securities, involves greater risk than investing in a diversified fund because a loss resulting from the decline in the value of one security may represent a greater portion of the total assets of a nondiversified fund.
The Fund may actively and frequently trade its portfolio securities. High
portfolio turnover results in higher transaction costs and can affect the
Fund's performance and have adverse tax consequences.
Like any mutual fund, an investment in the Fund could lose value and you
could lose money. For more detailed information about the risks associated with
the Fund, see "How the Fund Invests--Investment Risks."
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
EVALUATING PERFORMANCE
Because the Fund is new, no performance history is included in this prospectus.
Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
FEES AND EXPENSES
These tables show the sales charges, fees and expenses that you may pay if you
buy and hold shares of each share class of the Fund--Class A, B, C and Z. Each
share class has different sales charges--known as loads-- and expenses, but
represents an investment in the same fund. Class Z shares are available only to
a limited group of investors. For more information about which share class may
be right for you, see "How to Buy, Sell and Exchange Shares of the Fund."
Shareholder Fees/1/ (paid directly from your investment)
CLASS A CLASS B CLASS C CLASS Z
Maximum sales charge (load) imposed on
purchases (as a percentage of
offering price) 5% None 1% None
Maximum deferred sales charge (load)
(as a percentage of the lower of
original purchase price or sale
proceeds) None 5%/2/ 1%/3/ None
Maximum sales charge (load) imposed on
reinvested dividends and other
distributions None None None None
Redemption fees None None None None
Exchange fee None None None None
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Annual Fund Operating Expenses (deducted from Fund assets)
CLASS A CLASS B CLASS C CLASS Z
Management fees .90% .90% .90% .90%
+ Distribution and service (12b-1) fees .30%/4/ 1.00% 1.00% None
+ Other expenses/5/ .23% .23% .23% .23%
= Total annual Fund operating expenses 1.43% 2.13% 2.13% 1.13%
- Fee waiver .05% None None None
= Net annual Fund operating expenses 1.38%/4/ 2.13% 2.13% 1.13%
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1 Your broker may charge you a separate or additional fee for purchases and
sales of shares.
2 The contingent deferred sales charge (CDSC) for Class B shares decreases by
1% annually to 1% in the fifth and sixth years and 0% in the seventh year.
Class B shares convert to Class A shares approximately seven years after
purchase.
3 The CDSC for Class C shares is 1% for shares redeemed within 18 months of
purchase.
4 For the fiscal year ending 2-28-01, the Distributor of the Fund has contractually agreed to reduce its distribution and service (12b-1) fees for Class A shares to .25 of 1% of the average daily net assets of the Class A shares.
5 Other expenses are estimated, since this is a new fund.
Example
This example will help you compare the fees and expenses of the Fund's
different share classes and the cost of investing in the Fund with the cost of
investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same, except for the Distributor's
reduction of distribution and service (12b-1) fees for Class A shares during
the first year. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
1 YR 3 YRS
Class A shares $633 $925
Class B shares $716 $967
Class C shares $414 $760
Class Z shares $115 $359
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You would pay the following expenses on the same investment if you did not sell your shares:
1 YR 3 YRS
Class A shares $633 $925
Class B shares $216 $667
Class C shares $314 $760
Class Z shares $115 $359
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Strategic Partners Focused Growth Fund (800) 225-1852
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INVESTMENT OBJECTIVE AND POLICIES
In pursuing our objective of long-term growth of capital, we normally invest at least 65% of the Fund's total assets in equity-related securities of U.S. companies that we believe have strong capital appreciation potential.
In addition to common stocks in which the Fund primarily invests,
equity-related securities include nonconvertible preferred stocks; convertible
securities; American Depositary Receipts (ADRs); warrants and rights that can
be exercised to obtain stock; investments in various types of business
ventures, including partnerships and joint ventures; real estate investment
trusts (REITs); and similar securities. Convertible securities are securities--
like bonds, corporate notes and preferred stocks--that we can convert into the
company's common stock or some other equity security.
We may buy common stocks of companies of every size--small-, medium- and
large-capitalization-- although our investments are mostly in medium- and
large-capitalization stocks. The Fund intends to be fully invested, holding
less than 5% of its total assets in cash under normal market conditions.
Division of Assets
Strategy. Under normal conditions, there will be an approximately equal division of the Fund's assets between the two investment advisers. All daily cash inflows (that is, purchases and reinvested distributions) and outflows (that is, redemptions and expense items) will be divided between the two investment advisers as the Manager deems appropriate. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the approximately equal allocation. As a consequence, the Manager may allocate assets from the portfolio segment that has appreciated more to the other.
Our Growth Style
Alliance Capital Management's portfolio manager, Alfred Harrison, utilizes the
fundamental analysis and research of Alliance's large internal research staff.
In selecting stocks for the Fund, he emphasizes stock selection and investment
in a limited number of companies that have strong management, superior industry
positions, excellent balance sheets and the ability to demonstrate superior
earnings growth.
Jennison Associates' portfolio managers, Spiros Segalas and Kathleen McCarragher, invest in mid-size and large companies experiencing some or all of the following: high sales growth, high unit growth, high or improving returns on assets and equity and a strong balance sheet. These companies generally trade at high prices relative to their current earnings.
Risks. Reallocations may result in additional costs since sales of securities may result in higher portfolio turnover. Also, because each investment adviser selects portfolio securities independently, it is possible that a security held by one portfolio segment may also be held by the other portfolio segment of the Fund or that the two advisers may simultaneously favor the same industry. The Manager will monitor the overall portfolio to ensure that any such overlaps do not create an unintended industry concentration. In addition, if one investment adviser buys a security as the other adviser sells it, the net position of the Fund in the security may be approximately the same as it would have been with a single portfolio and no such sale and purchase, but the Fund will have incurred additional costs. The Manager will consider these costs in determining the allocation of assets. The Manager will consider the timing of reallocation based upon the best interests of the Fund and its shareholders. To maintain the Fund's federal income tax status as a regulated investment company, the Manager also may have to sell securities on a periodic basis and the Fund could realize capital gains that would not have otherwise occurred.
For more information, see "Investment Risks" and the Statement of Additional
Information, "Description of the Fund, Its Investments and Risks." The
Statement of Additional Information--which we refer to as the SAI--contains
additional information about the Fund. To obtain a copy, see the back cover
page of this prospectus.
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board can change investment policies
that are not fundamental.
OTHER INVESTMENTS AND STRATEGIES
In addition to the principal strategies, we may also use the following
investment strategies to try to increase the Fund's returns or protect its
assets if market conditions warrant.
Foreign Securities
We may invest in foreign securities, including stocks and other equity-related securities, money market instruments and other fixed-income securities of foreign issuers. We do not consider ADRs and other similar receipts or shares to be foreign securities.
Strategic Partners Focused Growth Fund (800) 225-1852
[GRAPHIC]
Money Market Instruments
The Fund may temporarily hold cash or 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 subject to the policy of normally investing at least 65% of the Fund's assets in equity-related securities. Money market instruments include the commercial paper of corporations, certificates of deposit, bankers' acceptances and other obligations of domestic and foreign banks, nonconvertible debt securities (corporate and government), short-term obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, repurchase agreements and cash (foreign currencies or U.S. dollars).
Repurchase Agreements
The Fund may use repurchase agreements, where a party agrees to sell a security to the Fund and then repurchase it at an agreed-upon price at a stated time. This creates a fixed return for the Fund and is, in effect, a loan by the Fund. Repurchase agreements are used for cash management purposes.
Temporary Defensive Investments
In response to adverse market, economic, political or other conditions, we may temporarily invest up to 100% of the Fund's assets in money market instruments. Investing heavily in these securities limits our ability to achieve our investment objective, but can help to preserve the Fund's assets when the equity markets are unstable.
Real Estate Investment Trusts
We may invest in the securities of real estate investment trusts known as
REITs. REITs are like corporations, except that they do not pay income taxes if
they meet certain IRS requirements. However, while REITs themselves do not pay
income taxes, the distributions they make to investors are taxable. REITs
invest primarily in real estate and distribute almost all of their income--most
of which comes from rents, mortgages and gains on sales of property--to
shareholders.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by the U.S. Treasury or
by an agency or instrumentality of the U.S. government. Not all U.S. government
securities are backed by the full faith and credit of the United States. Some
are supported only by the credit of the issuing agency.
Short Sales
The Fund may use short sales, where it sells a security it does not own, with
the expectation of a decline in the market value of that security. To complete
the transaction, the Fund will borrow the security to make delivery to the
buyer. The Fund must replace the security borrowed by purchasing it at the
market price at the time of replacement. The price at that time may be more or
less than the price at which the Fund sold the security. The Fund is required
to pay the lender any dividends or interest accrued. To borrow the security,
the Fund may pay a premium which would increase the cost of the security sold.
Derivative Strategies
We may use various derivative strategies to try to improve the Fund's returns. We may use hedging techniques to try to protect the Fund's assets. We cannot guarantee that these strategies will work, that the instruments necessary to implement these strategies will be available, or that the Fund will not lose money. Derivatives--such as futures, options and options on futures--involve costs and can be volatile. With derivatives, an investment adviser tries to predict whether the underlying investment--a security, market index, currency, interest rate or some other benchmark--will go up or down at some future date. We may use derivatives to try to reduce risk or to increase return consistent with the Fund's overall investment objective. The investment adviser will consider other factors (such as cost) in deciding whether to employ any particular strategy or use any particular instrument. Any derivatives we use may not match the Fund's underlying holdings.
Options. The Fund may purchase and sell put and call options on securities indexes traded on U.S. or foreign securities exchanges or in the over-the- counter market. An option is the right to buy or sell securities in exchange for a premium. The Fund will sell only covered options.
Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
Futures Contracts and Related Options. The Fund may purchase and sell stock index futures contracts and related options on stock index futures. The Fund may purchase and sell futures contracts on foreign currencies and related options on foreign currency futures contracts. A futures contract is an agreement to buy or sell a set quantity of an underlying product at a future date, or to make or receive a cash payment based on the value of a securities index.
Additional Strategies
The Fund also follows certain policies when it borrows money (the Fund can borrow up to 33 1/3% of the value of its total assets); lends its securities to others (the Fund can lend up to 33 1/3% of the value of its total assets including collateral received in the transaction); and holds illiquid securities (the Fund may hold up to 15% of its net assets in illiquid securities, including securities with legal or contractual restrictions on resale, those without a readily available market and repurchase agreements with maturities longer than seven days). The Fund is subject to certain investment restrictions that are fundamental policies, which means they cannot be changed without shareholder approval. For more information about these restrictions, see the SAI.
Portfolio Turnover
It is not a principal strategy of the Fund to actively and frequently trade its
portfolio securities to achieve its investment objective. Nevertheless, the
Fund may have an annual portfolio turnover rate of up to 200%. Portfolio
turnover is generally the percentage found by dividing the lesser of portfolio
purchases and sales by the monthly average value of the portfolio. High
portfolio turnover (100% or more) results in higher brokerage commissions and
other costs and can affect the Fund's performance. It also can result in a
greater amount of distributions as ordinary income rather than long-term
capital gains.
INVESTMENT RISKS
All investments involve risk, and investing in the Fund is no exception. Since the Fund's holdings can vary significantly from broad market indexes, performance of the Fund can deviate from performance of the indexes. This chart outlines the key risks and potential rewards of the Fund's principal investments and certain other non-principal investments the Fund may make. The investment types are listed in the order in which they normally will be used by the portfolio managers. See, too, "Description of the Fund, Its Investments and Risks" in the SAI.
Investment Type
Risks Potential Rewards
% of Fund's Total
Assets
Equity-related . Individual stocks . Historically,
securities could lose value stocks have
outperformed
other
investments over
the long term
. The equity
At least 65% markets could go
down, resulting . Generally,
in a decline in economic growth
value of the means higher
Fund's corporate
investments profits, which
lead to an
. Changes in increase in
economic or stock prices,
political known as capital
conditions, both appreciation
domestic and
international,
may result in a
decline in value
of the Fund's
investments
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Foreign . Foreign markets, . Investors can
securities economies and participate in
political systems foreign markets
may not be as and companies
stable as in the operating in
U.S. those markets
Up to 20%
. May profit from
. Currency risk-- changing values
changing values of foreign
of foreign currencies
currencies can
cause losses . Opportunities
for
. May be less diversification
liquid than U.S.
stocks and bonds
. Differences in
foreign laws,
accounting
standards, public
information,
custody and
settlement
practices provide
less reliable
information on
foreign
investments and
involve more risk
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Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
Investment Type (cont'd)
% of Fund's Total Risks Potential Rewards
Assets
Derivatives . Derivatives such . The Fund could
as futures and make money and
Percentage options that are protect against
varies; usually used for hedging losses if the
less than 10% purposes may not investment
fully offset the analysis proves
underlying correct
positions and
this could result . One way to
in losses to the manage the
Fund that would Fund's
not have risk/return
otherwise balance is by
occurred locking in the
value of an
. Derivatives used investment ahead
for risk of time
management may
not have the
intended effects
and may result in
losses or missed
opportunities
. The other party
to a derivatives
contract could
default
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U.S. government . Not all are . May preserve the
securities insured or Fund's assets
guaranteed by the
Up to 35%; usu- government but . Principal and
ally less than only by the interest may be
10% issuing agency guaranteed by
the U.S.
. Limits potential government
for capital
appreciation
. Interest rate
risk--the risk
that the value of
most debt
obligations will
fall when
interest rates
rise; the longer
its maturity, the
more its value
typically falls
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Real estate . Performance . Real estate
investment trusts depends on the holdings can
(REITs) strength of real generate good
estate market, returns from
Up to 25%; usu- REIT management rents, rising
ally less than and property market values,
10% management which etc.
can be affected
by many factors, . Greater
including diversification
national and than direct
regional economic ownership
conditions
--------------------------------------------------------------------------------
Short sales . May magnify . May magnify
underlying underlying
Up to 25% of net investment losses investment gains
assets; usually
less than 10% . Investment costs
may exceed
potential
underlying
investment gains
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Investment Type (cont'd)
% of Fund's Total Risks Potential Rewards
Assets
Illiquid . May be difficult . May offer a more
securities to value attractive yield
precisely or potential for
growth than more
Up to 15% of net . May be difficult widely traded
assets to sell at the securities
time or price
desired
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Money market . Limits potential . May preserve the
instruments for capital Fund's assets
appreciation
. Credit risk--the
Up to 100% on a risk that the
temporary basis default of an
issuer would
leave the Fund
with unpaid
interest or
principal
. Market risk--the
risk that the
market value of
an investment may
move up or down.
Market risk may
affect an
industry, a
sector or the
market as a whole
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Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
BOARD OF TRUSTEES
The Company's Board of Trustees oversees the actions of the Manager, Sub-
Manager, Investment Advisers and Distributor, and decides on general policies.
The Board also oversees the Company's officers, who conduct and supervise the
daily business operations of the Fund.
MANAGER
Prudential Investments Fund Management LLC (PIFM)
Gateway Center Three, 100 Mulberry Street
Newark, NJ 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's investment operations and administers its business affairs. PIFM is paid annual management fees of .90 of 1% of the Fund's average net assets up to and including $1 billion and .85 of 1% of average net assets over $1 billion. PIFM has responsibility for all investment advisory services and supervises Prudential Investments and the Fund's investment advisers.
PIFM and its predecessors have served as manager or administrator to investment companies since 1987. As of January 31, 2000, PIFM served as the manager to 43 mutual funds, and as manager or administrator to 22 closed-end investment companies, with aggregate assets of approximately $74.9 billion.
SUB-MANAGER
The Prudential Investment Corporation, called Prudential Investments, serves as the Sub-Manager for the portion of the Fund managed by Jennison Associates LLC (Jennison). Prudential Investments' address is Prudential Plaza, 751 Broad Street, Newark, NJ 07102. Prudential Investments provides services to PIFM as PIFM may request from time to time in the management and administration of the Fund. Prudential Investments has served as an adviser to mutual funds since 1984.
INVESTMENT ADVISERS
Alliance Capital Management, L.P. (Alliance) and Jennison are the Fund's investment advisers. Alliance's address is 1345 Avenue of the Americas, New York, NY 10105 and Jennison's address is 466 Lexington Avenue, New York, NY 10017.
Alliance is a leading international investment adviser, supervising client accounts with assets as of December 31, 1999 totaling more than $368 billion, including 52 investment companies with assets of more than $143 billion. Alliance has served as an investment adviser to mutual funds since 1983.
Jennison managed approximately $58.7 billion in assets as of January 31, 2000. Jennison has served as an investment adviser to mutual funds and other clients since 1990.
PORTFOLIO MANAGERS
Alfred Harrison is portfolio manager for the portion of the Fund's assets advised by Alliance. Mr. Harrison joined Alliance in 1978 and is manager of the firm's Minneapolis office. He is Vice Chairman of Alliance Capital Management Corporation.
Spiros Segalas and Kathleen McCarragher are co-portfolio managers for the portion of the Fund's assets advised by Jennison. Spiros "Sig" Segalas has been in the investment business for over 35 years and has managed equity portfolios for investment companies since 1990. He was a founding member of Jennison in 1969 and currently serves as Director, President and Chief Investment Officer of Jennison. Mr. Segalas received a B.A. from Princeton University and is a member of the New York Society of Security Analysts. Kathleen McCarragher is a Director and Executive Vice President of Jennison and is also Jennison's Growth Equity Investment Strategist. She joined Jennison in 1998 after a 17-year investment career, including positions at Weiss, Peck & Greer (1992 to 1998) as a portfolio manager and State Street Research and Management Company, where she was a member of the Investment Committee. She received a B.B.A. from the University of Wisconsin and an M.B.A. from Harvard Business School.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's shares under a Distribution Agreement with the Fund. The Fund has Distribution and Service Plans under Rule 12b-1 of the Investment Company Act. Under the Plans and the Distribution Agreement, PIMS pays the expenses of distributing the Fund's Class A, B, C and Z shares and provides certain shareholder support services. The Fund pays distribution and other fees to PIMS as compensation for its services for each class of shares other than Class Z. These fees--known as 12b-1 fees--are shown in the "Fees and Expenses" tables.
Strategic Partners Focused Growth Fund (800) 225-1852
[GRAPHIC]
Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes dividends of ordinary income and any
realized net capital gains to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA) or some other qualified tax-deferred plan or account. Dividends
and distributions from the Fund also may be subject to state and local income
tax in the state where you live.
Also, if you sell shares of the Fund for a profit, you may have to pay
capital gains taxes on the amount of your profit, again unless you hold your
shares in a qualified tax-deferred plan or account.
The following briefly discusses some of the important federal tax issues you
should be aware of, but is not meant to be tax advice. For tax advice, please
speak with your tax adviser.
DISTRIBUTIONS
The Fund distributes dividends of any net investment income to shareholders
typically once a year. For example, if the Fund owns ACME Corp. stock and the
stock pays a dividend, the Fund will pay out a portion of this dividend to its
shareholders, assuming the Fund's income is more than its costs and expenses.
The dividends you receive from the Fund will be taxed as ordinary income
whether or not they are reinvested in the Fund.
The Fund also distributes realized net capital gains to shareholders--
typically once a year. Capital gains are generated when the Fund sells its
assets for a profit. For example, if the Fund bought 100 shares of ACME Corp.
stock for a total of $1,000 and more than one year later sold the shares for a
total of $1,500, the Fund has net long-term capital gains of $500, which it
will pass on to shareholders (assuming the Fund's total gains are greater than
any losses it may have). Capital gains are taxed differently depending on how
long the Fund holds the security--if a security is held more than one year
before it is sold, long-term capital gains are taxed at the rate of 20%, but if
the security is held one year or less, short-term capital gains are taxed at
ordinary income rates of up to 39.6%. Different rates apply to corporate
shareholders.
For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in the Fund without any sales charge. If you ask us to
pay the distributions in cash, we will send you a check if your
account is with the Transfer Agent. Otherwise, if your account is with a broker, you will receive a credit to your account. Either way, the distributions may be subject to taxes, unless your shares are held in a qualified tax-deferred plan or account. For more information about automatic reinvestment and other shareholder services, see "Step 4: Additional Shareholder Services" in the next section.
TAX ISSUES
Form 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own
shares of the Fund as part of a qualified tax-deferred plan or account, your
taxes are deferred, so you will not receive a Form 1099. However, you will
receive a Form 1099 when you take any distributions from your qualified tax-
deferred plan or account.
Fund distributions are generally taxable to you in the calendar year they
are received, except when we declare certain dividends in the fourth quarter
and actually pay them in January of the following year. In such cases, the
dividends are treated as if they were paid on December 31 of the prior year.
Corporate shareholders are eligible for the 70% dividends-received deduction
for certain dividends.
Withholding Taxes
If federal tax law requires you to provide the Fund with your taxpayer identification number and certifications as to your tax status, and you fail to do this, or if you are otherwise subject to backup withholding, we will withhold and pay to the U.S. Treasury 31% of your distributions and sale proceeds. Dividends of net investment income and short-term capital gains paid to a nonresident foreign shareholder generally will be subject to a U.S. withholding tax of 30%. This rate may be lower, depending on any tax treaty the U.S. may have with the shareholder's country.
16 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
If You Purchase Just Before Record Date
If you buy shares of the Fund just before the record date (the date that
determines who receives the distribution), that distribution will be paid to
you. As explained above, the distribution may be subject to income or capital
gains taxes. You may think you've done well since you bought shares one day and
soon thereafter received a distribution. That is not so because when dividends
are paid out, the value of each share of the Fund decreases by the amount of
the dividend to reflect the payout, although this may not be apparent because
the value of each share of the Fund also will be affected by the market
changes, if any. The distribution you receive makes up for the decrease in
share value. However, the timing of your purchase does mean that part of your
investment came back to you as taxable income.
Qualified or Tax-Deferred Retirement Plans Retirement plans and accounts allow you to defer paying taxes on investment income and capital gains. Contributions to these plans may also be tax deductible, although distributions from these plans generally are taxable. In the case of Roth IRA accounts, contributions are not tax deductible, but distributions from the plan may be tax-free.
+ $ CAPITAL GAIN
(taxes owed)
RECEIPTS FROM SALE [GRAPHIC] OR
- $ CAPITAL LOSS
(offset against gain)
your shares within 90 days, you may not be allowed to include certain charges incurred in acquiring the shares for purposes of calculating gain or loss realized upon the sale of the shares.
Exchanging your shares of the Fund for the shares of a future series of the Company is considered a sale for tax purposes. In other words, it's a "taxable event." Therefore, if the shares you exchanged have increased in value since you purchased them, you have capital gains, which are subject to the taxes described above.
Any gain or loss you may have from selling or exchanging Fund shares will not be reported on Form 1099; however, proceeds from the sale will be reported on Form 1099-B. Therefore, unless you hold your shares in a qualified tax- deferred plan or account, you or your financial adviser should keep track of the dates on which you buy and sell--or exchange--Fund shares, as well as the amount of any gain or loss on each transaction. For tax advice, please see your tax adviser.
Automatic Conversion of Class B Shares
We have obtained a legal opinion that the conversion of Class B shares into
Class A shares--which happens automatically approximately seven years after
purchase--is not a "taxable event" because it does not involve an actual sale
of your Class B shares. This opinion, however, is not binding on the Internal
Revenue Service. For more information about the automatic conversion of Class B
shares, see "Class B Shares Convert to Class A Shares After Approximately Seven
Years" in the next section.
18 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
How to Buy, Sell and -------------------------------------------------------------------------------- Exchange Shares of the Fund -------------------------------------------------------------------------------- |
INITIAL OFFERING OF SHARES
PIMS will solicit subscriptions for Class A, Class B, Class C and Class Z
shares of the Fund during a subscription period beginning April 12, 2000 and
expected to end May 26, 2000. Fund shares subscribed for during this time will
be issued at a net asset value of $10.00 per share on a closing date expected
to occur on June 1, 2000. An initial sales charge of 5% (5.26% of the net
amount invested) is imposed on each transaction in Class A shares. The initial
sales charge may be reduced depending on the amount of the purchase as shown in
the table under "Reducing or Waiving Class A's Initial Sales Charge." An
initial sales charge of 1% (1.01% of the net amount invested) is imposed on
each transaction in Class C shares. Your broker will notify you of the end of
the subscription period. Payment for Fund shares will be due within three days.
If you send an order during the subscription period along with payment, your
money will be returned unless you allow the money to be invested in Prudential
MoneyMart Assets, Inc. (MoneyMart Fund), a money market fund. If this is your
first investment in MoneyMart Fund, all amounts received and invested in
MoneyMart Fund, including any dividends received on these funds, will be
automatically invested in this Fund on the closing date. You will not receive
share certificates. If you previously owned shares of MoneyMart Fund, dividends
accrued on your shares will not be exchanged for Fund shares. The minimum
initial investment is $1,000 for Class A and Class B shares and $2,500 for
Class C shares. There are no minimum investment requirements for Class Z
shares.
If you subscribe for shares, you will not have any rights as a shareholder
of the Fund until your shares are paid for and their issuance has been
reflected in the Fund's books. We reserve the right to withdraw, modify or
terminate the initial offering without notice and to refuse any order in whole
or in part.
The Fund will be closed for purchases after May 26, 2000 to June 9, 2000, while the investment advisers invest the proceeds of the offering in accordance with the Fund's investment objective and policies (the closing period). Beginning on or about June 12, 2000, the Fund will commence a continuous offering of its shares. During the closing period, shareholders may redeem existing positions, but the Fund will be closed to new purchases.
HOW TO BUY SHARES
Step 1: Open an Account
If you don't have an account with a securities firm that is permitted to buy or
sell shares of the Fund for you, call the Fund's Transfer Agent, Prudential
Mutual Fund Services LLC (PMFS), at (800) 225-1852, or contact:
Prudential Mutual Fund Services LLC
Attn: Investment Services
P.O. Box 15020
New Brunswick, NJ 08906-5020
To purchase by wire, call the number above to obtain an application. After PMFS receives your completed application, you will receive an account number. We have the right to reject any purchase order (including an exchange into the Fund) or suspend or modify the Fund's sale of its shares.
Step 2: Choose a Share Class
Individual investors can choose among Class A, Class B, Class C and Class Z
shares of the Fund, although Class Z shares are available only to a limited
group of investors.
Multiple share classes let you choose a cost structure that better meets
your needs. With Class A shares, you pay the sales charge at the time of
purchase, but the operating expenses each year are lower than the expenses of
Class B and Class C shares. With Class B shares, you only pay a sales charge if
you sell your shares within six years (that is why it is called a Contingent
Deferred Sales Charge or CDSC), but the operating expenses each year are higher
than Class A share expenses. With Class C shares, you pay a 1% front-end sales
charge and a 1% CDSC if you sell within 18 months of purchase, but the
operating expenses are also higher than the expenses for Class A shares.
When choosing a share class, you should consider the following:
. The amount of your investment
. The length of time you expect to hold the shares and the impact of
varying distribution fees
. The different sales charges that apply to each share class--Class A's
front-end sales charge vs. Class B's CDSC vs. Class C's low front-end
sales charge and low CDSC
Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
. Whether you qualify for any reduction or waiver of sales charges
. The fact that Class B shares automatically convert to Class A shares
approximately seven years after purchase
. Whether you qualify to purchase Class Z shares.
See "How to Sell Your Shares" for a description of the impact of CDSCs.
Share Class Comparison. Use this chart to help you compare the Fund's different share classes. The discussion following this chart will tell you whether you are entitled to a reduction or waiver of any sales charges.
CLASS A CLASS B CLASS C CLASS Z
Minimum purchase $1,000 $1,000 $2,500 None
amount/1/
Minimum amount for $100 $100 $100 None
subsequent purchases/1/
Maximum initial 5% of the public None 1% of the public None
sales charge offering price offering price
Contingent Deferred None If sold during: 1% on sales None
Sales Charge Year 1 5% made within
(CDSC)/2/ Year 2 4% 18 months of
Year 3 3% purchase/2/
Year 4 2%
Years 5/6 1%
Year 7 0%
Annual distribution .30 of 1%; 1% 1% None
(12b-1) and service fees (.25 of 1%
shown as a percentage of currently)
average net assets/3/
|
1 The minimum investment requirements do not apply to certain retirement and employee savings plans and custodial accounts for minors. The minimum initial and subsequent investment for purchases made through the Automatic Investment Plan is $50. For more information, see "Additional Shareholder Services-- Automatic Investment Plan."
2 For more information about the CDSC and how it is calculated, see "How to Sell Your Shares--Contingent Deferred Sales Charge (CDSC)."
3 These distribution fees are paid from the Fund's assets on a continuous basis. Over time, the fees will increase the cost of your investment and may cost you more than paying other types of sales charges. The service fee for Class A, Class B and Class C shares is .25 of 1%. The distribution fee for Class A shares is limited to .30 of 1% (including the .25 of 1% service fee). Class B and Class C shares pay a distribution fee (in addition to the service fee) of .75 of 1%. For the fiscal year ending 2-28-01, the Distributor of the Fund has contractually agreed to reduce its distribution and service (12b-1) fees for Class A shares to .25 of 1% of the average daily net assets of the Class A shares.
Reducing or Waiving Class A's Initial Sales Charge The following describes the different ways investors can reduce or avoid paying Class A's initial sales charge.
Increase the Amount of Your Investment. You can reduce Class A's sales charge by increasing the amount of your investment. This table shows how the sales charge decreases as the amount of your investment increases.
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED REALLOWANCE
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 million and above/1/ None None None
|
1 If you invest $1 million or more, you can buy only Class A shares, unless you qualify to buy Class Z shares.
To satisfy the purchase amounts above, you can:
. Invest with an eligible group of related investors
. Sign a Letter of Intent, stating in writing that you or an eligible group
of related investors will purchase a certain amount of shares in the Fund
and other Prudential mutual funds within 13 months.
The Distributor may reallow Class A's sales charge to dealers.
Benefit Plans. Benefit Plans can avoid Class A's initial sales charge if the Benefit Plan has existing assets of at least $1 million or 250 eligible employees or participants. For these purposes, a Benefit Plan is a pension, profit-sharing or other employee benefit plan qualified under Section 401 of the Internal Revenue Code, a deferred compensation or annuity plan under Sections 403(b) and 457 of the Internal Revenue Code, a rabbi trust, or a nonqualified deferred compensation plan.
[GRAPHIC]
Strategic Partners Focused Growth Fund (800) 225-1852
Mutual Fund Programs. Waivers are also available to investors in certain programs sponsored by brokers, investment advisers and financial planners who have agreements with the Fund's Distributor relating to:
. Mutual fund "wrap" or asset allocation programs where the sponsor places Fund trades and charges its clients a management, consulting or other fee for its services
. Mutual fund "supermarket" programs where the sponsor links its clients' accounts to a master account in the sponsor's name and the sponsor charges a fee for its services.
Broker-dealers, investment advisers or financial planners sponsoring these mutual fund programs may offer their clients more than one class of shares in the Fund in connection with different pricing options for their programs. Investors should consider carefully any separate transaction and other fees charged by these programs in connection with investing in each available share class before selecting a share class.
Other Types of Investors. Other investors pay no sales charge, including certain officers, employees or agents of the Manager and its affiliates, the investment advisers of the Fund and registered representatives and employees of brokers that have entered into a dealer agreement with the Distributor. To qualify for a reduction or waiver of the sales charge, you must notify the Transfer Agent or your broker at the time of purchase. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Reduction and Waiver of Initial Sales Charge--Class A Shares."
Waiving Class C's Initial Sales Charge
Benefit Plans. Benefit Plans (as defined above) may purchase Class C shares
without paying an initial sales charge.
Investment of Redemption Proceeds from Other Investment Companies. The initial sales charge will be waived for purchases of Class C shares if the purchase is made with money from the redemption of shares of any unaffiliated investment company. These purchases must be made within 60 days of the redemption. This waiver is not available to investors who purchase shares directly from the Transfer Agent. If you are entitled to the waiver, you must notify either the Transfer Agent or your broker. The Transfer Agent may require any supporting documents it considers appropriate.
Qualifying for Class Z Shares
Class Z shares of the Fund can be purchased by any of the following:
. Any Benefit Plan, as defined above, and certain nonqualified plans, provided the Benefit Plan--in combination with other plans sponsored by the same employer or group of related employers--has at least $50 million in defined contribution assets
. Current and former Trustees of the Company
. The Manager or an investment adviser or one of their respective affiliates, with an investment of $10 million or more.
In connection with the sale of shares, the Manager, the Distributor or one of their affiliates may pay brokers, financial advisers and other persons a commission of up to 4% of the purchase price for Class B shares, up to 2% of the purchase price for Class C shares and a finder's fee for Class A or Class Z shares from their own resources based on a percentage of the net asset value of shares sold or otherwise.
Class B Shares Convert to Class A Shares After Approximately Seven Years If you buy Class B shares and hold them for approximately seven years, we will automatically convert them into Class A shares without charge. At that time, we will also convert any Class B shares that you purchased with reinvested dividends and other distributions. Since the 12b-1 fees for Class A shares are lower than for Class B shares, converting to Class A shares lowers your Fund expenses.
When we do the conversion, you will get fewer Class A shares than the number of converted Class B shares if the price of the Class A shares is higher than the price of Class B shares. The total dollar value will be the same, so you will not have lost any money by getting fewer Class A shares. We do the conversions quarterly, not on the anniversary date of your purchase. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares-- Conversion Feature--Class B Shares."
Step 3: Understanding the Price You'll Pay The price you pay for each share of the Fund is based on the share value. The share value of a mutual fund--known as the net asset value or NAV--is determined by a simple calculation: it's the total value of the Fund (assets minus liabilities) divided by the total number of shares outstanding. For example, if the value of the investments held by Fund XYZ (minus its
24 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
How to Buy, Sell and -------------------------------------------------------------------------------- Exchange Shares of the Fund -------------------------------------------------------------------------------- |
We determine the NAV of our shares once each business day at 4:15 p.m. New York time on days that the New York Stock Exchange (NYSE) is open for trading. The NYSE is closed on most national holidays and Good Friday. Because the Fund may invest in foreign securities, its NAV may change on days when you cannot buy or sell shares. We do not determine the NAV on days when we have not received any orders to purchase, sell or exchange Fund shares, or when changes in the value of the Fund's portfolio do not materially affect the NAV.
What Price Will You Pay for Shares of the Fund? For Class A and Class C shares, you'll pay the public offering price, which is the NAV next determined after we receive your order to purchase, plus an initial sales charge (unless you're entitled to a waiver). For Class B and Class Z shares, you will pay the NAV next determined after we receive your order to purchase (remember, there are no up-front sales charges for these share classes). Your broker may charge you a separate or additional fee for purchases of shares.
Step 4: Additional Shareholder Services
As a Fund shareholder, you can take advantage of the following services and
privileges:
Automatic Reinvestment. As we explained in the "Fund Distributions and Tax Issues" section, the Fund pays out--or distributes--its net investment income and capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV without any sales charge. If you want your distributions paid in cash, you can indicate this preference on your application, notify your broker or notify the Transfer Agent in writing (at the address below) at least five business days before the date we determine who receives dividends.
Prudential Mutual Fund Services LLC
Attn: Account Maintenance
P.O. Box 15015
New Brunswick, NJ 08906-5015
Automatic Investment Plan. You can make regular purchases of the Fund for as little as $50 by having the funds automatically withdrawn from your bank or brokerage account at specified intervals.
Systematic Withdrawal Plan. A systematic withdrawal plan is available that will provide you with monthly, quarterly, semi-annual or annual redemption checks. Remember, the sale of Class B and Class C shares may be subject to a CDSC.
Reports to Shareholders. Every year we will send you an annual report (along with an updated prospectus) and a semi-annual report, which contain important financial information about the Fund. To reduce Fund expenses, we will send one annual shareholder report, one semi-annual shareholder report and one annual prospectus per household, unless you instruct us or your broker otherwise.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.
When you sell shares of the Fund--also known as redeeming your shares--the
price you will receive will be the NAV next determined after the Transfer
Agent, the Distributor or your broker receives your order to sell. If your
broker holds your shares, your broker must receive your order to sell by 4:15
p.m. New York time to process the sale on that day. Otherwise contact:
Prudential Mutual Fund Services LLC
Attn: Redemption Services
P.O. Box 15010
New Brunswick, NJ 08906-5010
26 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
How to Buy, Sell and -------------------------------------------------------------------------------- Exchange Shares of the Fund -------------------------------------------------------------------------------- |
Generally, we will pay you for the shares that you sell within seven days after the Transfer Agent, the Distributor or your broker receives your sell order. If you hold shares through a broker, payment will be credited to your account. If you are selling shares you recently purchased with a check, we may delay sending you the proceeds until your check clears, which can take up to 10 days from the purchase date. You can avoid delay if you purchase shares by wire, certified check or cashier's check. Your broker may charge you a separate or additional fee for sales of shares.
Restrictions on Sales
There are certain times when you may not be able to sell shares of the Fund, or when we may delay paying you the proceeds from a sale. As permitted by the Commission, this may happen only during unusual market conditions or emergencies when the Fund can't determine the value of its assets or sell its holdings. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Sale of Shares."
If you are selling more than $100,000 of shares, you want the check sent to someone or some place that is not in our records or you are a business or a trust and if you hold your shares directly with the Transfer Agent, you will need to have the signature on your sell order "signature guaranteed" by an "eligible guarantor institution." An "eligible guarantor institution" includes any bank, broker-dealer or credit union. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Sale of Shares--Signature Guarantee."
Contingent Deferred Sales Charge (CDSC)
If you sell Class B shares within six years of purchase or Class C shares
within 18 months of purchase, you will have to pay a CDSC. To keep the CDSC as
low as possible, we will sell amounts representing shares in the following
order:
. Amounts representing shares you purchased with reinvested dividends and distributions
. Amounts representing the increase in NAV above the total amount of
payments for shares made during the past six years for Class B shares and
18 months for Class C shares
. Amounts representing the cost of shares held beyond the CDSC period (six
years for Class B shares and 18 months for Class C shares).
Since shares that fall into any of the categories listed above are not
subject to the CDSC, selling them first helps you to avoid--or at least
minimize--the CDSC.
Having sold the exempt shares first, if there are any remaining shares that
are subject to the CDSC, we will apply the CDSC to amounts representing the
cost of shares held for the longest period of time within the applicable CDSC
period.
As we noted before in the "Share Class Comparison" chart, the CDSC for Class
B shares is 5% in the first year, 4% in the second, 3% in the third, 2% in the
fourth and 1% in the fifth and sixth years. The rate decreases on the first day
of the month following the anniversary date of your purchase, not on the
anniversary date itself. The CDSC is 1% for Class C shares--which is applied to
shares sold within 18 months of purchase. For both Class B and Class C shares,
the CDSC is calculated based on the lesser of the original purchase price or
the redemption proceeds. For purposes of determining how long you've held your
shares, all purchases during the month are grouped together and considered to
have been made on the last day of the month.
The holding period for purposes of determining the applicable CDSC will be
calculated from the first day of the month after initial purchase, excluding
any time shares were held in a money market fund.
Waiver of the CDSC--Class B Shares
The CDSC will be waived if the Class B shares are sold:
. After a shareholder is deceased or disabled (or, in the case of a trust
account, the death or disability of the grantor). This waiver applies to
individual shareholders, as well as shares owned in joint tenancy,
provided the shares were purchased before the death or disability
. To provide for certain distributions--made without IRS penalty--from a
tax-deferred retirement plan, IRA or Section 403(b) custodial account
. On certain sales from a Systematic Withdrawal Plan.
For more information on the above and other waivers, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Waiver of Contingent Deferred Sales Charge--Class B Shares."
28 Strategic Partners Focused Growth Fund [GRAPHIC] (800) 225-1852
How to Buy, Sell and -------------------------------------------------------------------------------- Exchange Shares of the Fund -------------------------------------------------------------------------------- |
Waiver of the CDSC--Class C Shares
Benefit Plans. The CDSC will be waived on redemptions from Benefit Plans
holding shares through a broker for which the broker provides administrative or
recordkeeping services.
Redemption in Kind
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.
Small Accounts
If you make a sale that reduces your account value to less than $1000, we may sell the rest of your shares (without charging any CDSC) and close your account. We would do this to minimize the Fund's expenses paid by other shareholders. We will give you 60 days' notice, during which time you can purchase additional shares to avoid this action. This involuntary sale does not apply to shareholders who own their shares as part of a 401(k) plan, an IRA or some other qualified tax-deferred plan or account.
90-Day Repurchase Privilege
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the Fund without paying an
initial sales charge. Also, if you paid a CDSC when you redeemed your shares,
we will credit your new account with the appropriate number of shares to
reflect the amount of the CDSC you paid. In order to take advantage of this
one-time privilege, you must notify the Transfer Agent or your broker at the
time of the repurchase. See the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Sale of Shares."
Retirement Plans
To sell shares and receive a distribution from a retirement account, call your
broker or the Transfer Agent for a distribution request form. There are special
distribution and income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for
you by your employer or plan trustee, you must arrange for the distribution request to be signed and sent by the plan administrator or trustee. For additional information, see the SAI.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares of the Fund for shares of the same class in any other series of Strategic Partners Series, as well as shares of certain money market funds, if you satisfy the minimum investment requirements. For example, you can exchange Class A shares of the Fund for Class A shares of another series of Strategic Partners Series, but you can't exchange Class A shares for Class B, Class C or Class Z shares. Class A and Class Z shares of the Fund also may be exchanged into Class A shares of Prudential MoneyMart Assets, Inc. and Class B and Class C shares of the Fund also may be exchanged into shares of Prudential Special Money Market Fund, Inc. After an exchange, at redemption, the CDSC will be calculated from the first day of the month after initial purchase, excluding any time shares were held in a money market fund. We may change the terms of the exchange privilege after giving you 60 days' notice. As of the date of this Prospectus, there are no other series of Strategic Partner Series. Therefore, you can currently exchange only into a money market fund, as described above.
If you hold shares through a broker, you must exchange shares through your broker. Otherwise contact:
Prudential Mutual Fund Services LLC
Attn: Exchange Processing
P.O. Box 15010
New Brunswick, NJ 08906-5010
There is no sales charge for exchanges. However, if you exchange--and then sell--Class B shares within approximately six years of your original purchase or Class C shares within 18 months of your original purchase, you must still pay the applicable CDSC. If you have exchanged Class B or Class C shares into a money market fund, the time you hold the shares in the money market fund will not be counted in calculating the required holding periods for CDSC liability.
Remember, as we explained in the section entitled "Fund Distributions and Tax Issues--If You Sell or Exchange Your Shares," exchanging shares is considered a sale for tax purposes. Therefore, if the shares you exchange
[GRAPHIC]
Strategic Partners Focused Growth Fund (800) 225-1852
are worth more than you paid for them, you may have to pay capital gains tax. For additional information about exchanging shares, see the SAI, "Shareholder Investment Account--Exchange Privilege."
Frequent Trading
Frequent trading of Fund shares in response to short-term fluctuations in the market--also known as "market timing"--may make it very difficult to manage the Fund's investments. When market timing occurs, the Fund may have to sell portfolio securities to have the cash necessary to redeem the market timer's shares. This can happen at a time when it is not advantageous to sell any securities, so the Fund's performance may be hurt. When large dollar amounts are involved, market timing can also make it difficult to use long-term investment strategies because we cannot predict how much cash the Fund will have to invest. When, in our opinion, such activity would have a disruptive effect on portfolio management, the Fund reserves the right to refuse purchase orders and exchanges into the Fund by any person, group or commonly controlled account. The decision may be based upon dollar amount, volume and frequency of trading. The Fund may notify a market timer of rejection of an exchange or purchase order after the day the order is placed. If the Fund allows a market timer to trade Fund shares, it may require the market timer to enter into a written agreement to follow certain procedures and limitations.
TELEPHONE REDEMPTIONS OR EXCHANGES
You may redeem your shares in any amount by calling the Fund at (800) 225-1852.
In order to redeem your shares by telephone, you must call the Fund before 4:15
p.m. New York time to receive a redemption amount based on that day's NAV.
The Fund's Transfer Agent will record your telephone instructions and
request specific account information before redeeming shares. The Fund will not
be liable if it follows instructions that it reasonably believes are made by
the shareholder. If the Fund does not follow reasonable procedures, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, you may have difficulty
in redeeming your shares by telephone. If this occurs, you should consider
redeeming your shares by mail or through your broker.
The telephone redemption procedure may be modified or terminated at any
time. If this occurs, you will receive a written notice from the Fund.
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Please read this prospectus before you invest in the Fund and keep it for future reference. For information or shareholder questions contact:
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906-5005
(800) 225-1852
(732) 482-7555 (Calling from outside the U.S.)
Additional information about the Fund can be obtained without charge and can be found in the following documents
Statement of Additional Information (SAI) (incorporated by reference into this prospectus)
Annual Report
(contains a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance)
Semiannual Report
[LOGO]
MFSP500A SPFGPRO
You can also obtain copies of Fund documents from the Securities and Exchange Commission as follows
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
publicinfo@sec.gov
(The SEC charges a fee to copy documents.)
IN PERSON
Public Reference Room in Washington, DC (For hours of operation, call
1-202-942-8090)
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
CUSIP Numbers
Class A Shares--86276R 10 6
Class B Shares--86276R 20 5
Class C Shares--86276R 30 4
Class Z Shares--86276R 40 3
Investment Company Act File No. 811-09805
[GRAPHIC] Printed on Recycled Paper
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Statement of Additional Information
dated , 2000
Strategic Partners Focused Growth Fund (the Fund) is a non-diversified series of Strategic Partners Series, an open-end, management investment company (the Company). The investment objective of the Fund is long-term growth of capital. It seeks to achieve this objective by investing primarily in approximately 40 equity-related securities of U.S. companies that are selected by the Fund's two investment advisers (approximately 20 by each) as having strong growth potential. There can be no assurance that the Fund's investment objective will be achieved. See "Description of the Fund, Its Investments and Risks."
The Company's address is Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, 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 Prospectus of the Fund dated , 2000, a copy of which may be obtained from the Company upon request.
TABLE OF CONTENTS
Page
----
Fund History............................................................... B-2
Description of the Fund, Its Investments and Risks......................... B-2
Investment Restrictions.................................................... B-14
Management of the Company.................................................. B-15
Control Persons and Principal Holders of Securities........................ B-17
Investment Advisory and Other Services..................................... B-17
Brokerage Allocation and Other Practices................................... B-21
Capital Shares, Other Securities and Organization.......................... B-22
Purchase, Redemption and Pricing of Fund Shares............................ B-23
Shareholder Investment Account............................................. B-31
Net Asset Value............................................................ B-33
Taxes, Dividends and Distributions......................................... B-34
Performance Information.................................................... B-37
Financial Statements....................................................... B-
Report of Independent Accountants.......................................... B-
Appendix I--General Investment Information................................. I-1
Appendix II................................................................
|
MFSP500B SPFGSAI
FUND HISTORY
Strategic Partners Focused Growth Fund (the Fund) is a series of Strategic Partners Series (the Company), which was established as a Delaware business trust on January 28, 2000.
DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS
(a) Classification. The Company is an open-end, management investment company. The Fund is a non-diversified series of the Company.
(b) and (c) Investment Strategies, Policies and Risks. The Fund's investment objective is long-term growth of capital. Under normal market conditions, the Fund intends to invest primarily (at least 65% of its total assets) in approximately 40 equity-related securities of U.S. companies that are selected by the Fund's two investment advisers (approximately 20 by each) as having strong growth potential. While all of the principal investment policies and strategies for seeking to achieve this objective are described in the Fund's Prospectus, the Fund may from time to time use the securities, instruments, principal and non-principal policies and strategies that are further described below in seeking to achieve its objective. The Fund may not be successful in achieving its objective and you can lose money.
Equity-Related Securities
Equity-related securities include common stocks as well as preferred stocks; securities convertible into or exchangeable for common or preferred stocks; equity investments in partnerships, joint ventures and other forms of non- corporate investment; real estate investment trusts (REITs); American Depositary Receipts (ADRs); American Depositary Shares (ADSs); and warrants and rights exercisable for equity securities. Purchased options are not considered equity securities for the Fund's purposes. The Fund will not invest more than 5% of its total assets in unattached rights and warrants.
American Depositary Receipts (ADRs) and American Depositary Shares (ADSs). ADRs and ADSs are U.S. dollar-denominated certificates or shares issued by a United States bank or trust company and represent the right to receive securities of a foreign issuer deposited in a domestic bank or foreign branch of a United States bank and traded on a United States exchange or in the over- the-counter market. Generally, ADRs and ADSs are in registered form. There are no fees imposed on the purchase or sale of ADRs and ADSs when purchased from the issuing bank or trust company in the initial underwriting, although the issuing bank or trust company may impose charges for the collection of dividends and the conversion of ADRs and ADSs into the underlying securities. Investment in ADRs and ADSs has certain advantages over direct investment in the underlying foreign securities since: (1) ADRs and ADSs are denominated in U.S. dollars, registered domestically, easily transferable, and market quotations are readily available for them; and (2) issuers whose securities are represented by ADRs and ADSs are usually subject to auditing, accounting, and financial reporting standards comparable to those of domestic issuers.
Warrants and Rights. 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 price set in the warrant, the Fund can acquire the stock at a price below its market value. Rights are similar to warrants but normally have a shorter duration and are distributed directly by the issuer to shareholders. Rights and warrants have no voting rights, receive no dividends and have no rights with respect to the corporation issuing them.
Real Estate Investment Trusts. The Fund may invest in securities of real estate investment trusts or REITs. Unlike corporations, REITs do not have to pay income taxes if they meet certain requirements of the Internal Revenue Code of 1986, as amended (Internal Revenue Code). To qualify, a REIT must distribute at least 95% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property. REITs offer investors greater liquidity and diversification than direct ownership of a handful of properties, as well as greater income potential than an investment in common stock. Like any investment in real estate, though, a REIT's performance depends on several factors, such as its ability to find tenants for its properties, to renew leases and to finance property purchases and renovations.
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 Bank, the Federal Home Loan Mortgage Corporation (FHLMC), 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.
Obligations issued or guaranteed as to principal and interest by the U.S. 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 U.S. 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.
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 Investments
The Fund is permitted to invest up to 20% of its total assets in securities of foreign issuers, including money market instruments and debt and equity securities. ADRs and ADSs are not considered foreign securities within this limitation.
Investing in securities of foreign issuers and countries involves certain considerations and risks which are not typically associated with investing in securities of domestic companies. Foreign issuers are not generally subject to uniform accounting, auditing and financial standards or other requirements comparable to those applicable to U.S. companies. There may also be less government supervision and regulation of foreign securities exchanges, brokers and public companies than exist in the United States. Dividends and interest paid by foreign issuers may be subject to withholding and other foreign taxes which may decrease the net return on such investments as compared to dividends and interest paid to the Fund by domestic companies. There may be the possibility of expropriations, confiscatory taxation, political, economic or social instability or diplomatic developments which could affect assets of the Fund held in foreign countries.
There may be less publicly available information about foreign issuers and governments compared to reports and ratings published about U.S. companies. Foreign securities markets have substantially less volume than, for example, the New York Stock Exchange and securities of some foreign issuers are less liquid and more volatile than securities of comparable U.S. companies. Brokerage commissions and other transaction costs of foreign securities exchanges are generally higher than in the United States.
In addition, 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 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 foreign currency forward 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 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.
Under the Internal Revenue Code, changes in an exchange rate 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 will result in foreign currency gains or losses that increase or decrease an investment company's taxable income. The exchange rates between the U.S. dollar and other currencies can be volatile and are determined by such factors as supply and demand in the currency exchange markets, international balances of payments, government intervention, speculation and other economic and political conditions.
Foreign securities include securities of any foreign country an investment adviser considers appropriate for investment by the Fund. Foreign securities may also include securities of foreign issuers that are traded in U.S. dollars in the United States although the underlying security is usually denominated in a foreign currency.
The costs attributable to foreign investing are higher than the costs of domestic investing. For example, the cost of maintaining custody of foreign securities generally exceeds custodian costs for domestic securities, and transaction and settlement costs of foreign investing are frequently higher than those attributable to domestic investing. Foreign investment income may be subject to foreign withholding or other government taxes that could reduce the return to the Fund on those securities. Tax treaties between the United States and certain foreign countries may, however, reduce or eliminate the amount of foreign tax to which the Fund would be subject.
Risk Factors and Special Considerations of Investing in Euro-Denominated Securities
On January 1, 1999, 11 of the 15 member states of the European Monetary Union introduced the "euro" as a common currency. During a three-year transitional period, the euro will coexist with each member state's national currency. By July 1, 2002, the euro is expected to become the sole legal tender of the member states. During the transition period, the Fund will treat the euro as a separate currency from the national currency of any member state.
The adoption by the member states of the euro will eliminate the substantial currency risk among member states and will likely affect the investment process and considerations of the Fund's investment advisers. To the extent the Fund holds non-U.S. dollar-denominated securities, including those denominated in the euro, the Fund will still be subject to currency risk due to fluctuations in those currencies as compared to the U.S. dollar.
The medium- to long-term impact of the introduction of the euro in member states cannot be determined with certainty at this time. In addition to the effects described above, it is likely that more general long-term ramifications can be expected, such as changes in economic environment and changes in behavior of investors, all of which will impact the Fund's investments.
Risk Management and Return Enhancement Strategies
The Fund also may engage in various portfolio strategies, including using derivatives, to seek to reduce certain risks of its investments and to attempt to enhance return. These strategies currently include the use of options on stock indexes and futures contracts and options on indexes. The Fund also may purchase futures contracts on foreign currencies and on debt securities and aggregates of debt securities. The Fund's ability to use these strategies may be limited by various factors, such as market conditions, regulatory limits and tax considerations and there can be no assurance that any of these strategies will succeed. The Fund, and thus its investors, may lose money through any unsuccessful use of these strategies. If new financial products and risk management techniques are developed, the Fund may use them to the extent consistent with its investment objective and policies.
Options on Securities Indexes. The Fund may purchase and write (that is, sell) put and call options on securities indexes that are traded on U.S. or foreign securities exchanges or in the over-the-counter market to try to enhance return or to hedge the Fund's portfolio. 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 a security that it owns against a decline in market value and purchase call options in an effort to protect against an increase in the price of securities it intends to purchase. The Fund also may purchase put and call options to offset previously written put and call options of the same series.
A call option gives the purchaser, in exchange for a premium paid, the right, for a specified period of time, to purchase the position 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 a specified amount of cash 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 position 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 position 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 position at the exercise price. The Fund might, therefore, be obligated to purchase the underlying position for more than its current market price.
The Fund will write only "covered" options. A written option is covered if, as long as the Fund is obligated under the option, it (1) owns an offsetting position in the underlying securities that comprise the index or (2) segregates cash or other liquid assets in an amount equal to or greater than its obligation under the option. Under the first circumstance, the Fund's losses are limited because it owns the underlying position; under the second circumstance, in the case of a written call option, the Fund's losses are potentially unlimited. There is no limitation on the amount of call options the Fund may write.
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 indexes 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 securities 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 indexes would be subject to an 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 advisers currently use 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: (1) there may be insufficient trading interest in certain options; (2) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (3) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (6) 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 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 Indexes. The Fund's purchase and sale of options on indexes will be subject to risks described above under "Risks of Transactions in Options." In addition, the distinctive characteristics of options on indexes 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 indexes 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 an 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 Indexes. 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 indexes only under the circumstances described below under "Limitations on the Purchase and Sale of Options on Stock Indexes and Futures Contracts and Options on Futures Contracts."
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 (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 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.
Futures Contracts. As a purchaser of a futures contract, the Fund incurs an obligation to take delivery of a specified amount of the obligation underlying the futures contract at a specified time in the future for a specified price. As a seller of a futures contract, the Fund incurs an obligation to deliver the specified amount of the underlying obligation at a specified time in return for
an agreed upon price. The Fund may purchase futures contracts on stock indexes and foreign currencies. The Fund may purchase futures contracts on debt securities, including U.S. government securities, aggregates of debt securities, stock indexes and foreign currencies.
A "sale" of a futures contract (or a "short" futures position) means the assumption of a contractual obligation to deliver the securities or currency underlying the contract at a specified price at a specified future time. A "purchase" of a futures contract (or a "long" futures position) means the assumption of a contractual obligation to acquire the securities or currency underlying the contract at a specified price at a specified future time. Certain futures contracts are settled on a net cash payment basis rather than by the sale and delivery of the securities or currency underlying the futures contract. U.S. futures contracts have been designed by exchanges that have been designated as "contract markets" by the Commodity Futures Trading Commission (the CFTC), an agency of the U.S. government, and must be executed through a futures commission merchant (that is, a brokerage firm) which is a member of the relevant contract market. Futures contracts trade on these contract markets and the exchange's affiliated clearing organization guarantees performance of the contracts as between the clearing members of the exchange.
At the time a futures contract is purchased or sold, the Fund must allocate cash or securities as a deposit payment (initial margin). It is expected that the initial margin on U.S. exchanges will vary from one-half of 1% to 4% of the face value of the contract. Under certain circumstances, however, such as during periods of high volatility, the Fund may be required by an exchange to increase the level of its initial margin payment. Thereafter, the futures contract is valued daily and the payment in cash of "variation margin" may be required, a process known as "mark-to-the-market." Each day the Fund is required to provide or is entitled to receive variation margin in an amount equal to any change in the value of the contract since the preceding day.
Although most futures contracts call for actual delivery or acceptance of securities or cash, the contracts usually are closed out before the settlement date without the making or taking of delivery. A futures contract sale is closed out by effecting a futures contract purchase for the same aggregate amount of the specific type of security and the same delivery date. If the sale price exceeds the offsetting purchase price, the seller would be paid the difference and would realize a gain. If the offsetting purchase price exceeds the sale price, the seller would pay the difference and would realize a loss. Similarly, a futures contract purchase is closed out by effecting a futures contract sale for the same aggregate amount of the specific type of security (or currency) and the same delivery date. If the offsetting sale price exceeds the purchase price, the purchaser would realize a gain, whereas if the purchase price exceeds the offsetting sale price, the purchaser would realize a loss. There is no assurance that the Fund will be able to enter into a closing transaction.
When the Fund enters into a futures contract it is initially required to segregate with its Custodian, in the name of the broker performing the transaction, an "initial margin" of cash or other liquid assets equal to approximately 2% to 3% of the contract amount. Initial margin requirements are established by the exchanges on which futures contracts trade and may, from time to time, change. In addition, brokers may establish margin deposit requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in securities transactions in that initial margin does not involve the borrowing of funds by a brokers' client but is, rather, a good faith deposit on a futures contract which will be returned to the Fund upon the proper termination of the futures contract. The margin deposits made are marked-to- market daily and the Fund may be required to segregate subsequent deposits at its Custodian for that purpose, of cash or other liquid assets, called "variation margin," in the name of the broker, which are reflective of price fluctuations in the futures contract.
A stock index futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying stocks in the index is made. When the futures contract is entered into, each party deposits an initial margin with a broker or in a segregated custodial account of approximately 5% of the contract amount. Subsequent variation market payments will be made on a daily basis as the price of the underlying stock index fluctuates, making the long and short positions in the futures contracts more or less valuable.
The ordinary spreads between values in the cash and futures markets, due to differences in the character of those markets, are subject to distortions. In addition, futures contracts entail risks. First, all participants in the futures market are subject to initial and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing price distortions. Third, from the point of view of speculators, the margin deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of distortion, a correct forecast of general interest rate trends by an investment adviser may still not result in a successful transaction.
Options on Futures Contracts. The Fund will also enter into options on futures contracts for certain bona fide hedging, return enhancement and risk management purposes. The Fund may purchase put and call options and write (that is, sell) "covered" put and call options on futures contracts that are traded on U.S. and foreign exchanges. 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). If the option is exercised by the holder before the last trading day during the option period, the option writer delivers the futures position, as well as any balance in the writer's futures margin account, which represents the amount by which the market price of the stock index 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 stock index future. If it is exercised on the last trading day, the option writer delivers to the option holder cash in an amount equal to the difference between the option exercise price and the closing level of the relevant index on the date the option expires.
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.
The Fund may only write (that is, sell) covered put and call options on futures contracts. The Fund will be considered "covered" with respect to a call option it writes on a futures contract if the Fund owns the securities or currency which is deliverable under the futures contract or an option to purchase that futures contract having a strike price equal to or less than the strike price of the "covered" option and having an expiration date not earlier than the expiration date of the "covered" option, or if it segregates and maintains with its Custodian for the term of the option cash or other liquid assets, equal to the fluctuating value of the optioned futures. The Fund will be considered "covered" with respect to a put option it writes on a futures contract if it owns an option to sell that futures contract having a strike price equal to or greater than the strike price of the "covered" option and having an expiration date not earlier than the expiration date of the "covered" option, or if it segregates with its Custodian for the term of the option cash or other liquid assets at all times equal in value to the exercise price of the put (less any initial margin deposited by the Fund with its Custodian with respect to such put option). There is no limitation on the amount of the Fund's assets which can be segregated.
Writing a put option on a futures contract serves as a partial hedge against an increase in the value of securities the Fund intends to acquire. If the futures price at expiration of the option is above the exercise price, the Fund will retain the full amount of the option premium which provides a partial hedge against any increase that may have occurred in the price of the securities the Fund intends to acquire. If the market price of the underlying futures contract is below the exercise price when the option is exercised, the Fund will incur a loss, which may be wholly or partially offset by the decrease in the value of the securities the Fund intends to acquire.
Writing a call option on a futures contract serves as a partial hedge against a decrease in the value of the Fund's portfolio securities. If the market price of the underlying futures contract at expiration of a written call option is below the exercise price, the Fund will retain the full amount of the option premium, thereby partially hedging against any decline that may have occurred in the Fund's holdings of securities. If the futures price when the option is exercised is above the exercise price, however, the Fund will incur a loss, which may be wholly or partially offset by the increase in the value of the securities in the Fund's portfolio which were being hedged.
The Fund will purchase put options on futures contracts to hedge its portfolio against the risk of a decline in the value of the securities it owns as a result of market activity or fluctuating currency exchange rates. The Fund will also purchase call options on futures contracts as a hedge against an increase in the value of securities the Fund intends to acquire as a result of market activity or fluctuating currency exchange rates.
Futures Contracts on Foreign Currencies and Options Thereon. The Fund may buy and sell futures contracts on foreign currencies and purchase and write options thereon. Generally, foreign currency futures contracts and options thereon are similar to the futures contracts and options thereon discussed previously. By entering into currency futures and options thereon on U.S. and foreign exchanges, the Fund will seek to establish the rate at which it will be entitled to exchange U.S. dollars for another currency at a future time. By selling currency futures, the Fund will seek to establish the number of dollars it will receive at delivery for a certain amount of a foreign currency. In this way, whenever the Fund anticipates a decline in the value of a foreign currency against
the U.S. dollar, the Fund can attempt to "lock in" the U.S. dollar value of some or all of the securities held in its portfolio that are denominated in that currency. By purchasing currency futures, the Fund can establish the number of dollars it will be required to pay for a specified amount of a foreign currency in a future month. Thus if the Fund intends to buy securities in the future and expects the U.S. dollar to decline against the relevant foreign currency during the period before the purchase is effected, the Fund can attempt to "lock in" the price in U.S. dollars of the securities it intends to acquire. At the time a futures contract is purchased or sold, the Fund must allocate cash or securities as initial margin. Thereafter, the futures contract is valued daily and the payment of "variation margin" may be required, resulting in the Fund's paying or receiving cash that reflects any decline or increase, respectively, in the contract's value, that is, "marked- to-market."
The purchase of options on currency futures will allow the Fund, for the price of the premium and related transaction costs it must pay for the option, to decide whether or not to buy (in the case of a call option) or to sell (in the case of a put option) a futures contract at a specified price at any time during the period before the option expires. If an investment adviser, in purchasing an option, has been correct in its judgment concerning the direction in which the market or the price of a foreign currency would move as against the U.S. dollar, the Fund may exercise the option and thereby take a futures position to hedge against the risk it had correctly anticipated or close out the option position at a gain that will offset, to some extent, market or currency exchange losses otherwise suffered by the Fund. If exchange rates move in a way the Fund did not anticipate, however, the Fund will have incurred the expense of the option without obtaining the expected benefit; any such movement in exchange rates may also thereby reduce rather than enhance the Fund's profits on its underlying securities transactions.
The Fund may also use European-style options. This means that the option is only exercisable immediately prior to its expiration. This is in contrast to American-style options, which are exercisable at any time prior to the expiration date of the option.
Additional Risks of Options, Futures Contracts and Options on Futures
Contracts. Futures contracts and options thereon on securities and currencies
may be traded on foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the U.S., may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities. The value
of such positions also could be adversely affected by (1) other complex
foreign political, legal and economic factors, (2) lesser availability than in
the U.S. of data on which to make trading decisions, (3) delays in the Fund's
ability to act upon economic events occurring in the foreign markets during
non-business hours in the U.S., (4) the imposition of different exercise and
settlement terms and procedures and margin requirements than in the U.S. and
(5) lesser trading volume.
Exchanges on which options, futures contracts and options on futures contracts are traded may impose limits on the positions that the Fund may take in certain circumstances.
Special Risk Considerations Relating to Futures Contracts and Options Thereon. 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. The use of these instruments will hedge only the currency risks associated with investments in foreign securities, not market risks. In the case of futures contracts on securities indexes, 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 an investment adviser may still not result in a successful hedging transaction.
The Fund's ability to establish and close out positions in futures contracts and options on futures contracts will be subject to the development and maintenance of liquid markets. Although the Fund generally will purchase or sell only those futures contracts and options thereon for which there appears to be a liquid market, there is no assurance that a liquid market on an exchange will exist for any particular futures contract or option thereon at any particular time. In the event no liquid market exists for a particular futures contract or option thereon in which the Fund maintains a position, it will not be possible to effect a closing transaction in that contract or to do so at a satisfactory price and the Fund would have to either make or take delivery under the futures contract or, in the case of a written option, wait to sell the underlying securities until the option expires or is exercised or, in the case of a purchased option, exercise the option. In the case of a futures contract or an option on a futures contract which the Fund has written and which the Fund is unable to close, the Fund would be required to maintain margin deposits on the futures contract or option and to make variation margin payments until the contract is closed.
Successful use of futures contracts and options thereon by the Fund is subject to the ability of an investment adviser to predict correctly movements in the direction of interest and foreign currency rates and the market generally. If the investment adviser's expectations are not met, the Fund would be in a worse position than if a hedging strategy had not been pursued. For example, if the Fund has hedged against the possibility of an increase in interest 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 have to sell securities to meet the requirements. These sales may, 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.
Limitations on the Purchase and Sale of Options on Stock Indexes and Futures Contracts and Options on Futures Contracts. The Fund will engage in transactions in futures contracts and options thereon only for bona fide hedging, return enhancement and risk management purposes, in each case in accordance with the rules and regulations of the CFTC, and not for speculation.
The Fund will write put options on stock indexes and futures contracts on foreign currencies only if they are covered by segregating with the Fund's Custodian an amount of cash or other liquid assets equal to the aggregate exercise price of the puts. In accordance with CFTC regulations, the Fund may not purchase or sell futures contracts or options thereon if the initial margin and premiums for options on futures would exceed 5% of the liquidation value of the Fund's total assets after taking into account unrealized profits and unrealized losses on such contracts; provided, however, that in the case of an option that is in-the-money at the time of the purchase, the in-the- money amount may be excluded in calculating the 5% limitation. The above restriction does not apply to the purchase and sale of futures contracts and options thereon for bona fide hedging purposes within the meaning of the CFTC regulations. In instances involving the purchase of futures contracts or call options thereon or the writing of put options thereon by the Fund, an amount of cash and other liquid assets equal to the market value of the futures contracts and options thereon (less any related margin deposits), will be segregated with the Fund's Custodian to cover the position, or alternative cover will be employed, thereby insuring that the use of such instruments is unleveraged. The Fund does not intend to purchase options on securities indexes 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 indexes 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 or other liquid assets substantially replicating the movement of the index, in the judgment of the Fund's investment adviser, 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 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 or pledged 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 or pledged falls below 100% of the current index value times the multiplier times the number of contracts, the Fund will so segregate or pledge an amount in cash or other liquid assets 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 or other liquid assets 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 segregated by the Fund in cash or other liquid assets 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.
The Fund's purchase and sale of futures contracts and purchase and writing of options on futures contracts will be for the purpose of protecting its portfolio against anticipated future changes in foreign currency exchange rates which might otherwise either adversely affect the value of the Fund's portfolio securities or adversely affect the prices of securities that the Fund intends to purchase at a later date, and to enhance the Fund's return. As an alternative to bona fide hedging as defined by the CFTC, the Fund may comply with a different standard established by CFTC rules with respect to futures contracts and options thereon purchased by the Fund incidental to the Fund's activities in the securities markets, under which the value of the assets underlying such positions will not exceed the sum of (1) cash or other liquid assets segregated for this purpose, (2) cash proceeds on existing investments due within thirty days and (3) accrued profits on the particular futures contract or option thereon.
In addition, CFTC regulations may impose limitations on the Fund's ability to engage in certain return enhancement and risk management strategies. There are no limitations on the Fund's use of futures contracts and options on futures contracts beyond the restrictions set forth above.
Although the Fund intends to purchase or sell futures and options on futures only on exchanges where there appears to be an active market, there is no guarantee that an active market will exist for any particular contract or at any particular time. If there is not a liquid market at a particular time, it may not be possible to close a futures position at such time, and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. However, when futures positions are used to hedge portfolio securities, such securities will not be sold until the futures positions can be liquidated. In such circumstances, an increase in the price of securities, if any, may partially or completely offset losses on the futures contracts.
Risks of Risk Management and Return Enhancement Strategies
Participation in the options or futures market 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. The Fund, and thus its investors, may lose money through any unsuccessful use of these strategies. If a Subadviser's predictions of movements in the direction of the securities or foreign currency 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 these strategies include: (1) dependence on a Subadviser's ability to predict correctly movements in the direction of 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 risk that the counterparty may be unable to complete the transaction; and (6) the possible inability of the Fund to purchase or sell a portfolio security at a time that 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 assets in connection with hedging transactions.
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 an investment adviser. An exchange, 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.
Repurchase Agreements
The Fund may 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 quite short, possibly overnight or a few days, although it may extend over a number of months. The resale price is in excess of the purchase price, reflecting an agreed-upon rate of return effective for the period of time the Fund's money is invested in the repurchase agreement. The Fund's repurchase agreements will at all times be fully collateralized in an amount at least equal to the resale price. The instruments held as collateral are valued daily, and if the value of the instruments declines, the Fund will require additional collateral. If the seller defaults and the value of the collateral securing the repurchase agreement declines, the Fund may incur a loss.
The Fund will enter into repurchase transactions only with parties meeting creditworthiness standards approved by the applicable investment adviser. In the event of a default or bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
[The Fund participates in a joint repurchase account with other investment companies managed by Prudential Investments Fund Management LLC (PIFM) pursuant to an order of the Securities and Exchange Commission (the Commission). 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 33 1/3% 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 other liquid assets or an irrevocable letter of credit in favor of the Fund equal to at least 100% of 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 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 portfolio securities will only be made to firms determined to be creditworthy pursuant to procedures approved by the Board of Trustees of the Company. 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.
Borrowing
The Fund may borrow up to 33 1/3% 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 its total assets to secure these borrowings. If the Fund's asset coverage for borrowings falls below 300%, the Fund will take prompt action (within 3 days) to reduce its borrowings. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, the Fund may be required to sell portfolio securities to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time. The Fund will not purchase portfolio securities when borrowings exceed 5% of the value of its total assets.
Illiquid Securities
The Fund may hold up to 15% of its net assets in illiquid securities. If the Fund were to exceed this limit, the investment advisers would take prompt action to reduce the Fund's holdings in illiquid securities to no more than 15% of its net assets as required by applicable law. Illiquid securities include repurchase agreements which have a maturity of longer than seven days, securities with legal or contractual restrictions on resale (restricted securities) and securities that are not readily marketable in markets within or outside of the United States. Repurchase agreements subject to demand are deemed to have a maturity equal to the applicable notice period.
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. (NASD).
Restricted securities eligible for resale pursuant to Rule 144A under the Securities Act and privately placed commercial paper for which there is a readily available market are treated as liquid only when deemed liquid under procedures established by the Trustees. The Fund's investment in Rule 144A securities could have the effect of increasing illiquidity to the extent that qualified institutional buyers become, for a limited time, uninterested in purchasing Rule 144A securities. The investment advisers will monitor the liquidity of such restricted securities subject to the supervision of the Board of Trustees. In reaching liquidity decisions, an investment adviser will consider, among others, 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 (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer). In addition, in order for commercial paper that is issued in reliance on Section 4(2) of the Securities Act to be considered liquid, (a) it must be rated in one of the two highest rating categories by at least two nationally recognized statistical rating organizations (NRSRO), or if only one NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable quality in the view of an investment adviser; and (b) it must not be "traded flat" (that is, without accrued interest) or in default as to principal or interest.
Securities of Other Investment Companies
The Fund is permitted to invest up to 10% of its total assets in securities of other non-affiliated investment companies. The Fund does not intend to invest in such securities during the coming year. If the Fund does invest in securities of other investment companies, shareholders of the Fund may be subject to duplicate management and advisory fees. See "Investment Restrictions."
Segregated Assets
The Fund segregates with its Custodian, State Street Bank and Trust Company, cash, U.S. government securities, equity securities (including foreign securities), debt securities or other liquid, unencumbered assets equal in value to its obligations in respect of potentially leveraged transactions. These include forward contracts, when-issued and delayed delivery securities, futures contracts, written options and options on futures contracts (unless otherwise covered). If collateralized or otherwise covered, in accordance with Commission guidelines, these will not be deemed to be senior securities. The assets segregated will be marked-to-market daily.
When-Issued and Delayed Delivery Securities
The Fund may purchase or sell securities on 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 as much as 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. The Fund's Custodian will segregate cash or other liquid assets having a value equal to or greater than the Fund's purchase commitments. The securities so purchased are subject to market fluctuation and no interest accrues to the
purchaser during the period between purchase and settlement. At the time of delivery of the securities the value may be more or less than the purchase price and an increase in the percentage of the Fund's assets committed to the purchase of securities on a when-issued or delayed delivery basis may increase the volatility of the Fund's net asset value.
(d) Temporary Defensive Strategy and Short-Term Investments
When adverse market or economic conditions dictate a defensive strategy, the Fund may temporarily invest without limit in high quality money market instruments, including commercial paper of corporations, foreign government securities, certificates of deposit, bankers' acceptances and other obligations of domestic and foreign banks, non-convertible debt securities (corporate and government), obligations issued or guaranteed by the U.S. government, its agencies or its instrumentalities, repurchase agreements and cash (foreign currencies or U.S. dollars). Money market instruments typically have a maturity of one year or less as measured from the date of purchase.
The Fund may also temporarily hold cash or 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 subject to the 65% policy.
(e) Portfolio Turnover
As a result of the investment policies described above, the Fund may engage in a substantial number of portfolio transactions. 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 (100% or more) 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 capital gains compared to investment companies with lower portfolio turnover. See "Brokerage Allocation and Other Practices" and "Taxes, Dividends and Distributions."
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 (1) 67% of the shares represented at a meeting at which more than 50% of the outstanding voting shares are present in person or represented by proxy or (2) more than 50% of the outstanding voting 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 up to 33 1/3% 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 Trustees pursuant to deferred compensation arrangements are not deemed to be a pledge of assets subject to this restriction.
4. Purchase any security (other than obligations of the U.S. government, its agencies or instrumentalities) if as a result 25% or more of the Fund's total assets (determined at the time of the investment) would be invested in a single industry.
5. 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.
6. Buy or sell commodities or commodity contracts, except that the Fund may purchase and sell financial futures contracts and options thereon, and forward foreign currency exchange contracts.
7. 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.
8. Make investments for the purpose of exercising control or management.
9. Invest 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.
10. Make loans, except through (a) repurchase agreements and (b) loans of portfolio securities limited to 33 1/3% of the Fund's total assets.
11. Purchase more than 10% of all outstanding voting securities of any one issuer.
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.
MANAGEMENT OF THE COMPANY
Position Principal Occupations
Name and Address** (Age) with Company During Past Five Years
------------------------ ------------ ----------------------
Eugene C. Dorsey (72) Trustee Retired President, Chief Executive Officer and Trustee
of the Gannett Foundation (now Freedom Forum); former
Publisher of four Gannett Newspapers and Vice
President of Gannett Co., Inc.; past Chairman,
Independent Sector, Washington, D.C. (largest national
coalition of philanthropic organizations); former
Chairman of the American Council for the Arts; former
Director of the Advisory Board of Chase Manhattan Bank
of Rochester.
*Robert F. Gunia (53) Trustee and Vice Executive Vice President and Chief Administrative
President Officer (since June 1999) of Prudential Investments;
Corporate Vice President (since September 1997) of The
Prudential Insurance Company of America (Prudential);
Executive Vice President and Treasurer (since December
1996) of Prudential Investments Fund Management LLC
(PIFM); President (since April 1999) of Prudential
Investment Management Services LLC (PIMS); formerly
Senior Vice President (March 1987-March 1999) of
Prudential Securities Incorporated (Prudential
Securities) and 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.
|
Position with Principal Occupations
Name and Address** (Age) the Company During Past Five Years
------------------------ ------------- ----------------------
Robert E. LaBlanc (65) Trustee President of Robert E. LaBlanc Associates, Inc.
(telecommunications) since 1981; formerly General
Partner at Salomon Brothers; formerly Vice Chairman of
Continental Telecom; Director of Salient 3
Communications, Storage Technology Corporation, Titan
Corporation, TIE/communications, Inc., The Tribune
Company, Chartered Semiconductor Manufacturing, Ltd.
and Manhattan College.
Douglas H. McCorkindale Trustee President (since September 1997) and Vice Chairman
(60) (since March 1984) of Gannett Co., Inc.; and Director
of Continental Airlines, Inc., Gannett Co., Inc. and
Global Crossing Ltd.
Thomas T. Mooney (58) Trustee President of the Greater Rochester Metro Chamber of
Commerce; former Deputy Monroe County Executive;
former Rochester City Manager; Trustee of Center for
Governmental Research, Inc.; Director of Blue Cross of
Rochester, Executive Service Corps of Rochester and
Monroe County Water Authority.
*David R. Odenath, Jr. Trustee and Vice Officer in Charge, President, Chief Executive Officer
(42) President and Chief Operating Officer (since June 1999), PIFM;
Senior Vice President (since June 1999), Prudential;
formerly Senior Vice President (August 1993-May 1999),
PaineWebber Group, Inc.
Stephen Stoneburn (56) Trustee President and Chief Executive Officer, Quadrant Media
Corp. (publishing) (since June 1996); formerly Senior
Vice President and Managing Director, Cowles Business
Media (January 1993-1995); prior thereto, Senior Vice
President (January 1991-1992) and Publishing Vice
President (May 1989-December 1990) of Gralla
Publications (a division of United Newspapers, U.K.);
formerly Senior Vice President of Fairchild
Publications, Inc.
*John R. Strangfeld, Jr. Trustee and Chief Executive Officer, Chairman, President and
(45) President Director of The Prudential Investment Corporation
(since January 1990); Executive Vice President of
Prudential Global Asset Management Group of Prudential
(since February 1998); Chairman of Pricoa Capital
Group (since August 1989); Chief Executive Officer of
Private Asset Management Group of Prudential (November
1994-December 1998).
Clay T. Whitehead (61) Trustee President of National Exchange Inc. (new business
development firm) (since May 1983).
David F. Connor (36) Secretary Assistant General Counsel (since March 1998) of PIFM;
Associate Attorney, Drinker Biddle & Reath LLP prior
thereto.
Grace C. Torres (40) Treasurer First Vice President (since December 1996) of PIFM;
and Principal First Vice President (since March 1994) of Prudential
Financial and Securities; formerly First Vice President (March 1994-
Accounting September 1996) of Prudential Mutual Fund Management,
Officer Inc.
Stephen M. Ungerman (46) Assistant Tax Director (since March 1996) of Prudential
Treasurer Investments and the Private Asset Group of The
Prudential Insurance Company of America (Prudential);
formerly First Vice President (February 1993-September
1996) of Prudential Mutual Fund Management, Inc.
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* "Interested" Trustee, as defined in the Investment Company Act, by reason of affiliation with the Manager, Sub-Manager, a Subadviser or the Distributor.
** The address of the Trustees and officers is c/o Prudential Investments Fund Management LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
The Company has Trustees who, in addition to overseeing the actions of the Fund's Manager, Sub-Manager, Subadvisers and Distributor, decide upon matters of general policy. The Trustees also review the actions of the Fund's officers who conduct and supervise the daily business operations of the Fund.
The Trustees have adopted a retirement policy which calls for the retirement of Trustees on December 31 of the year in which they reach the age of 75.
Pursuant to the terms of the Management Agreement with the Fund, the Manager pays all compensation of officers and employees of the Company as well as the fees and expenses of all Trustees of the Company who are affiliated persons of the Manager. The Company currently pays each of its Trustees who is not an affiliated person of PIFM or the investment advisers annual compensation of $ in addition to certain out-of-pocket expenses. The amount of annual compensation paid to each Trustee may change as a result of the introduction of additional funds on the boards of which the Trustee will be asked to serve, as well as service by such Trustee on one or more committees.
Trustees may receive their Trustees' fees pursuant to a deferred fee agreement with the Company. Under the terms of the agreement, the Company accrues daily the amount of Trustees' 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 a Commission 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 Trustee. The Company's obligation to make payments of deferred Trustees' fees, together with interest thereon, is a general obligation of the Company.
The following table sets forth the aggregate compensation paid for the calendar year ended December 31, 1999 to the Trustees who are not affiliated with the Manager for service on the boards of all investment companies managed by PIFM (Fund Complex), including an estimate for the current year for the Company.
Compensation Table
Total 1999
Compensation
From Fund
Complex Paid
Name of Trustee To Trustees
--------------- -----------------
Eugene C. Dorsey** $ ( / )*
Robert F. Gunia+ None
Robert E. LaBlanc $
Douglas H. McCorkindale* $ 80,000 (24/49)*
Thomas T. Mooney** $129,500 (35/75)*
David R. Odenath, Jr.+ None
Stephen Stoneburn $ ( / )*
John R. Strangfeld, Jr.+ None
Clay T. Whitehead $ 77,000 (38/66)*
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** Total compensation from all of the funds in the Fund Complex for the calendar year ended December 31, 1999, includes amounts deferred at the election of Trustees under the funds' deferred compensation plans. Including accrued interest, total compensation amounted to $ , $135,102 and $156,478 for Messrs. Dorsey, McCorkindale and Mooney, respectively.
+ Interested Trustees do not receive compensation from the Company or any fund in the Fund Complex.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Trustees of the Company are eligible to purchase Class Z shares of the Fund, which are sold without either an initial sales charge or contingent deferred sales charge to a limited group of investors.
As of the date of this Statement of Additional Information, PIFM owned all of the shares of the Fund and controlled the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
(a) Manager, Sub-Manager and Investment Advisers
The manager of the Fund is Prudential Investments Fund Management LLC (PIFM or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. PIFM serves as manager to all of the other investment companies that,
together with the Funds, comprise the Prudential mutual funds. See "How the Fund is Managed--Manager" in the Prospectus of the Fund. As of January 31, 2000, PIFM managed and/or administered open-end and closed-end management investment companies with assets of approximately $74.9 billion.
PIFM is a subsidiary of Prudential Securities and The Prudential Insurance Company of America (Prudential). Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary of PIFM, serves as the transfer agent for the Fund.
Pursuant to the Management Agreement with the Company (the Management Agreement), PIFM, subject to the supervision of the Company's Board of Trustees 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, 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 (the Custodian), and 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.
For its services, PIFM receives, pursuant to the Management Agreement, a fee at an annual rate of .90 of 1% of the Fund's average daily net assets up to and including $1 billion and .85 of 1% of average daily net assets in excess of $1 billion. The fee is computed daily and payable monthly.
In connection with its management of the business affairs of the Fund, PIFM bears the following expenses:
(a) the salaries and expenses of all personnel of the Fund and the Manager, except the fees and expenses of Trustees who are not affiliated persons of PIFM or the Fund's investment advisers;
(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 Prudential Investment Corporation, doing business as Prudential Investments (PI or the Sub-Manager), Alliance Capital Management, L.P. (Alliance) and Jennison Associates LLC (Jennison, and collectively with Alliance, the investment advisers or the Subadvisers) pursuant to the sub-management between PIFM and PI and the subadvisory agreements between PIFM and Alliance or Jennison, respectively (the Subadvisory Agreements).
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 Trustees who are not affiliated persons of the Manager or the Fund's investment advisers, (c) the fees and certain expenses of the Custodian and Transfer 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 share 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 Commission, including the preparation and printing of the Fund's registration statements and prospectuses for such purposes, and paying the fees and expenses of notice filings made in accordance with state securities laws, (k) allocable communications expenses with respect to investor services and all expenses of shareholders' and Trustees' 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 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 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.
PIFM has entered into a Sub-Management Agreement with PI and a Subadvisory Agreement with each Subadviser. The Sub-Management Agreement provides that PI shall provide Jennison certain research services and will assist with the maintenance of
books and records as Jennison may request from time to time. For its services, PI is compensated by PIFM at an annual rate of .60 of 1% of the average daily net assets for the portion of such assets which Jennison manages on total Fund assets up to and including $1 billion and .55 of 1% of such average daily net assets on total Fund assets in excess of $1 billion.
The Subadvisory Agreements provide that the Subadvisers will furnish investment advisory services to approximately 50% of the Fund's portfolio in connection with the management of the Fund. In connection therewith, Alliance and Jennison are obligated to keep certain books and records of the Fund. Under the Subadvisory Agreements, the Subadvisers, subject to the supervision of PIFM, are responsible for managing the assets of the Fund in accordance with its investment objective, investment program and policies. The Subadvisers determine what securities and other instruments are purchased and sold for the Fund and are responsible for obtaining and evaluating financial data relevant to the Fund. PIFM continues to have responsibility for all investment advisory services pursuant to the Management Agreement. Under the Subadvisory Agreements, Alliance is compensated by PIFM for its services at an annual rate of .60 of 1% of the average daily net assets for the portion of such assets which Alliance manages up to and including $1 billion and .55 of 1% of such average daily net assets in excess of $1 billion, and Jennison is compensated by PI, as Sub-Manager, for its services at an annual rate of .30 of 1% of the average daily net assets advised by Jennison on total Fund assets up to $1 billion and .25 of 1% of such average daily net assets on total Fund assets in excess of $1 billion.
The Sub-Management Agreement and each Subadvisory Agreement provide that each will terminate in the event of its assignment (as defined in the Investment Company Act) or upon the termination of the Management Agreement. The Sub-Management Agreement and each Subadvisory Agreement may be terminated by the Company, PIFM, PI or the applicable Subadviser upon not more than 60 days', nor less than 30 days', written notice. The Sub-Management Agreement and each Subadvisory Agreement provides that each 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.
(b) Principal Underwriter, Distributor and Rule 12b-1 Plans
Prudential Investment Management Services LLC (PIMS or the Distributor), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts as the distributor of the shares of the Fund. PIMS is a subsidiary of Prudential.
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 Company on behalf of the Fund under Rule 12b-1 under the Investment Company Act and a distribution agreement (the Distribution Agreement), the Distributor incurs the expenses of distributing the Fund's Class A, Class B and Class C shares, respectively. The Distributor also incurs the expenses of distributing the Class Z shares under the Distribution Agreement with the Fund, none of which are reimbursed by or paid for by the Fund.
The expenses incurred under the Plans include commissions and account servicing fees paid to, or on account of, brokers or financial institutions 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 the Distributor associated with the sale of Fund shares, including lease, utility, communications and sales promotion expenses.
Under the Plans, the Fund is obligated to pay distribution 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.
The distribution and/or service fees may also be used by the Distributor to compensate on a continuing basis brokers in consideration for the distribution, marketing, administrative and other services and activities provided by brokers with respect to the promotion of the sale of the Fund's shares and the maintenance of related shareholder accounts.
Class A Plan. Under the Class A Plan, the Fund may pay the Distributor 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 (1) up to .25 of 1% of the average 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 (2) 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. The Distributor has contractually 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 for the fiscal year ending February 28, 2001.
Class B and Class C Plans. Under the Class B and Class C Plans, the Fund pays the Distributor 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
the Distributor of (1) an asset-based sales charge of .75 of 1% of the average
daily net assets of each of the Class B and Class C shares, respectively, and
(2) 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. The Distributor also
receives contingent deferred sales charges from certain redeeming shareholders
and, with respect to Class C shares, an initial sales charge.
The Distributor also receives the proceeds of contingent deferred sales charges paid by investors upon certain redemptions of Class B shares and an initial sales charge and the proceeds of contingent deferred sales charges paid by investors upon certain redemptions of Class C shares.
Distribution expenses attributable to the sale of Class A, Class B or Class C shares of the Fund will be allocated to each such class based upon the ratio of sales of each such class to the sales of Class A, Class B and Class C 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.
The Class A, Class B and Class C Plans continue in effect from year to year, provided that each such continuance is approved at least annually by a vote of the Board of Trustees, including a majority vote of the Trustees who are not interested persons of the Company and who have no direct or indirect financial interest in the Class A, Class B and Class C Plan or in any agreement related to the Plans (the Rule 12b-1 Trustees), cast in person at a meeting called for the purpose of voting on such continuance. A Plan may be terminated at any time, without penalty, by the vote of a majority of the Rule 12b-1 Trustees or by the vote of the holders of a majority of the outstanding shares of the applicable class of the Fund on not more than 60 days', nor less than 30 days', written notice to any other party to the Plan. 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 Trustees 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 Trustees will review at least quarterly a written report of the distribution expenses incurred on behalf of each class of shares of the Fund by the Distributor. 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 Trustees shall be committed to the Rule 12b-1 Trustees.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify the Distributor to the extent permitted by applicable law against certain liabilities under the federal securities laws.
In addition to distribution and service fees paid by the Fund under the Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may make payments to dealers (including Prudential Securities) and other persons who distribute shares of the Fund (including Class Z shares). Such payments may be calculated by reference to the net asset value of shares sold by such persons or otherwise.
Fee Waivers/Subsidies
PIFM 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. In addition, the Distributor has contractually agreed to waive a portion of its distribution fees for the Class A shares for the fiscal year ending February 28, 2001. Fee waivers and subsidies will increase the Fund's total return.
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. 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 included in the calculation of the 6.25% limitation. The annual asset- based sales charge of the Fund may not exceed .75 of 1%. The 6.25% limitation applies to each class of 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.
(c) Other Service Providers
State Street Bank and Trust Company, One Heritage Drive, North Quincy, Massachusetts 02171, serves as Custodian for the portfolio securities of the Fund and cash and in that capacity maintains certain financial and accounting books and records pursuant
to an agreement with the Company. Subcustodians provide custodial services for the Fund's foreign assets held outside the United States.
Prudential Mutual Fund Services LLC (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 PIFM. 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 per shareholder account of $10.00, 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. PMFS is also reimbursed for its out-of-pocket expenses, including but not limited to postage, stationery, printing, allocable communication expenses and other costs.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York 10036, serves as the Fund's independent accountants, and in that capacity audits the annual financial statements of the Fund.
Codes of Ethics
The Board of Trustees of the Fund has adopted a Code of Ethics. In addition, the Manager, Subadvisers and Distributor have each adopted a Code of Ethics (the Codes). The Codes permit personnel subject to the Codes to invest in securities, including securities that may be purchased or held by the Fund. However, the protective provisions of the Codes prohibit certain investments and limit such personnel from making investments during periods when the Fund is making such investments. The Codes are on public file with, and are available from, the Commission.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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 Subadvisers. Broker-dealers may receive 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. Brokerage commissions on United States securities options and futures are subject to negotiation between the Manager and the broker or futures commission merchant.
In the over-the-counter markets, securities 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, except in accordance with rules of the Commission. Thus, it will not deal in the over-the-counter market with Prudential Securities acting as market maker, and it will not execute a negotiated trade with Prudential Securities if execution involves Prudential Securities' acting as principal with respect to any part of the Fund's order.
In placing orders for portfolio securities of the Fund, the Manager's overriding objective is to obtain the best possible combination of favorable price and efficient execution. The Manager seeks to effect each transaction at a price and commission that provides the most favorable total cost or proceeds reasonably attainable in the circumstances. The factors that the Manager may consider in selecting a particular broker, dealer or futures commission merchant (firms) are the Manager's knowledge of negotiated commission rates currently available and other current transaction costs; the nature of the portfolio transaction; the size of the transaction; the desired timing of the trade; the activity existing and expected in the market for the particular transaction; confidentiality; the execution, clearance and settlement capabilities of the firms; the availability of research and research related services provided through such firms; the Manager's knowledge of the financial stability of the firms; the Manager's knowledge of actual or apparent operational problems of firms; and the amount of capital, if any, that would be contributed by firms executing the transaction. Given these factors, the Fund may pay transaction costs in excess of that which another firm might have charged for effecting the same transaction.
When the Manager selects a firm that executes orders or is a party to portfolio transactions, relevant factors taken into consideration are whether that firm has furnished research and research products and/or services, such as research reports,
research compilations, statistical and economic data, computer data bases, quotation equipment and services, research oriented computer software, hardware and services, reports concerning the performance of accounts, valuations of securities, investment related periodicals, investment seminars and other economic services and consultants. Such services are used in connection with some or all of the Manager's investment activities; some of such services, obtained in connection with the execution of transactions for one investment account, may be used in managing other accounts, and not all of these services may be used in connection with the Fund.
The Manager maintains an internal allocation procedure to identify those firms who have provided it with research and research related products and/or services, and the amount that was provided, and to endeavor to direct sufficient commissions to them to ensure the continued receipt of those services that the Manager believes provides a benefit to the Fund and its other clients. The Manager makes a good faith determination that the research and/or service is reasonable in light of the type of service provided and the price and execution of the related portfolio transactions.
When the Manager deems the purchase or sale of equities to be in the best interests of the Fund or its other clients, including Prudential, the Manager may, but is under no obligation to, aggregate the transactions in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the transactions, as well as the expenses incurred in the transaction, will be made by the Manager in the manner it considers to be most equitable and consistent with its fiduciary obligations to its clients.
The allocation or orders among firms and the commission rates paid are reviewed periodically by the Company's Board of Trustees. Portfolio securities may not be purchased from any underwriting or selling syndicate of which Prudential Securities or any affiliate, during the existence of the syndicate, is a principal underwriter (as defined in the Investment Company Act), except in accordance with rules of the Commission. This limitation, in the opinion of the Fund, will not significantly affect the Fund's ability to pursue its present investment objective. However, in the future, in other circumstances, the Fund may be at a disadvantage because of this limitation in comparison to other funds with similar objectives but not subject to such limitations.
Subject to the above considerations, Prudential Securities (or any affiliate) may act as a securities broker or futures commission merchant for the Fund. In order for Prudential Securities (or any affiliate) to effect any portfolio transactions for the Fund, the commissions, fees or other remuneration received by Prudential Securities (or any affiliate) must be reasonable and fair compared to the commissions, fees or other remuneration paid to other firms 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 firm in a commensurate arm's-length transaction. Furthermore, the Board of Trustees of the Company, including a majority of non-interested Trustees, has adopted procedures which are reasonably designed to provide that any commissions, fees or other remuneration paid to Prudential Securities (or any affiliate) are consistent with the foregoing standard. In accordance with Section 11(a) of the Securities Exchange Act of 1934, Prudential Securities may not retain compensation for effecting transactions on a national securities exchange for the Fund unless the Fund has expressly authorized the retention of such compensation. Prudential Securities must furnish to the Fund at least annually a statement setting forth the total amount of all compensation retained by Prudential Securities from transactions effected for the Fund during the applicable period. Brokerage and futures transactions with Prudential Securities (or any affiliate) are also subject to such fiduciary standards as may be imposed upon Prudential Securities (or such affiliate) by applicable law.
CAPITAL SHARES, OTHER SECURITIES AND ORGANIZATION
The Company is authorized to issue an unlimited number of shares of beneficial interest, $.001 par value per share divided into four classes, designated Class A, Class B, Class C and Class Z shares. Each class of shares represents an interest in the same assets of the Fund and is identical in all respects except that (1) each class is subject to different sales charges and distribution and/or service fees (except for Class Z shares, which are not subject to any sales charges and distribution and/or service fees), which may affect performance, (2) each class has exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class, (3) each class has a different exchange privilege, (4) only Class B shares have a conversion feature and (5) Class Z shares are offered exclusively for sale to a limited group of investors. In accordance with the Company's Declaration of Trust, the Trustees may authorize the creation of additional series and classes within such series, with such preferences, privileges, limitations and voting and dividend rights as the Trustees may determine. The voting rights of the shareholders of a series or class can be modified only by the vote of shareholders of that series or class.
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. Each share of each class is equal as to earnings, assets and voting privileges, except as noted above, and each class of shares (with the exception of Class Z shares, which are not subject to any distribution or service fees) 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 of liquidation, each share of the Fund is entitled to its portion of all of the Fund's assets after all debt and expenses of the Fund have been paid. Since Class B and Class C shares generally bear higher distribution expenses than Class A shares, the liquidation proceeds to shareholders of those classes are likely to be lower than to Class A shareholders and to Class Z shareholders, whose shares are not subject to any distribution and/or service fees.
The Company does not intend to hold annual meetings of shareholders unless otherwise required by law. The Company will not be required to hold meetings of shareholders unless, for example, the election of Trustees 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 the vote of 10% of the Company's outstanding shares for the purpose of voting on the removal of one or more Trustees or to transact any other business.
Under the Declaration of Trust, the Trustees may authorize the creation of additional series of shares (the proceeds of which would be invested in separate, independently managed portfolios with distinct investment objectives and policies and share purchase, redemption and net asset value procedures) with such preferences, privileges, limitations and voting and dividend rights as the Trustees may determine. All consideration received by the Fund for shares of any additional series, and all assets in which such consideration is invested, would belong to that series (subject only to the rights of creditors of that series) and would be subject to the liabilities related thereto. Under the Investment Company Act, shareholders of any additional series of shares would normally have to approve the adoption of any advisory contract relating to such series and of any changes in the fundamental investment policies related thereto.
The Trustees have the power to alter the number and the terms of office of the Trustees, provided that always at least a majority of the Trustees have been elected by the shareholders of the Fund. The voting rights of shareholders are not cumulative, so that holders of more than 50 percent of the shares voting can, if they choose, elect all Trustees being selected, while the holders of the remaining shares would be unable to elect any Trustees.
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined net asset value (NAV) per share plus a sales charge which, at the election of the investor, may be imposed either (1) at the time of purchase (Class A or Class C shares) or (2) on a deferred basis (Class B or Class C shares). Class Z shares of the Fund are offered to a limited group of investors at NAV without any sales charges.
Purchase by Wire
For an initial purchase of shares of the Fund by wire, you must complete an application and 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: Strategic Partners Focused Growth Fund, specifying on the wire the account number assigned by PMFS and your name and identifying the class in which you are eligible to invest (Class A, Class B, Class C or Class Z shares).
If you arrange for receipt by State Street of federal funds prior to the calculation of NAV (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 Strategic Partners Focused Growth Fund, Class A, Class B, Class C or Class Z 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.
Issuance of Fund Shares for Securities
Transactions involving the issuance of Fund shares for securities (rather
than cash) will be limited to (1) reorganizations, (2) statutory mergers, or
(3) other acquisitions of portfolio securities that (a) meet the investment
objective and policies of the Fund, (b) are liquid and not subject to
restrictions on resale, (c) have a value that is readily ascertainable via
listing on or trading in a recognized United States or international exchange
or market, and (d) are approved by one of the Fund's investment advisers.
Specimen Price Make-up
Under the current distribution arrangements between the Fund and the Distributor, Class A shares are sold with a maximum sales charge of 5%, Class C* shares are sold with a 1% sales charge, and Class B* and Class Z shares are sold at NAV. Using the NAV of the Fund at the inception of the Fund's public offering, the maximum offering price of the Fund's shares is as follows:
Class A
Net asset value and redemption price per Class A share.................. $10.00
Maximum sales charge (5% of offering price)............................. .53
------
Maximum offering price to public........................................ $10.53
======
Class B
Net asset value, offering price and redemption price per Class B
share*................................................................. $10.00
======
Class C
Net asset value and redemption price per Class C share*................. $10.00
Sales charge (1% of offering price)..................................... .10
------
Offering price to public................................................ $10.00
======
Class Z
Net asset value, offering price and redemption price per Class Z share.. $10.00
======
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Selecting a Purchase Alternative
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 4 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 C shares over either Class A or Class B shares.
If you intend to hold your investment for longer than 4 years, but less than 5 years, and do not qualify for a reduced sales charge on Class A shares, you should consider purchasing Class B or Class C shares over Class A shares. This is because the initial sales charge plus the cumulative annual distribution- related fee on Class A shares would exceed those of the Class B and Class C shares if you redeem your investment during this time period. In addition, more of your money would be invested initially in the case of Class C shares, because of the relatively low initial sales charge, and all of your money would be invested initially in the case of Class B shares, which are sold at NAV.
If you intend to hold your investment for longer than 5 years, you should consider purchasing Class A shares over either Class B or Class C shares. This is because the maximum sales charge plus the cumulative annual distribution- related fee on Class A shares would be less than those of the Class B and 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 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.
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 6 years in the case of Class B shares and for more than 5 years in the case of Class C
shares for the higher cumulative annual distribution-related fee on those shares plus, in the case of Class C shares, the 1% initial sales charge to exceed the initial sales charge plus the cumulative annual distribution- related fees 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 NAV, the effect of the return on the investment over this period of time or redemptions when the CDSC is applicable.
Reduction and Waiver of Initial Sales Charge--Class A Shares
Benefit Plans. Class A shares may be purchased at NAV, without payment of an initial sales charge, by pension, profit-sharing or other employee benefit plans qualified under Section 401 of the Internal Revenue Code, deferred compensation or annuity plans under Sections 401(a), 403(b) and 457 of the Internal Revenue Code, "rabbi" trusts and non-qualified deferred compensation plans (collectively, Benefit Plans), provided that the Benefit Plan has existing assets of at least $ or 250 eligible employees or participants. Class A shares may be purchased at NAV by participants who are repaying loans made from such plans to the participant.
Other Waivers. In addition, Class A shares may be purchased at NAV, through the Distributor or the Transfer Agent, by:
. Officers of the Prudential mutual funds (including the Fund)
. Employees of the Distributor, Prudential Securities, PIFM and their subsidiaries and members of the families of such persons who maintain an "employee related" account at Prudential Securities or the Transfer Agent
. Employees of subadvisers of the Prudential mutual funds provided that purchases at NAV are permitted by such person's employer
. Prudential, directors, employees and special agents of Prudential and its subsidiaries and all persons who have retired directly from active service with Prudential or one of its subsidiaries
. Registered representatives and employees of brokers who have entered into a selected dealer agreement with the Distributor provided that purchases at NAV are permitted by such person's employer
. Real estate brokers, agents and employees of real estate brokerage companies affiliated with the Prudential Real Estate Affiliates who maintain an account at Prudential Securities, Prusec or with the Transfer Agent
. Investors who have a business relationship with a financial adviser who
joined Prudential Securities from another investment firm, provided that
(1) the purchase is made within 180 days of the commencement of the
financial adviser's employment at Prudential Securities, or within one
year in the case of Benefit Plans, (2) the purchase is made with
proceeds of a redemption of shares of any open-end non-money market fund
sponsored by the financial adviser's previous employer (other than a
fund which imposes a distribution or service fee of .25 of 1% or less)
and (3) the financial adviser served as the client's broker on the
previous purchase
. Investors in Individual Retirement Accounts, provided the purchase is made in a directed rollover to such Individual Retirement Account or with the proceeds of a tax-free rollover of assets from a Benefit Plan for which Prudential provides administrative or recordkeeping services and further provided that such purchase is made within 60 days of receipt of the Benefit Plan distribution
. Orders placed by broker-dealers, investment advisers or financial planners who have entered into an agreement with the Distributor, who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services (for example, mutual fund "wrap" or asset allocation programs)
. Orders placed by clients of broker-dealers, investment advisers or financial planners who place trades for customer accounts if the accounts are linked to the master account of such broker-dealer, investment adviser or financial planner and the broker-dealer, investment adviser or financial planner charges the clients a separate fee for its services (for example, mutual fund "supermarket" programs).
For an investor to obtain any reduction or waiver of the initial sales charges, at the time of the sale either the Transfer Agent must be notified directly by the investor or the Distributor must be notified by the broker facilitating the transaction that the sale
qualifies for the reduced or waived 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 acquired upon the reinvestment of dividends and distributions.
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 "How to Buy, Sell and Exchange Shares of the Fund--Reducing or Waiving Class A's Initial Sales Charge" in the Prospectus of the Fund.
An eligible group of related Fund investors includes any combination of the following:
. An individual
. The individual's spouse, their children and their parents
. The individual's and spouse's Individual Retirement Account (IRA)
. 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)
. A trust created by the individual, the beneficiaries of which are the individual, his or her spouse, parents or children
. A Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account created by the individual or the individual's spouse
. One or more employee benefit plans of a company controlled by an individual.
Also, an eligible group of related Fund investors may include 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 Transfer Agent, the Distributor or your broker 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 any retirement or group plans.
Letter of Intent. Reduced sales charges also 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 shares of the Fund (Investment Letter of Intent). Retirement and group plans may also qualify to purchase Class A shares at NAV by entering into a Letter of Intent whereby they agree to enroll, within a thirteen-month period, a specified number of eligible employees or participants (Participant Letter of Intent).
For purposes of the Investment Letter of Intent, all shares of the Fund and shares of other Prudential mutual funds (excluding money market funds other than those acquired pursuant to the exchange privilege) 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 your broker will not be aggregated to determine the reduced sales charge.
A Letter of Intent permits a purchaser, in the case of an Investment Letter of Intent, to establish a total investment goal to be achieved by any number of investments over a thirteen-month period and, in the case of a Participant Letter of Intent, to establish a minimum eligible employee or participant enrollment goal over a thirteen-month period. Each investment made during the period, in the case of an Investment Letter of Intent, will receive the reduced sales charge applicable to the amount represented by the goal, as if it were a single investment. In the case of a Participant Letter of Intent, each investment made during the period will be made at net asset value. Escrowed Class A 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, except in the case of retirement and group plans where the employer or plan sponsor will be responsible for paying any applicable sales charge. The effective date of an Investment Letter of Intent (except in the case of retirement and group plans), 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 Investment Letter of Intent does not obligate the investor to purchase, nor the Fund to sell, the indicated amount. Similarly, the Participant Letter of Intent does not obligate the retirement or group plan to enroll the indicated number of eligible employees
or participants. In the event the Letter of Intent goal is not achieved within the thirteen-month period, the purchaser (or the employer or plan sponsor in the case of any retirement or group plan) is required to pay the difference between the sales charge otherwise applicable to the purchases made during this period and sales charge 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 qualifies 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 Class A shares of the Fund pursuant to a Letter of Intent should carefully read such Letter of Intent.
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, in the case of an Investment Letter of Intent, be granted subject to confirmation of the investor's holdings or in the case of a Participant Letter of Intent, subject to confirmation of the number of eligible employees or participants in the retirement or group plan. Letters of Intent are not available to individual participants in any retirement or group plans.
Class B Shares
The offering price of Class B shares for investors choosing one of the deferred sales charge alternatives is the NAV next determined following receipt of an order in proper form by the Transfer Agent, your broker or the Distributor. Although there is no sales charge imposed at the time of purchase, redemptions of Class B shares may be subject to a CDSC. See "Sale of Shares--Contingent Deferred Sales Charge" below.
The Distributor will pay, from its own resources, sales commissions of up to 4% of the purchase price of Class B shares to brokers, financial advisers and other persons who sell Class B shares at the time of sale. This facilitates the ability of the Fund to sell the Class B shares without an initial sales charge being deducted at the time of purchase. The Distributor anticipates that it will recoup its advancement of sales commissions from the combination of the CDSC and the distribution fee.
Class C Shares
The offering price of Class C shares is the next determined NAV plus a 1% sales charge. In connection with the sale of Class C shares, the Distributor will pay, from its own resources, brokers, financial advisers and other persons which distribute Class C shares a sales commission of up to 2% of the purchase price at the time of the sale.
Waiver of Initial Sales Charge--Class C Shares
Benefit Plans. Class C shares may be purchased at NAV, without payment of an initial sales charge, by Benefit Plans (as defined above).
Investment of Redemption Proceeds from Other Investment Companies. Investors may purchase Class C shares at NAV, without the initial sales charge, with the proceeds from the redemption of shares of any unaffiliated registered investment company. Such purchases must be made within 60 days of the redemption. This waiver is not available to investors who purchase shares directly from the Transfer Agent. You must notify the Transfer Agent directly or through your broker if you are entitled to this waiver and provide the Transfer Agent with such supporting documents as it may deem appropriate.
Class Z Shares
Class Z shares of the Fund currently are available for purchase by the following categories of investors:
. Pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code, deferred compensation and
annuity plans under Sections 457 and 403(b)(7) of the Internal Revenue
Code and non-qualified plans for which the Fund is an available option
(collectively, Benefit Plans), provided such Benefit Plans (in
combination with other plans sponsored by the same employer or group of
related employers) have at least $50 million in defined contribution
assets
. Participants in any fee-based program or trust program sponsored by an affiliate of the Distributor which includes mutual funds as investment options and for which the Fund is an available option
. Current and former Trustees of the Company
. The Manager, Sub-Manager or a Subadviser or any of their affiliates with an investment of $10 million or more.
After a Benefit Plan qualifies to purchase Class Z shares, all subsequent purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the Distributor or one of their affiliates may pay brokers, financial advisers and other persons which distribute shares a finder's fee, from its own resources, based on a percentage of the net asset value of shares sold by such persons.
Sale of Shares
You can redeem your shares at any time for cash at the NAV next determined after the redemption request is received in proper form (in accordance with procedures established by the Transfer Agent in connection with investors' accounts) by the Transfer Agent, the Distributor or your broker. In certain cases, however, redemption proceeds will be reduced by the amount of any applicable CDSC, as described below. See "Contingent Deferred Sales Charge" below. If you are redeeming your shares through a broker, your broker must receive your sell order before the Fund computes its NAV for that day (that is, 4:15 P.M., New York time) in order to receive that day's NAV. Your broker will be responsible for furnishing all necessary documentation to the Distributor and may charge you for its services in connection with redeeming shares of the Fund.
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 name(s) shown on the face of the certificates, must be received by the Transfer Agent, the Distributor or your broker 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 LLC, Attention: Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010, the Distributor or to your broker.
Signature Guarantee. If the proceeds of the redemption (1) exceed $100,000,
(2) are to be paid to a person other than the record owner, (3) are to be sent
to an address other than the address on the Transfer Agent's records, or (4)
are to be paid to a corporation, partnership, trust or fiduciary, and your
shares are held directly with the Transfer Agent, 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.
Payment for shares presented for redemption will be made by check within
seven days after receipt by the Transfer Agent, the Distributor or your broker
of the certificate and/or written request, except as indicated below. If you
hold shares through a broker, payment for shares presented for redemption will
be credited to your account at your broker, unless you indicate otherwise.
Such payment may be postponed or the right of redemption suspended at times
(1) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (2) when trading on such Exchange is restricted, (3)
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
(4) during any other period when the Commission, by order, so permits;
provided that applicable rules and regulations of the Commission shall govern
as to whether the conditions prescribed in (2), (3) or (4) exist.
Redemption in Kind. If the Trustees determine 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 Commission. Securities will be readily marketable and will be valued in the same manner as in a regular redemption. If your shares are redeemed in kind, you would incur transaction costs in converting the assets into cash. The Fund, however, has 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 NAV of the Fund during any 90-day period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Fund, the Trustees 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 such shareholders 60 days' prior written notice in which to purchase sufficient additional shares to avoid such redemption. No CDSC will be imposed on any such involuntary redemption.
90-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 90 days after the date of the redemption. Any CDSC paid in connection with such
redemption will be credited (in shares) to your account. (If less than a full repurchase is made, the credit will be on a pro rata basis.) You must notify the Transfer Agent, either directly or through the Distributor or your broker, at the time the repurchase privilege is exercised to adjust your account for the CDSC you previously paid. Thereafter, any redemptions will be subject to the CDSC applicable at the time of the redemption. See "Contingent Deferred Sales Charge" below. Exercise of the repurchase privilege will generally not affect federal tax treatment of any gain realized upon redemption. However, if the redemption was made within a 30 day period of the repurchase and if the redemption resulted in a loss, some or all of the loss, depending on the amount reinvested, may not be allowed for federal income tax purposes.
Contingent Deferred Sales Charge
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 18 months 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 18 months, 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 acquired through reinvestment of dividends or distributions are not subject to a CDSC. The amount of any CDSC will be paid to and retained by the Distributor.
The amount of the CDSC, if any, will vary depending on the number of years from the time of payment for the purchase of 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 CDSC 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.
The following table sets forth the rates of the CDSC applicable to redemption of Class B shares:
Contingent Deferred Sales
Charge as a Percentage
Year Since Purchase of Dollars Invested or
Payment Made Redemption Proceeds
------------------- -------------------------
First........................................ 5.0%
Second....................................... 4.0%
Third........................................ 3.0%
Fourth....................................... 2.0%
Fifth........................................ 1.0%
Sixth........................................ 1.0%
Seventh...................................... None
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In determining whether a CDSC is applicable to a redemption, the calculation will be made in a manner that results 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 NAV above the total amount of payments for the purchase of Class B shares made during the preceding six years and 18 months for Class C shares; 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 decide 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 Charge--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, at the time of death or initial determination of 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 are:
(1) in the case of a tax-deferred retirement plan, a lump-sum or other distribution after retirement;
(2) in the case of an IRA (including a Roth IRA), a lump-sum or other distribution after attaining age 59 1/2 or a periodic distribution based on life expectancy;
(3) in the case of a Section 403(b) custodial account, a lump sum or other distribution after attaining age 59 1/2; and
(4) 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 (that is, following voluntary or involuntary termination of employment or following retirement). Under no circumstances will the CDSC be waived on redemptions resulting from the termination of a tax-deferred retirement plan, unless such redemptions otherwise qualify for a waiver as described above. 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.
Systematic Withdrawal Plan. The CDSC will be waived (or reduced) on certain redemptions from a Systematic Withdrawal Plan. On an annual basis, up to 12% of the total dollar amount subject to the CDSC may be redeemed without charge. The Transfer Agent will calculate the total amount available for this waiver annually on the anniversary date of your purchase. The CDSC will be waived (or reduced) on redemptions until this threshold 12% is reached.
In addition, the CDSC will be waived on redemptions of shares held by Trustees of the Company.
You must notify the Fund's Transfer Agent either directly or through your broker at the time of redemption, that you are entitled to waiver of the CDSC and provide the Transfer Agent with such supporting documentation as it may deem appropriate. The waiver will be granted subject to confirmation of your entitlement. In connection with these waivers, the Transfer Agent will require you to submit the supporting documentation set forth below.
Category of Waiver Required Documentation
Death A copy of the shareholder's death
certificate or, in the case of a
trust, a copy of the grantor's death
certificate, plus a copy of the trust
agreement identifying the grantor.
Disability--An individual will be A copy of the Social Security
considered disabled if he or she Administration award letter or a
is unable to engage in any letter from a physician on the
substantial gainful activity by physician's letterhead stating that
reason of any medically the shareholder (or, in the case of a
determinable physical or mental trust, the grantor) is permanently
impairment which can be expected disabled. The letter must also
to result in death or to be of indicate the date of disability.
long-continued and indefinite
duration.
Distribution from an IRA or 403(b) A copy of the distribution form from
Custodial Account the custodial firm indicating (i) the
date of birth of the shareholder and
(ii) that the shareholder is over age
59 and is taking a normal
distribution--signed by the
shareholder.
Distribution from Retirement Plan A letter signed by the plan
administrator/trustee indicating the
reason for the distribution.
Excess Contributions A letter from the shareholder (for an
IRA) or the plan administrator/trustee
on company letterhead indicating the
amount of the excess and whether or
not taxes have been paid.
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The Transfer Agent reserves the right to request such additional documents as it may deem appropriate.
Waiver of Contingent Deferred Sales Charge--Class C Shares
The CDSC will be waived on redemptions from Benefit Plans holding shares through a broker for which the broker provides administrative or recordkeeping services.
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 be effected at relative net asset value without the imposition of any additional sales charge.
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: (1) 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 (2) multiplied by the total number of Class B shares purchased and then held 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 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 (that is, $1,000 divided by $2,100 (47.62%), multiplied by 200 shares equals 95.24 shares). The Manager reserves the right to modify the formula for determining the number of Eligible Shares in the future as it deems appropriate on notice to shareholders.
Since annual distribution-related fees are lower for Class A shares than Class B shares, the per share NAV 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.
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 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 would not convert to Class A shares until approximately eight years from purchase. For purposes of measuring the time period during which shares are held in a money market fund, exchanges will be deemed to have been made on the last day of the month. Class B shares acquired through exchange will convert to Class A shares after expiration of the conversion period applicable to the original purchase of such shares.
The conversion feature may be subject to the continuing availability of opinions of counsel or rulings of the Internal Revenue Service (1) that the dividends and other distributions paid on Class A, Class B, Class C and Class Z shares will not constitute "preferential dividends" under the Internal Revenue Code and (2) that the conversion of shares does not constitute a taxable event. The conversion of Class B shares into Class A shares may be suspended if such opinions or rulings are no longer available. If conversions are suspended, Class B shares of the Fund will continue to be subject, possibly indefinitely, to their higher annual distribution and service fee.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account is established for each investor under which the shares are held for the investor by the Transfer Agent. If a share 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 broker. Any shareholder who receives a cash payment representing a dividend or distribution may reinvest such dividend or distribution at NAV 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 NAV per share next determined after receipt of the check or proceeds by the Transfer Agent. Such shareholder will receive credit for any CDSC paid in connection with the amount of proceeds being reinvested.
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 $6,000 at a public university. Assuming these costs increase at a rate of 7% a year, as has been projected, for the freshman class of 2011, the cost of four years at a private college could reach $210,000 and over $90,000 at a public university./1/
The following chart shows how much you would need in monthly investments to achieve specified lump sums to finance your investment goals./2/
Period of Monthly Investments: $100,000 $150,000 $200,000 $250,000 -------------------- -------- -------- -------- -------- 25 Years............................. $ 105 $ 158 $ 210 $ 263 20 Years............................. 170 255 340 424 15 Years............................. 289 438 578 722 10 Years............................. 547 820 1,093 1,366 5 Years.............................. 1,361 2,041 2,721 3,402 |
See "Automatic Investment Plan"
/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 Investment Plan (AIP)
Under AIP, 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 brokerage 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. Share certificates are not issued to AIP participants.
Further information about this program and an application form can be obtained from the Transfer Agent, the Distributor or your broker.
Systematic Withdrawal Plan
A systematic withdrawal plan is available to shareholders through the Transfer Agent, the Distributor or your broker. 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 may be subject to a CDSC.
In the case of shares held through the Transfer Agent (1) a $10,000 minimum account value applies, (2) withdrawals may not be for less than $100 and (3) the shareholder must elect to have all dividends and/or distributions automatically reinvested in additional full and fractional shares at NAV on shares held under this plan.
The Transfer Agent, the Distributor or your broker acts as an agent 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 (1) the purchase of Class A and Class C shares and (2) the redemption 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 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/
Contributions Personal Made Over: Savings IRA ------------- -------- ------- 10 years.............................................. $26,165 $31,291 15 years.............................................. 44,675 58,649 20 years.............................................. 68,109 98,846 25 years.............................................. 97,780 157,909 30 years.............................................. 135,346 244,692 |
NET ASSET VALUE
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. The Fund will compute its NAV 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 NAV. In the event the New York Stock Exchange closes early on any business day, the NAV of the Fund's shares shall be determined at a time between such closing and 4:15 P.M., New York time. The New York Stock Exchange is closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Under the Investment Company Act, the Board of Trustees is responsible for determining in good faith the fair value of securities of the Fund. In accordance with procedures adopted by the Board of Trustees, the value of investments listed on a
securities exchange and NASDAQ National Market System securities (other than options on stock and stock indexes) are valued at the last sales price on such exchange system on 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 or at the bid price on such day in the absence of an asked price. 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 by the Manager, in consultation with a Subadviser, to be over-the-counter, are valued on the basis of valuations provided by an independent pricing agent or principal market maker 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 by the Manager in consultation with the Subadvisers to be over-the-counter, are valued at the mean between the last reported bid and asked prices provided by principal market makers. Options on stock and stock indexes traded on an exchange are valued at the mean between the most recently quoted bid and asked prices on the respective exchange and futures contracts and options thereon are valued at their last sale prices as of the close of trading on the applicable commodities exchange or board of trade or, if there was no sale on the applicable commodities exchange or board of trade on such day, at the mean between the most recently quoted bid and asked prices on such exchange or board of trade. Quotations of foreign securities in a foreign currency are converted to U.S. dollar equivalents at the current rate obtained from a recognized bank or dealer, and foreign currency forward contracts are valued at the current cost of covering or offsetting such contracts. 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 an investment adviser under procedures established by and under the general supervision of the Company's Board of Trustees.
Securities or other assets for which reliable market quotations are not readily available or for which the pricing agent or principal market maker does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Manager or applicable Subadviser (or Valuation Committee or Board of Trustees), does not represent fair value, are valued by the Valuation Committee or Board of Trustees in consultation with the Manager and applicable Subadviser, including its portfolio managers, traders and research and credit analysts on the basis of the following factors: cost of the security, transactions in comparable securities, relationships among various securities and such other factors as may be determined by the Manager, Subadviser, Board of Trustees or Valuation Committee to materially affect the value of the security. Short-term investments 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 Trustees not to represent fair value. Short-term securities with remaining maturities of more than 60 days, 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.
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. The NAV of Class Z shares will generally be higher than the NAV of Class A, Class B or Class C shares because Class Z shares are not subject to any distribution or service fee. It is expected, however, that the NAV of the four classes will tend to converge immediately after the recording of dividends, if any, which will differ by approximately the amount of the distribution and/or service fee expense accrual differential among the classes.
TAXES, DIVIDENDS AND DISTRIBUTIONS
The Fund intends to elect to qualify and intends 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 and capital gains which are distributed to shareholders, and permits net capital gains of the Fund (that is, 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. Net capital gains of the Fund which are available for distribution to shareholders will be computed by taking into account any capital loss carryforward of the Fund.
Qualification of the Fund as a regulated investment company requires, among other things, that (a) the Fund derive at least 90% of its annual gross income (without reduction for losses from the sale or other disposition of securities or foreign currencies) 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 diversify its holdings so that, at the end of each quarter of the taxable year, (1) at least 50% of the 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 value of the Fund's assets and 10% of the outstanding voting securities of such issuer, and (2) 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 (c) the Fund distribute to its shareholders at least 90% of its net investment income and net short-term gains (that is, the excess of net short-term capital gains over net long-term capital losses) 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 otherwise holds an offsetting position with respect to the securities. 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 be treated as gains and losses from the sale of securities. 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 short-term 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, constructive sale, anti-conversion and straddle provisions of the Internal Revenue Code which may, among other things, require the Fund to defer recognition of losses. In addition, debt securities acquired by the Fund may be subject to original issue discount and market discount rules which, respectively, may cause the Fund to accrue income in advance of the receipt of cash with respect to interest or cause gains to be treated as ordinary income.
Special rules apply to most options on stock indexes, futures contracts and options thereon. 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. Sixty percent of any gain or loss recognized on these 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 indexes will be capital gain or loss and will be long- term or short-term depending on the holding period of the option. In addition, positions which are part of a "straddle" will be subject to certain wash sale, short sale and constructive 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.
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 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 or losses, 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.
Shareholders electing to receive dividends and distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share so received equal to the NAV of a share of the Fund on the reinvestment date.
Any dividends or distributions 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 or distributions. Furthermore, such dividends or distributions, 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 or 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.
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 distributions 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. Dividends attributable to foreign corporations, interest income, capital and currency gain, gain or loss from Section 1256 contracts (described above), and income from certain other sources will not constitute qualified dividends. Individual shareholders are not eligible for the dividends-received deduction.
The per share dividends on Class B and Class C shares will be lower than the per share dividends on Class A and Class Z shares as a result of the higher distribution-related fee applicable to the Class B and Class C shares. The per share distributions of net capital gains, if any, will be paid in the same amount for Class A, Class B, Class C and Class Z shares. See "Net Asset Value."
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. In addition, the Fund must distribute during the calendar year 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 calendar 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.
The Fund may, from time to time, invest in "passive foreign investment companies" (PFICs). A 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 on 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. The Fund may make a "mark-to-market" election with respect to any marketable 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, as ordinary income with respect to PFIC stock. No loss will be recognized on PFIC stock, except to the extent of gains recognized in prior years. Alternatively, the Fund, if it meets certain requirements, 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.
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. The Fund does not expect to meet the requirements of the Internal Revenue Code for "passing- through" to its shareholders any foreign income taxes paid.
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.
Dividends and distributions may also be subject to state and local taxes.
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, Class C and Class Z shares.
Average annual total return is computed according to the following formula:
P(1 + T) to the power of n = ERV
Where: P = hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1000 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).
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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, Class C and Class Z shares.
Aggregate total return represents the cumulative change in the value of an investment in the Fund and is computed according to the following formula:
Where: P = a hypothetical initial payment of $1000.
ERV = ending redeemable value of a hypothetical $1000 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).
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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, Class C and Class Z shares. The 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:
( a - b )
YIELD = 2[( ----- + 1)6-1]
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.
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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.
Advertising.
PRUDENTIAL'S INVESTMENT MANAGEMENT RESEARCH (IMR)--MAKING A DIFFERENCE IN THE
SELECTION OF PRUDENTIAL-SOLD PRODUCTS
The Basic Need for Due Diligence/What is Investment Management Research?
Identifying attractive investment strategies offered by high-quality investment management firms, evaluating their performance, and keeping abreast of relevant developments concerning such firms and strategies is both difficult and time consuming. It was this
realization that spurred the formation of the Investment Management Research (IMR) group in early 1998. IMR provides investment management research advice and consulting support to all groups and clients that use money management products offered by Prudential and its subsidiaries. IMR may represent the first centralized research department focused on the entire worldwide money management community within a major U.S.-based financial services firm.
The Team:
IMR has a highly specialized, well-trained staff of eight analysts devoted full-time to following the global money management community. Members of the department possess or are currently pursuing advanced degrees such as the Masters in Business Administration (MBA) and/or advanced certifications such as the Chartered Financial Analyst (CFA) designation. In addition, members of the team have significant financial-services industry experience, with diverse backgrounds, and prior analytical experience. The specialized knowledge and talent of the IMR team is a valuable resource for Prudential and its clients.
Mission
IMR's mission is:
. To conduct high-quality research and due diligence on investment management firms and the vehicles and strategies they offer;
. To provide superior insight on issues related to investment management topics and industry related issues; and
. To distribute such research in an effective manner to agents and financial advisors so that the clients of the firm may achieve their long-term financial goals and objectives.
Functions and Products of IMR:
. Analytical Input into Program Decisions
. Ensuring a World Class Menu of Investment Management Strategies
. Research Reports on Mutual Funds and Separate Accounts
. Mutual Fund Selection Guides
. White Papers on Investment Management Industry-Related Issues
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/
Performance Comparison of Different Types of Investments Over The Long Term (12/31/25 - 12/31/99)
[BAR CHART]
Common Stocks 11.4%
Long-Term Gov't. Bonds 5.1%
Inflation 3.1%
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/1/ Source: Ibbotson Associates. Used with permission. All rights reserved. Common stock returns are based on the Standard & Poor's 500 Composite Stock Price 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. Investors cannot invest directly in an index. Past performance is not a guarantee of future results.
Information About the Investment Advisers. Jennison Associates LLC has 30 years of experience in managing growth stock portfolios. Jennison uses a bottom-up stock selection approach to identify companies they believe exhibit superior absolute and relative earnings growth, and which are attractively valued. The Jennison team is led by Spiros "Sig" Segalas, recently named Manager of the Decade by Mutual Fund Magazine (11/30/99), and Kathleen McCarragher. Sig also manages the well-known Harbor Capital Appreciation Fund.
Alliance Capital Management, L.P. is a premier manager of growth-oriented mutual funds. Alliance selects securities based on proprietary research conducted by 270 investment professionals in 21 investment offices worldwide. The Alliance Large Capitalization Growth Team is led by Alfred Harrison, who has managed the well-known Alliance Premier Growth Fund since 1992. The Alliance team begins its stock selection with a primary research universe of about 500 companies, and this is narrowed to an "Alliance 100," from which stocks for the Fund are selected.
[BAR CHART]
Technology 75%
Capital Goods 27%
Basic Materials 24%
Consumer Cyclicals 21%
Communication Services 17%
Energy 16%
Financials Index 2%
Consumer Staples -8%
Healthcare -9%
Transportation -11%
Utilities -12%
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Source: Standard & Poor's Index Industry Group Performance
STRATEGIC PARTNERS SERIES
Statement of Assets and Liabilities STRATEGIC PARTNERS FOCUSED GROWTH FUND
------------------------------------------------------------------------------------------------
Assets March 15, 2000
--------------
Cash............................................................................. $100,000
Deferred offering costs.......................................................... 258,000
--------
Total assets.................................................................. 358,000
--------
Liabilities
Offering costs payable........................................................... 258,000
--------
Total liabilities............................................................. 258,000
--------
Net Assets (Note 1)
Applicable to 10,000 shares of beneficial interest............................ $100,000
========
Net assets were comprised of:
Shares of beneficial interest, at par...................................... $ 10
Paid-in capital in excess of par........................................... 99,990
--------
$100,000
========
Calculation of Offering Price
Class A:
Net asset value and redemption price per Class A share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
Maximum sales charge (5% of offering price)................................... .53
---------
Offering price to public...................................................... $10.53
=========
Class B:
Net asset value, offering price and redemption price per Class B share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
=========
Class C:
Net asset value and redemption price per Class C share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
Sales charge (1% of offering price)........................................... .10
---------
Offering price to public...................................................... $10.10
=========
Class Z:
Net asset value, offering price and redemption price per Class Z share
($25,000 / 2,500 shares of beneficial interest issued and outstanding)..... $10.00
=========
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STRATEGIC PARTNERS SERIES
Notes to Financial Statements STRATEGIC PARTNERS FOCUSED GROWTH FUND
-------------------------------------------------------------------------------
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Note 1.
Strategic Partners Series--Strategic Partners Focused Growth Fund (the 'Fund'), a separately managed series of the Strategic Partners Series (the 'Trust'), which was organized as a business trust in Delaware on January 26, 2000, is an open-end, non-diversified management investment company. The Fund had no significant operations other than the issuance of 2,500 shares each of Class A, Class B, Class C, and Class Z beneficial interest for $100,000 on March 15, 2000 to Prudential Investments Fund Management LLC (PIFM or Manager).
Certain costs incurred and to be incurred in connection with the initial offering of shares of the Fund, estimated at $258,000, will be deferred and amortized over the period of benefit, not to exceed 12 months from the date of the Fund's commencement of operations. Estimated organizational expenses of the Fund in the amount of approximately $12,100 incurred prior to the offering of the Fund's shares will be paid by the Manager.
The Trust will be entering into a management agreement with PIFM.
The management fee paid PIFM will be computed daily and payable monthly, at an annual rate of .90 of 1% of the average daily net assets of the Fund up to and including $1 billion and .85 of 1% on average net assets over $1 billion.
The Trust will be entering into a distribution agreement with Prudential Investment Management Services LLC (the Distributor or PIMS) for distribution of the Fund's shares. Pursuant to separate Plans of Distribution (the Class A Plan, the Class B Plan and the Class C Plan, collectively the Plans) adopted by the Trust under Rule 12b-1 of the Investment Company Act of 1940, the Distributor incurs 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), affiliates of the manager, commissions paid to, or on account of, other broker-dealers or certain financial institutions 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 Securities and Prusec associated with the sale of Fund shares, including lease, utility, communications and sales promotion expenses.
Pursuant to the Class A Plan, the Fund will compensate the Distributor for its expenses with respect to Class A shares at an annual rate of up to .30 of 1% of the average daily net asset value of the Class A shares. The Distributor has agreed to limit its distribution-related fees payable under the Class A Plan to .25 of 1% of the average daily net asset value of the Class A shares for the fiscal period ending February 28, 2001.
Pursuant to the Class B and Class C Plans, the Fund will compensate the Distributor 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 Class B and Class C shares. No distribution or service fees are paid to PIMS as distributor of the Class Z shares.
Prudential Mutual Fund Services LLC, a wholly owned subsidiary of PIFM, serves as the Trust's transfer agent.
In our opinion, the accompanying statement of assets and liabilities presents fairly, in all material respects, the financial position of Strategic Partners Series--Strategic Partners Focused Growth Fund (the 'Trust') at March 15, 2000, in conformity with accounting principles generally accepted in the United States. This financial statement is the responsibility of the Trust's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this financial statement in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
APPENDIX I--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
Asset Allocation
Asset allocation is a technique for reducing risk, providing balance. Asset allocation among different types of securities within an overall investment portfolio helps to reduce risk and to potentially provide stable returns, while enabling investors to work toward their financial goal(s). Asset allocation is also a strategy to gain exposure to better performing asset classes while maintaining investment in other asset classes.
Diversification
Diversification is a time-honored technique for reducing risk, providing "balance" to an overall portfolio and potentially achieving more stable returns. Owning a portfolio of securities mitigates the individual risks (and returns) of any one security. Additionally, diversification among types of securities reduces the risks (and general returns) of any one type of security.
Duration
Debt securities have varying levels of sensitivity to interest rates. As interest rates fluctuate, the value of a bond (or a bond portfolio) will increase or decrease. Longer term bonds are generally more sensitive to changes in interest rates. When interest rates fall, bond prices generally rise. Conversely, when interest rates rise, bond prices generally fall.
Duration is an approximation of the price sensitivity of a bond (or a bond portfolio) to interest rate changes. It measures the weighted average maturity of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest rate payments. Duration is expressed as a measure of time in years--the longer the duration of a bond (or a bond portfolio), the greater the impact of interest rate changes on the bond's (or the bond portfolio's) price. Duration differs from effective maturity in that duration takes into account call provisions, coupon rates and other factors. Duration measures interest rate risk only and not other risks, such as credit risk and, in the case of non- U.S. dollar denominated securities, currency risk. Effective maturity measures the final maturity dates of a bond (or a bond portfolio).
Market Timing
Market timing--buying securities when prices are low and selling them when prices are relatively higher--may not work for many investors because it is impossible to predict with certainty how the price of a security will fluctuate. However, owning a security for a long period of time may help investors offset short-term price volatility and realize positive returns.
Power of Compounding
Over time, the compounding of returns can significantly impact investment returns. Compounding is the effect of continuous investment on long-term investment results, by which the proceeds of capital appreciation (and income distributions, if elected) are reinvested to contribute to the overall growth of assets. The long-term investment results of compounding may be greater than that of an equivalent initial investment in which the proceeds of capital appreciation and income distributions are taken in cash.
Standard Deviation
Standard deviation is an absolute (non-relative) measure of volatility which, for a mutual fund, depicts how widely the returns varied over a certain period of time. When a fund has a high standard deviation, its range of performance has been very wide, implying greater volatility potential. Standard deviation is only one of several measures of a fund's volatility.
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a)(1) Agreement and Declaration of Trust. Incorporated by reference to Exhibit (a)(1) to the Registration Statement on Form N-1A filed on February 1, 2000 (File No. 333-95849).
(2) Certificate of Trust. Incorporated by reference to Exhibit (a)(2) to the Registration Statement on Form N-1A filed on February 1, 2000 (File No. 333-95849).
(b) By-laws.*
(c) Instruments Defining Rights of Shareholders.*
(d) (1) Form of Management Agreement between the Registrant and Prudential Investments Fund Management LLC.*
(2) Form of Sub-Management Agreement between Prudential Investments Fund Management LLC and The Prudential Investment Corporation.*
(3) Form of Subadvisory Agreement between The Prudential Investment Corporation and Jennison Associates LLC.*
(4) Form of Subadvisory Agreement between Prudential Investments Fund Management LLC and Alliance Capital Management, L.P.*
(e) (1) Form of Distribution Agreement with Prudential Investment Management Services LLC.*
(2) Form of Dealer Agreement.*
(g) (1) Custodian Contract between the Registrant and State Street Bank and Trust Company.*
(2) Amendment to Custodian Contract.*
(h) Form of Transfer Agency and Service Agreement between the Registrant and Prudential Mutual Fund Services LLC.*
(i) Opinion and consent of Counsel.*
(j) Consent of independent accountants.*
(m) (1) Form of Distribution and Service Plan for Class A shares.*
(2) Form of Distribution and Service Plan for Class B shares.*
(3) Form of Distribution and Service Plan for Class C shares.*
(n) Rule 18f-3 Plan.*
(p) (1) Fund Code of Ethics.*
(2) Manager, Sub-Manager and Distributor Code of Ethics.*
(3) Alliance Capital Management L.P. Code of Ethics.*
(4) Jennison Associates LLC Code of Ethics.*
* Filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification.
As permitted by Sections 17(h) and (i) of the Investment Company Act of 1940 (the 1940 Act) and pursuant to Del. Code Ann. title 12 sec. 3817, a Delaware business trust may provide in its governing instrument for the indemnification of its officers and trustees from and against any and all claims and demands whatsoever. Article VII, Section 2 of the Agreement and Declaration of Trust (Exhibit a(1) to the Registration Statement) states that (1) the Registrant shall indemnify any present trustee or officer to the fullest extent permitted by law against liability, and all expenses reasonably incurred by him or her in connection with any claim, action, suit or proceeding in which he or she is involved by virtue of his or her service as a trustee, officer or both, and against any amount incurred in settlement thereof and (2) all persons extending credit to, contracting with or having any claim against the
Registrant shall look only to the assets of the appropriate Series (or if no Series has yet been established, only to the assets of the Registrant). Indemnification will not be provided to a person adjudged by a court or other adjudicatory body to be liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties (collectively "disabling conduct"). In the event of a settlement, no indemnification may be provided unless there has been a determination, as specified in the Agreement and Declaration of Trust, that the officer or trustee did not engage in disabling conduct. In addition, Article XI of Registrant's By-Laws (Exhibit b to the Registration Statement) provides that any trustee, officer, employee or other agent of Registrant shall be indemnified by the Registrant against all liabilities and expenses subject to certain limitations and exceptions contained in Article XI of the By-Laws. As permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of the Distribution Agreement (Exhibit e to the Registration Statement), the 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, as amended (Securities Act) may be permitted to Trustees, 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 Trustee, 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 Trustee, 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 will purchase an insurance policy insuring its officers and Trustees against liabilities, and certain costs of defending claims against such officers and Trustees, to the extent such officers and Trustees 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 Trustees under certain circumstances.
Section 8 of the Management Agreement (Exhibit d(1) to the Registration Statement), Section 4 of the Sub-Management Agreement (Exhibit d(2) to the Registration Statement) and Section 4 of each Subadvisory Agreement (Exhibits d(3) and d(4) to the Registration Statement) limit the liability of Prudential Investments Fund Management LLC (PIFM), The Prudential Investment Corporation (PIC), Jennison Associates LLC and Alliance Capital Management, L.P., 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 the 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 or her office.
Under its Agreement and Declaration of Trust, 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.
Item 26. Business and Other Connections of Investment Adviser.
(a) Prudential Investments Fund Management LLC
See "How the Fund is Managed--Manager" in the Prospectus constituting Part A of this Registration Statement and "Investment Advisory and Other Services" in the Statement of Additional Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PIFM are listed in Schedules A and D of Form ADV of PIFM as currently on file with the Securities and Exchange Commission, the text of which is hereby incorporated by reference (File No. 801-31104).
The business and other connections of PIFM's directors and principal executive officers are set forth below. Except as otherwise indicated, the address of each person is Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077.
Name and Address Position with PIFM Principal Occupations
---------------- ------------------ ---------------------
David R. Odenath, Jr. Officer in Charge, Officer in Charge, President, Chief Executive Officer
President, Chief and Chief Operating Officer, PIFM; Senior Vice
Executive Officer President, The Prudential Insurance Company of
and Chief Operating America (Prudential)
Officer
Robert F. Gunia Executive Vice Executive Vice President and Chief Administrative
President and Chief Officer, PIFM; Vice President, Prudential; President,
Administrative Prudential Investment Management Services LLC (PIMS)
Officer
William V. Healey Executive Vice Executive Vice President, Chief Legal Officer and
President, Chief Secretary, PIFM; Vice President and Associate General
Legal Officer and Counsel, Prudential; Senior Vice President, Chief
Secretary Legal Officer and Secretary, PIMS
Brian W. Henderson Executive Vice Executive Vice President, PIFM; Senior Vice President
President and Chief Operating Officer, PIMS
Stephen Pelletier Executive Vice Executive Vice President, PIFM
President
Judy A. Rice Executive Vice Executive Vice President, PIFM
President
Lynn M. Waldvogel Executive Vice Executive Vice President, PIFM
President
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Sub-Manager" in the Prospectus constituting
Part A of this Registration Statement and "Investment Advisory and Other
Services" 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 07102.
Name and Address Position with PIC Principal Occupations
---------------- ----------------- ---------------------
Jeffrey Hiller Chief Compliance Chief Compliance Officer, Prudential Global Asset
Officer Management
John R. Strangfeld, Jr. Chairman of the Board, President of Prudential Global Asset Management Group
President, Chief of Prudential; Senior Vice President, Prudential;
Executive Officer and Chairman of the Board, President, Chief Executive
Director Officer and Director, PIC
Bernard Winograd Senior Vice President Chief Executive Officer, Prudential Real Estate
and Investors; Senior Vice President and Director, PIC
Director
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(c) Jennison Associates LLC.
See "How the Fund is Managed--Investment Advisers" in the Prospectus constituting Part A of this Registration Statement and "Investment Advisory and Other Services" in the Statement of Additional Information constituting
Part B of this Registration Statement.
The business and other connections of Jennison directors and executive officers are listed in its Form ADV as currently on file with the Securities and Exchange Commission (File No. 801-5608), the text of which is hereby incorporated by reference.
(d) Alliance Capital Management, L.P.
See "How the Fund is Managed--Investment Advisers" in the Prospectus constituting Part A of this Registration Statement and "Investment Advisory and Other Services" in the Statement of Additional Information constituting
Part B of this Registration Statement.
The business and other connections of the directors and executive officers of Alliance Capital Management Corporation, the general partner of Alliance Capital Management, L.P., are listed in its Form ADV as currently on file with the Securities and Exchange Commission (File No. 801-32361), the text of which is hereby incorporated by reference.
Item 27. Principal Underwriters.
(a) Prudential Investment Management Services LLC (PIMS)
PIMS is distributor for Cash Accumulation Trust, COMMAND Government Fund, COMMAND Money Fund, COMMAND Tax-Free Fund, Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund), Prudential Balanced Fund, Prudential California Municipal Fund, Prudential Diversified Bond Fund, Inc., Prudential Diversified Funds, 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 Total Return 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 International Bond Fund, Inc., Prudential Mid-Cap Value Fund, Prudential MoneyMart Assets, 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 Sector Funds, Inc., Prudential Small-Cap Quantum Fund, Inc., Prudential Small Company Value Fund, Inc., Prudential Special Money Market Fund, Inc., Prudential Structured Maturity Fund, Inc., Prudential 20/20 Focus Fund, Prudential Tax-Free Money Fund, Inc., Prudential Tax-Managed Funds, Prudential World Fund, Inc., Strategic Partners Series, Target Funds, The Prudential Investment Portfolios, Inc. and The Target Portfolio Trust.
PIMS is also distributor of the following unit investment trusts: Separate Accounts: Prudential's Gibraltar Fund, Inc., The Prudential Variable Contract Account -2, The Prudential Variable Contract Account -10, The Prudential Variable Contract Account -11, The Prudential Variable Contract Account -24, The Prudential Variable Contract Account GI -2, The Prudential Discovery Select Group Variable Contract Account, The Pruco Life Flexible Premium Variable Annuity Account, The Pruco Life of New Jersey Flexible Premium Variable Annuity Account, The Prudential Individual Variable Contract Account and The Prudential Qualified Individual Variable Contract Account.
(b) Information concerning the directors and officers of PIMS is set forth below.
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
------- ------------- -------------
Margaret Deverell.. Vice President and Chief Financial Officer None
Robert F. Gunia.... President None
Kevin Frawley...... Senior Vice President and Compliance Officer None
213 Washington
Street
Newark, NJ 07102
William V. Healey.. Senior Vice President, Secretary and None
Chief Legal Officer
Brian W. Henderson. Senior Vice President and Officer None
John R. Strangfeld, Advisory Board Member None
Jr................
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(c) Registrant has no principal underwriter who is not an affiliated person of the Registrant.
Item 28. 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 Trust Company, One Heritage Drive, North Quincy, Massachusetts 02171; The Prudential Investment Corporation, Prudential Plaza, 745 Broad Street, Newark, New Jersey 07102; the Registrant, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077; Jennison Associates LLC, 466 Lexington Avenue, New York,
New York 10017; Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, New York, 10105 and 601 Second Avenue South, Suite 5000,
Minneapolis, Minnesota 55402; and Prudential Mutual Fund Services LLC, Raritan
Plaza One, Edison, New Jersey 08837. Documents required by Rules 31a-1(b)(5),
(6), (7), (9), (10) and (11) and 31a-1(f) and Rules 31a-1(b)(4) and (11) and
31a-1(d) will be kept at Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077, 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 LLC.
Item 29. Management Services.
Other than as set forth under the captions "How the Fund is Managed-- Manager," "How the Fund is Managed-- Sub-Manager," "How the Fund is Managed-- Investment Advisers" and "How the Fund is Managed--Distributor" in the Prospectus and the caption "Investment Advisory and Other Services" 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 30. Undertakings.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Newark, and State of New Jersey, on the 24th day of March, 2000.
STRATEGIC PARTNERS SERIES
By /s/ John R. Strangfeld, Jr. --------------------------------- John R. Strangfeld, Jr., 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/ Eugene C. Dorsey Trustee March 24, 2000
--------------------------------------
Eugene C. Dorsey
/s/ Robert F. Gunia Trustee March 24, 2000
--------------------------------------
Robert F. Gunia
/s/ Robert E. LaBlanc Trustee March 24, 2000
--------------------------------------
Robert E. LaBlanc
/s/ Douglas H. McCorkindale Trustee March 24, 2000
--------------------------------------
Douglas H. McCorkindale
/s/ Thomas T. Mooney Trustee March 24, 2000
--------------------------------------
Thomas T. Mooney
/s/ David R. Odenath, Jr. Trustee March 24, 2000
--------------------------------------
David R. Odenath, Jr.
/s/ Stephen Stoneburn Trustee March 24, 2000
--------------------------------------
Stephen Stoneburn
/s/ John R. Strangfeld, Jr. President and Trustee March 24, 2000
--------------------------------------
John R. Strangfeld, Jr.
/s/ Clay T. Whitehead Trustee March 24, 2000
--------------------------------------
Clay T. Whitehead
/s/ Grace C. Torres Treasurer and Principal Financial March 24, 2000
--------------------------------------
Grace C. Torres and Accounting Officer
|
STRATEGIC PARTNERS SERIES
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
(a)(1) Agreement and Declaration of Trust. Incorporated by reference
to Exhibit (a)(1) to the Registration Statement on Form N-1A
filed on February 1, 2000 (File No. 333-95849).
(a)(2) Certificate of Trust. Incorporated by reference to Exhibit
(a)(2) to the Registration Statement on Form N-1A filed on
February 1, 2000 (File No. 333-95849).
(b) By-laws.*
(c) Instruments Defining Rights of Shareholders.*
(d)(1) Form of Management Agreement between the Registrant and
Prudential Investments Fund Management LLC.*
(d)(2) Form of Sub-Management Agreement between Prudential Investments
Fund Management LLC and The Prudential Investment Corporation.*
(d)(3) Form of Subadvisory Agreement between The Prudential Investment
Corporation and Jennison Associates LLC.*
(d)(4) Form of Subadvisory Agreement between Prudential Investments
Fund Management LLC and Alliance Capital Management, L.P.*
(e)(1) Form of Distribution Agreement with Prudential Investment
Management Services LLC.*
(e)(2) Form of Dealer Agreement.*
(g)(1) Custodian Contract between the Registrant and State Street Bank
and Trust Company.*
(g)(2) Amendment to Custodian Contract.*
(h) Form of Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services LLC.*
(i) Opinion and consent of Counsel.*
(j) Consent of independent accountants.*
(m)(1) Form of Distribution and Service Plan for Class A shares.*
(m)(2) Form of Distribution and Service Plan for Class B shares.*
(m)(3) Form of Distribution and Service Plan for Class C shares.*
(n) Rule 18f-3 Plan.*
(p)(1) Fund Code of Ethics.*
(p)(2) Manager, Sub-Manager and Distributor Code of Ethics.*
(p)(3) Alliance Capital Management L.P. Code of Ethics.*
(p)(4) Jennison Associates LLC Code of Ethics.*
|
*Filed herewith.
Exhibit 99.(b)
BY-LAWS
OF
STRATEGIC PARTNERS SERIES
TABLE OF CONTENTS
Page
ARTICLE I - AGREEMENT AND DECLARATION OF TRUST......................................... 1
Section 1. Agreement and Declaration of Trust........................................ 1
Section 2. Definitions............................................................... 1
ARTICLE II - OFFICES................................................................... 1
Section 1. Principal Office.......................................................... 1
Section 2. Registered Office and Other Office........................................ 1
ARTICLE III - SHAREHOLDERS............................................................. 1
Section 1. Meetings.................................................................. 1
Section 2. Notice of Meetings........................................................ 2
Section 3. Record Date for Meetings.................................................. 2
Section 4. Proxies................................................................... 2
Section 5. Inspection of Books....................................................... 3
Section 6. Action without Meeting.................................................... 3
Section 7. Application of this Article............................................... 4
ARTICLE IV - TRUSTEES.................................................................. 4
Section 1. Meetings of the Trustees.................................................. 4
Section 2. Quorum and Manner of Acting............................................... 5
ARTICLE V - COMMITTEES................................................................. 5
Section 1. Executive and Other Committees............................................ 5
Section 2. Meetings, Quorum and Manner of Acting..................................... 5
ARTICLE VI - OFFICERS.................................................................. 6
Section 1. General Provisions....................................................... 6
Section 2. Term of Office and Qualifications........................................ 6
Section 3. Removal.................................................................. 6
Section 4. Powers and Duties of the Chairman........................................ 6
Section 5. Powers and Duties of the President....................................... 7
Section 6. Powers and Duties of the Vice President.................................. 7
Section 7. Powers and Duties of the Treasurer....................................... 7
Section 8. Powers and Duties of the Secretary....................................... 8
Section 9. Powers and Duties of Assistant Treasurers................................ 8
Section 10. Powers and Duties of Assistant Secretaries............................... 8
Section 11. Compensation of Officers and Trustees.................................... 8
ARTICLE VII - FISCAL YEAR.............................................................. 9
|
ARTICLE VIII - SEAL.................................................................... 9 ARTICLE IX - WAIVERS OF NOTICE......................................................... 9 ARTICLE X - CUSTODY OF SECURITIES...................................................... 9 Section 1. Employment of a Custodian............................................... 9 Section 2. Action upon Termination of Custodian Agreement.......................... 9 Section 3. Provisions of Custodian Contract........................................ 10 Section 4. Central Certificate System.............................................. 11 ARTICLE XI - INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND OTHER AGENTS......... 11 Section 1. Agents, Proceedings, Expenses........................................... 11 Section 2. Indemnification......................................................... 11 Section 3. Limitations, Settlements................................................ 12 Section 4. Insurance, Rights Not Exclusive......................................... 12 Section 5. Advance of Expenses..................................................... 12 Section 6. Fiduciaries of Employee Benefit Plan.................................... 13 ARTICLE XII - AMENDMENTS............................................................... 13 |
BY-LAWS
OF
STRATEGIC PARTNERS SERIES
ARTICLE I
Agreement and Declaration of Trust
Section 1. Agreement and Declaration of Trust. These By-Laws shall be subject to the Agreement and Declaration of Trust, as from time to time amended, supplemented or restated (the "Declaration of Trust") of Strategic Partners Series (the "Trust").
Section 2. Definitions. Unless otherwise defined herein, the terms used herein have the respective meanings given them in the Declaration of Trust.
ARTICLE II
Offices
Section 1. Principal Office. The principal office of the Trust shall be located in the City of Newark, State of New Jersey, or such other location as the Trustees may from time to time determine.
Section 2. Registered Office and Other Offices. The registered office of the Trust shall be located in the City of Wilmington, State of Delaware or such other location within the State of Delaware as the Trustees may from time to time determine. The Trust may establish and maintain such other offices and places of business as the Trustees may from time to time determine.
ARTICLE III
Shareholders
Section 1. Meetings. Meetings of the Shareholders shall be held at the principal executive offices of the Trust or at such other place within the United States of America as the Trustees shall designate. Meetings of the Shareholders shall be called by the Secretary whenever (i) ordered by the Trustees or (ii) for the purpose of voting on the removal of any Trustee, requested in writing by Shareholders holding at least ten percent (10%) of the outstanding Shares entitled to vote. If the Secretary, when so ordered or requested, refuses or neglects for more than 10 days to call such meetings, the Trustees or the
Shareholders so requesting, may, in the name of the Secretary, call the meeting by giving notice thereof in the manner required when notice is given by the Secretary.
Section 2. Notice of Meetings. Except as otherwise herein provided, notice of all meetings of the Shareholders, stating the time, place and purposes of the meeting, shall be given by the Secretary by delivering or mailing, postage prepaid, to each Shareholder entitled to vote at said meeting at his or her address as recorded on the register of the Trust at least ten (10) days and not more than ninety (90) days before the meeting. Only the business stated in the notice of the meeting shall be considered at such meeting. Notice of adjournment of a Shareholders' meeting to another time or place need not be given, if such time and place are announced at the meeting and the adjourned meeting is held within a reasonable time after the date set for the original meeting. No notice need be given to any Shareholder who shall have failed to inform the Trust of his or her current address or if a written waiver of notice, executed before or after the meeting by the Shareholder or his or her attorney thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings. For the purpose of determining the Shareholders who are entitled to notice of and to vote at any meeting, the Trustees may from time to time close the transfer books for such period, not exceeding thirty (30) days, as the Trustees may determine; or without closing the transfer books the Trustees may fix a date not more than ninety (90) days prior to the date of any meeting of Shareholders as a record date for the determination of the persons to be treated as Shareholders of record for such purpose.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote either in person or by written proxy signed by the Shareholder, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken; provided, however, that notwithstanding any other provision of this Section 4 to the contrary, the Trustees may at any time adopt one or more electronic, telecommunication, telephonic, computerized or other alternatives to execution of a written instrument that will enable holders of Shares entitled to vote at any meeting to appoint a proxy to vote such holders' Shares at such meeting. Proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust. Only Shareholders of record shall be entitled to vote. When any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or the legal control of any other person as regards the charge or management of such Share, he or she may vote by his or her guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. At all meetings of the Shareholders, unless the voting is conducted by inspectors, all questions relating to the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided by the chairman of the meeting. Except as otherwise provided herein or in the Declaration of Trust, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Shareholders were shareholders of a Delaware corporation.
Section 5. Inspection of Books. The Trustees shall from time to time determine whether and to what extent, and at what times and places, and under what conditions and regulations the accounts and books of the Trust or any of them shall be open to the inspection of the Shareholders; and no Shareholder shall have any right to inspect any account or book or document of the Trust except as conferred by law or otherwise by the Trustees or by resolution of the Shareholders.
Section 6. Action without Meeting. Any action that may be taken at any meeting of Shareholders may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by the holders of outstanding Shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all Shares entitled to vote on that action were present and voted. All such consents shall be filed with the records of Shareholder meetings. Such consents shall be treated for all purposes as a vote taken at a meeting of Shareholders.
Section 7. Application of this Article. Meetings of Shareholders shall consist of Shareholders of any Series (or Class thereof) or of all Shareholders, as determined pursuant to the Declaration of Trust, and this Article shall be construed accordingly.
ARTICLE IV
Trustees
Section 1. Meetings of the Trustees. The Trustees may in their discretion provide for regular or stated meetings of the Trustees. Notice of regular or stated meetings need not be given. Meetings of the Trustees other than regular or stated meetings shall be held whenever called by the Chairman, the President, or by any two of the Trustees, at the time being in office. Notice of the time and place of each meeting other than regular or stated meetings shall be given by the Secretary or an Assistant Secretary or by the officer or Trustees calling the meeting and shall be delivered or mailed, postage prepaid, to each Trustee at least two days before the meeting, or shall be telegraphed, cabled, or wired to each Trustee at his or her business address, or personally delivered to him or her, at least one day before the meeting. Such notice may, however, be waived by any Trustees. Notice of a meeting need not be given to any Trustee if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her. A notice or waiver of notice need not specify the purpose of any meeting. The Trustees may meet by means of a telephone conference circuit or similar communications equipment by means of which all persons participating in the meeting are connected, which meeting shall be deemed to have been held at a place designated by the Trustees at the meeting. Participation in a telephone conference meeting shall constitute presence in person at such meeting. Any action required or permitted to be taken at any meeting of the Trustees may be taken by the Trustees without a meeting if a majority of the Trustees then in office (or such higher number of Trustees as would be required to act on the matter under the Declaration of Trust, these By-Laws or applicable law if a meeting were held) consent to the action in writing and the written consents are filed with the records of the Trustees' meetings. Such consents shall be treated for all purposes as a vote taken at a meeting of the
Trustees. Notwithstanding the foregoing, all actions of the Trustees shall be taken in compliance with the provisions of the Investment Company Act of 1940, as amended.
Section 2. Quorum and Manner of Acting. A majority of the Trustees then in office shall constitute a quorum for the transaction of business. If at any meeting of the Trustees 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 be obtained. Notice of an adjourned meeting need not be given. The act of the majority of the Trustees present at any meeting at which there is a quorum shall be the act of the Trustees, except as may be otherwise specifically provided by law or by the Declaration of Trust or by these By-Laws.
ARTICLE V
Committees
Section 1. Operating and Other Committees. The Trustees by vote of a majority of all the Trustees may elect from their own number an Operating Committee to consist of not less than three (3) Trustees to hold office at the pleasure of the Trustees, which shall have the power to conduct the current and ordinary business of the Trust while the Trustees are not in session, including the purchase and sale of securities and the designation of securities to be delivered upon redemption of Shares of the Trust, and such other powers of the Trustees as the Trustees may, from time to time, delegate to them except those powers by law, the Declaration of Trust or these By-laws they are prohibited from delegating. The Trustees may also elect from their own number or otherwise other Committees from time to time, the number composing such Committees, the powers conferred upon the same (subject to the same limitations as with respect to the Operating Committee), the terms of membership on such Committees and the termination or circumstances giving rise to the termination of such Committees to be determined by the Trustees. The Trustees may designate a chairman of any such Committee. In the absence of such designation the Committee may elect its own chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1) provide for stated meetings of any Committees, (2) specify the manner of calling and notice required for a special meeting of any Committee, (3) specify the number of members of a Committee required to constitute a quorum and the numbers of members of a Committee required to exercise specified powers delegated to such
Committee, (4) authorize the making of decisions to exercise specified powers by written assent of the requisite number of members of a Committee without a meeting, and (5) authorize the members of a Committee to meet by means of a telephone conference circuit. Each Committee shall keep regular minutes of its meetings and records of decisions taken without a meeting and cause them to be recorded in a book designated for that purpose and kept at the principal executive offices of the Trust.
ARTICLE VI
Officers
Section 1. General Provisions. The officers of the Trust shall be a President, a Treasurer and a Secretary, who shall be elected by the Trustees. The Trustees may elect or appoint such other officers or agents as the business of the Trust may require, including a Chairman of the Board ("Chairman"), one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may delegate to any officer or Committee the power to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided by law, the Declaration of Trust or these By-Laws, the President, the Treasurer and the Secretary, and all other officers shall hold office at the pleasure of the Trustees. The Secretary and Treasurer may be the same person. A Vice President and the Treasurer or a Vice President and the Secretary may be the same person, but the offices of Vice President, Secretary and Treasurer shall not be held by the same person. The President shall hold no other office, but may be a Trustee of the Trust. Except as above provided, any two offices may be held by the same person. The Chairman, if there be one, shall be a Trustee and may but need not be a Shareholder. Any other officer may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of the Trustees, may remove any officer with or without cause, by a vote of a majority of the Trustees then in office. Any officer or agent appointed by an officer or committee may be removed with or without cause by such appointing officer or committee.
Section 4. Powers and Duties of the Chairman. The Chairman, if such an officer is elected, shall if present preside at meetings of the Shareholders and the Trustees, shall be the chief executive officer of the Trust and shall, subject to the control of the Trustees, have general supervision, direction and control
of the business and the officers of the Trust and exercise and perform such other powers and duties as may be from time to time assigned to him by the Trustees or prescribed by the Declaration of Trust or these By-Laws.
Section 5. Powers and Duties of the President. Subject to the powers of the Chairman, if there be such an officer, the President shall be the principal executive officer of the Trust. He or she may call meetings of the Trustees and of any Committee thereof when he or she deems it necessary and, in the absence of the Chairman, shall preside at all meetings of the Shareholders and the Trustees. Subject to the control of the Trustees, the Chairman and any Committees of the Trustees, within their respective spheres, as provided by the Trustees, the President shall at all times exercise a general supervision and direction over the affairs of the Trust. The President shall have the power to employ attorneys, accountants and other advisers and agents for the Trust and to employ such subordinate officers, agents, clerks and employees as he or she may find necessary to transact the business of the Trust. He or she shall also have the power to grant, issue, execute or sign such powers of attorney, proxies or other documents as may be deemed advisable or necessary in furtherance of the interests of the Trust. The President shall have such other powers and duties as from time to time may be conferred upon or assigned to him or her by the Trustees.
Section 6. Powers and Duties of the Vice President. In the absence or disability of the President, the Vice President or, if there be more than one Vice President, any Vice President designated by the Trustees shall perform all the duties and may exercise any of the powers of the President, subject to the control of the Trustees. Each Vice President shall perform such other duties as may be assigned to him or her from time to time by the Trustees or the President.
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be the principal financial and accounting officer of the Trust. The Treasurer shall deliver all funds of the Trust which may come into his or her hands to such Custodian as the Trustees may employ pursuant to Article X of these By-Laws. He or she shall render a statement of condition of the finances of the Trust to the Trustee as often as they shall require the same and he or she shall in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Trustees. The Treasurer
shall give a bond for the faithful discharge of his or her duties, if required so to do by the Trustees, in such sum and with such surety or sureties as the Trustees shall require.
Section 8. Powers and Duties of the Secretary. The Secretary shall keep the minutes of all meetings of the Trustees and of the Shareholders in proper books provided for that purpose; he or she shall have custody of the seal of the Trust; he or she shall have charge of the Share transfer books, lists and records unless the same are in the charge of the Transfer Agent. The Secretary shall attend to the giving and serving of all notices by the Trust in accordance with the provisions of these By-laws and as required by law; and subject to these By-Laws, he or she shall in general perform all duties incident to the office of the Secretary and such other duties as from time to time may be assigned to him or her by the Trustees.
Section 9. Powers and Duties of Assistant Treasurers. In the absence or disability of the Treasurer, any Assistant Treasurer designated by the Trustees shall perform all the duties, and may exercise any of the powers, of the Treasurer. Each Assistant Treasurer shall perform such other duties as from time to time may be assigned to him or her by the Trustees. Each Assistant Treasurer shall give a bond for the faithful discharge of his or her duties, if required so to do by the Trustees, in such sum and with such surety or sureties as the Trustees shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the absence or disability of the Secretary, any Assistant Secretary designated by the Trustees shall perform all the duties, and may exercise any of the powers, of the Secretary. Each Assistant Secretary shall perform such other duties as from time to time may be assigned to him or her by the Trustees.
Section 11. Compensation of Officers and Trustees. Subject to any applicable provisions of the Declaration of Trust, the compensation of the officers and Trustees shall be fixed from time to time by the Trustees or, in the case of officers, by any Committee or officer upon whom such power may be conferred by the Trustees. No officer shall be prevented from receiving such compensation as such officer by reason of the fact that he or she is also a Trustee.
ARTICLE VII
Fiscal Year
The fiscal year of the Trust shall end on such date as the Trustees shall from time to time determine.
ARTICLE VIII
Seal
The Trustees may adopt a seal which shall be in such form and shall have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
Waivers of Notice
Whenever any notice whatever is required to be given by law, the Declaration of Trust or these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. A notice shall be deemed to have been telegraphed, cabled or wired for the purposes of these By-Laws when it has been delivered to a representative of any telegraph, cable or wire company with instructions that it be telegraphed, cabled or wired.
ARTICLE X
Custody of Securities
Section 1. Employment of a Custodian. The Trust shall place and at all times maintain in the custody of a Custodian (including any sub-custodian for the Custodian) all funds, securities and similar investments included in the Trust Property. The Custodian (and any sub-custodian) shall be a bank having not less than $20,000,000 aggregate capital, surplus and undivided profits and shall be appointed from time to time by the Trustees, who shall fix its remuneration.
Section 2. Action upon Termination of Custodian Agreement. Upon termination of a Custodian Agreement or inability of the Custodian to continue to serve, the Trustees shall promptly appoint a successor custodian, but in the event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as possible a special meeting of the Shareholders to determine whether the Trust shall function without a custodian or shall be liquidated. If so directed by a vote of holders of the majority of the outstanding Shares entitled to vote, the Custodian shall deliver and pay over all Trust Property held by it as specified in such vote.
Section 3. Provisions of Custodian Contract. The following provisions shall apply to the employment of a Custodian and to any contract entered into with the Custodian so employed: The Trustees shall cause to be delivered to the Custodian all securities included in the Trust Property or to which the Trust may become entitled, and shall order the same to be delivered by the Custodian only in completion of a sale, exchange, transfer, pledge, loan of portfolio securities to another person, or other disposition thereof, all as the Trustees may generally or from time to time require or approve or to a successor Custodian; and the Trustees shall cause all funds included in the Trust Property or to which it may become entitled to be paid to the Custodian, and shall order the same disbursed only for investment against delivery of the securities acquired (including securities acquired under a repurchase agreement), or the return of cash held as collateral for loans of portfolio securities, or in payment of expenses, including management compensation, and liabilities of the Trust, including distributions to Shareholders, or to a successor Custodian. Notwithstanding anything to the contrary to these By-Laws, upon receipt of proper instructions, which may be standing instructions, the Custodian may deliver funds in the following cases: In connection with repurchase agreements, the Custodian shall transmit prior to receipt on behalf of the Fund of any securities or other property, funds from the Fund's custodian account to a special custodian approved by the Trustees of the Fund, which funds shall be used to pay for securities to be purchased by the Fund subject to the Fund's obligation to sell and the seller's obligation to repurchase such securities (in such case, the securities shall be held in the custody of the special custodian); in connection with the Trust's purchase or sale of financial futures contracts, the Custodian shall transmit, prior to receipt on behalf of the Fund of any securities or other property, funds from the Trust's custodian account in order to furnish and to maintain funds with brokers as margin to guarantee the performance of the Trust's futures obligations in accordance with the applicable requirements of commodities exchanges and brokers.
Section 4. Central Certificate System. Subject to applicable rules, regulations and orders adopted by the Commission, the Trustees may direct the Custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, or such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust.
ARTICLE XI
Indemnification of Trustees, Officers,
Employees and Other Agents
Section 1. Agents, Proceedings, Expenses. For the purpose of this Article, "agent" means any Person who is or was a Trustee, officer, employee or other agent of the Trust or is or was serving at the request of the Trust as a trustee, director, officer, employee or agent of another organization in which the Trust has any interest as a shareholder, creditor or otherwise; "proceeding" means any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including appeals); and "expenses" includes, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and all other liabilities whatsoever.
Section 2. Indemnification. The Trust shall indemnify agents of the Trust (each a "Covered Person") against judgments, fines, settlements and expenses to the fullest extent authorized, and in the manner permitted, by applicable federal and state law.
Section 3. Insurance, Rights Not Exclusive. The rights of indemnification herein provided may be insured against by policies maintained by the Trust on behalf of any agent, shall be severable, shall not be exclusive of or affect any other rights to which any agent may now or hereafter be entitled and shall inure to the benefit of the heirs, executors and administrators of any agent. Pursuant and subject to Sections 2 and 4, the Trust shall indemnify each Covered Person against, or advance the expenses of any Covered Person for, the amount of any deductible provided in any liability insurance policy maintained by the Trust.
Section 4. Advance of Expenses. The Trust shall advance the expenses of Covered Persons who are parties to any Proceeding to the fullest extent authorized, and in the manner permitted, by applicable federal and state law. For purposes of this paragraph, "Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
Section 5. Fiduciaries of Employee Benefit Plan. The Article does not apply to any proceeding against any Trustee, investment manager or other fiduciary of an employee benefit plan in that person's capacity as such, even though that person may also be an agent of this Trust as defined in Section 1 of this Article. Nothing contained in this Article shall limit any right to indemnification to which such Trustee, investment manager, or other fiduciary may be entitled by contract or otherwise which shall be enforceable to the extent permitted by applicable law other than this Article.
ARTICLE XII
Amendments
These By-Laws, or any of them, may be altered, amended or repealed, or new By-laws may be adopted by (a) a vote of holders of the majority of the outstanding Shares entitled to vote or (b) by the Trustees, provided, however, that no By-law may be amended, adopted or repealed by the Trustees if such amendment, adoption or repeal is required by applicable law, the Declaration of Trust or these By-Laws, to be submitted to a vote of the Shareholders.
Exhibit 99.(c)
The following provisions of the Declaration of Trust and By-Laws of Strategic Partners Series constitute all instruments defining the rights of holders of the securities proposed to be offered:
I. Relevant Provisions of Declaration of Trust:
Article III Shares Article IV The Board of Trustees Article V Shareholders' Voting Powers and Meetings Article VIII, Section 2 Termination of Trust or Series Article VIII, Section 4 Amendments Article VIII, Section 9 Derivative Actions
II. Relevant Provisions of By-Laws:
Article III Shareholders
Article XII Amendments
Exhibit 99.(d)(1)
Agreement made this ____ day of March, 2000, between Strategic Partners Series (the Trust), a Delaware business trust, on behalf of its series, Strategic Partners Focused Growth Fund (the Fund), and Prudential Investments Fund Management LLC, a New York limited liability company (the Manager).
W I T N E S S E T H
WHEREAS, the Trust is an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, the Trust 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 business affairs, and the Manager is willing to render such investment advisory and administrative services;
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Manager to act as manager of the Fund and administrator of its business 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 agreements with: (i) Alliance Capital Management, L.P. (Alliance or the Subadviser) pursuant to which Alliance shall furnish to the Fund the investment advisory services in connection with the management of a portion of the Fund (the Subadvisory Agreement), and (ii) The Prudential Investment Corporation (PIC or the Sub-Manager) pursuant to which PIC shall furnish to the Fund certain advisory and recordkeeping services with respect to the portion of the Fund to be advised by Jennison Associates LLC (the Sub-Management 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 Trustees of the Trust,
the Manager shall administer the Fund's business 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 objective, 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/or 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 Declaration of Trust and By-Laws of the Trust and the Prospectus (as each of the foregoing is hereinafter defined) of the Fund and with the instructions and directions of the Board of Trustees of the Trust and will conform to and comply with the requirements of the 1940 Act and all other applicable federal and state laws and regulations.
(c) The Manager shall determine the securities and futures contracts to be purchased or sold by 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 Trust's Registration Statement and the Fund's Prospectus (hereinafter defined) or as the Board of Trustees 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 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 Trust's Board of Trustees 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, the Sub-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 to the Trust's Board of Trustees 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 Trust's Custodian).
(f) The Manager shall provide to the Trust's Custodian on each business day 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 Trust 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) Declaration of Trust of the Trust, as filed with the Secretary of State of Delaware (such Declaration of Trust, as in effect on the date hereof
and as amended from time to time, are herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Trustees of the Trust authorizing the appointment of the Manager and approving the form of this agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of 1933, as amended, on Form N-1A (the Registration Statement), as filed with the Securities and Exchange Commission (the Commission) relating to the Trust, including the Fund and its shares, and all amendments thereto;
(e) Notification of Registration of the Trust under the 1940 Act on Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the 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 Trustees or officers of the Trust to serve in the capacities in which they are elected. All services to be furnished by the Manager under this Agreement may be furnished through the medium of any such directors, officers or employees of the Manager.
5. The Manager shall keep the 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 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 Trustees who are not affiliated persons of the Manager or the Fund's Sub-Manager or Subadviser,
(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 fees payable to Alliance pursuant to the Subadvisory Agreement and fees payable to PIC pursuant to the Sub-Management 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 Trustees who are not affiliated persons of the Manager or the Fund's Sub-Manager or Subadviser,
(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 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 Trustees of the Trust, 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 Trust's Transfer and Dividend Disbursing Agent, which may be the Custodian, that relate to the maintenance of each shareholder account,
(e) the charges and expenses of legal counsel and independent accountants for the 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 typesetting and printing stock certificates representing shares of the Fund,
(j) the cost of fidelity and directors and officers 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 broker or dealer and paying notice filing fees under state securities laws, including the preparation and printing of the Trust's registration statements and the Fund's prospectuses and statements of additional information for filing under federal and state securities laws for such purposes,
(l) communications expenses with respect to investor services and all expenses of shareholders' and Trustees' 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.
With respect to any of the foregoing expenses that are general corporate expenses, the Trust will allocate such expenses among all of its series, including the Strategic Partners Focused Growth Fund, based upon each series' relative net assets.
7. 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 .90 of 1% of the Fund's average daily net assets up to $1 billion and .85 of 1% of the Fund's average daily net assets over $1 billion. This fee will be computed daily and will be paid to the Manager monthly.
8. 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.
9. 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 Trustees of the Trust or
by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, or by the Manager 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).
10. 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 Trust to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or dissimilar nature, nor limit or restrict the right of the Manager to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Board of Trustees of the Trust from time to time, the Manager shall for all purposes herein be deemed to be an independent contractor and shall have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund.
12. 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 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.
13. 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.
14. 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 Gateway Center Three, 100 Mulberry
Street, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the Trust at
Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention:
President.
15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
16. The Fund may use any name including the word "Prudential" only for so long as this Agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which
shall have succeeded to the Manager's business as Manager or any extension, renewal or amendment thereof remain in effect. At such time as such an agreement shall no longer be in effect, the 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 Trust use 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.
STRATEGIC PARTNERS SERIES
By: __________________________
John R. Strangfeld
President
PRUDENTIAL INVESTMENTS FUND
MANAGEMENT LLC
By: __________________________
Robert F. Gunia
Executive Vice President
Exhibit 99.(d)(2)
STRATEGIC PARTNERS SERIES
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Agreement made as of this ____ day of _____________, 2000, 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 (PIC or the Sub-Manager).
WHEREAS, PIFM has been selected to serve as Manager of Strategic Partners Focused Growth Fund (the Fund), a series of Strategic Partners Series (the Trust), a Delaware business trust and an open-end, management investment company registered under the Investment Company Act of 1940 (the 1940 Act), pursuant to an agreement dated ___________________, 2000 (the Management Agreement);
WHEREAS, pursuant to authority granted in the Management Agreement, PIFM desires to retain PIC to provide investment advisory and administrative and recordkeeping services to the Fund in connection with the management of a portion of its assets and PIC is willing to render such investment advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees of the Trust, the Sub-Manager shall manage the investment operations of a portion of the Fund and the composition of a portion of the Fund's portfolio, including the purchase, retention and disposition thereof, in accordance with the Fund's investment objective, 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 Sub-Manager shall provide supervision of a portion of the Fund's investments and of Jennison Associates LLC (Jennison or the Subadviser) and oversee the selection by the Subadviser from time to time of the investments and securities to be purchased, retained, sold or loaned by the Fund, and the 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 Sub-Manager shall act in conformity with the Agreement and Declaration of Trust and By-Laws of the Trust and the Prospectus of the Fund and with the instructions and directions of the Manager and of the Board of Trustees of the Trust and will cooperate with PIFM's compliance personnel responsible for ensuring compliance of the Fund with the applicable requirements of the 1940 Act, the Internal Revenue Code of 1986 and all other applicable federal and state laws and regulations.
(iii) The Sub-Manager shall oversee and assist the Subadviser in determining the securities and futures contracts to be purchased or sold by a portion of the Fund and will oversee the Subadviser's placement of orders with or through such persons, brokers, dealers or futures commission merchants (including, but not limited to, Prudential Securities Incorporated) to carry out the policy with respect to brokerage as set forth in the Trust's Registration Statement and the Fund's Prospectus or as the Board of Trustees may direct from time to time. In providing the Fund with investment advice, it is recognized that the Sub-Manager and the Subadviser will give primary consideration to securing the most favorable price and efficient execution under the circumstances. Within the framework of this policy, the Sub-Manager and 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 Sub-Manager's and 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 Sub-Manager and 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 Sub-Manager and the Subadviser are 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 Trust's Board of Trustees 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 Sub-Manager and the Subadviser in connection with the Sub-Manager's and the Subadviser's services to other clients.
On occasions when the Sub-Manager and the Subadviser deem 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 Sub-Manager or the Subadviser, the Sub-Manager and 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 Sub-Manager or the Subadviser in the manner the Sub- Manager and the Subadviser consider to be the most equitable and consistent with their fiduciary obligations to the Fund and to such other clients.
(iv) The Sub-Manager shall maintain, either itself or with the
assistance of the Subadviser, 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 PIFM or the Board of Trustees such
periodic and special reports as PIFM or the Trustees may reasonably
request.
(v) The Sub-Manager, either itself or with the assistance of the Subadviser, shall provide the Trust's Custodian on each business day with information relating to all transactions concerning the Fund's assets and shall provide the Manager with such information upon request of the Manager.
(vi) The investment management and administrative services provided by the Sub-Manager hereunder are not to be deemed exclusive, and the Sub-Manager shall be free to render similar services to others.
(b) The Sub-Manager shall authorize and permit any of its partners, officers and employees who may be elected as Trustees or officers of the Trust to serve in the capacities in which they are elected. Services to be furnished by the Sub-Manager under this Agreement may be furnished
through the medium of any of such Trustees, officers or employees.
(c) The Sub-Manager, either itself or with the assistance of the Subadviser, shall keep the Fund's books and records required to be maintained pursuant to paragraph 1(a) hereof and shall timely furnish to the Manager all information relating to the Sub-Manager'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 Sub-Manager agrees that all records which it maintains for the Fund are the property of the Fund and the Sub-Manager will surrender promptly to the Fund any of such records upon the Fund's request, provided however that the Sub-Manager may retain a copy of such records. The Sub-Manager 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. The Manager and Sub-Manager shall oversee and review the Subadviser's performance of Subadviser's duties under the Subadvisory Agreement.
3. For the services provided in this Agreement, the Manager will pay to the Sub-Manager as full compensation therefor a fee at an annual rate of .60 of 1% of the average daily net assets of the portion of the Fund advised and managed by the Sub-Manager on total Fund assets up to and including $1 billion and .55 of 1% of the average daily net assets of the portion of Fund advised and managed by the Sub-Manager on total Fund assets in excess of $1 billion. This fee will be computed daily and paid to the Sub-Manager monthly.
4. The Sub-Manager shall not be liable for any error of judgment or for any loss suffered by the Fund, 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 Sub-Manager'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 Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, or by the Manager or the Sub-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) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of the Sub-Manager's directors, officers, or employees 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 Sub-Manager'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 Sub-Manager at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature or other material prepared for distribution to shareholders of the Trust or the public, which refer to the Sub-Manager in any way, prior to use thereof and not to use material if the Sub-Manager 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 Sub-Manager hereunder by first-class or overnight mail, facsimile transmission equipment or hand delivery.
8. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1); to the Manager at Gateway Center
Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention: President, or
(2) to the Sub-Manager at Prudential Plaza, Newark, NJ 07102, Attention:
Secretary.
9. This Agreement may be amended by mutual consent, but the consent of the Trust must be obtained in conformity with the requirements of the 1940 Act.
10. 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
THE PRUDENTIAL INVESTMENT CORPORATION
Exhibit 99.(d)(3)
STRATEGIC PARTNERS SERIES
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Agreement made as of this ____ day of _____________, 2000, between The Prudential Investment Corporation, a New Jersey corporation (PIC or the Sub- Manager), and Jennison Associates LLC, a Delaware limited liability company (the Subadviser).
WHEREAS, the Sub-Manager has entered into a Sub-Management Agreement, dated ________________, 2000 (the Sub-Management Agreement), with Prudential Investments Fund Management LLC (PIFM or the Manager);
WHEREAS, PIFM has been selected to serve as Manager of Strategic Partners Focused Growth Fund (the Fund), a series of Strategic Partners Series (the Trust), a Delaware business trust and an open-end, management investment company registered under the Investment Company Act of 1940 (the 1940 Act);
WHEREAS, PIFM has selected PIC to serve as Sub-Manager with respect to a portion of the Fund and to provide certain services to PIFM in the management of the Fund, as described in the Sub-Management Agreement; and
WHEREAS, pursuant to authority granted in the Sub-Management Agreement, PIC desires to retain the Subadviser to provide investment advisory services to the Fund in connection with the management of a portion of its assets 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, the Sub-Manager and the Board of Trustees of the Trust, the Subadviser shall manage the investment operations of a portion of the Fund and the composition of a portion of the Fund's portfolio, including the purchase, retention and disposition thereof, in accordance with the Fund's investment objective, 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 a portion 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 Agreement and Declaration of Trust and By-Laws of the Trust and the Prospectus of the Fund and with the instructions and directions of the Manager, the Sub-Manager and of the Board of Trustees of the Trust and will cooperate with PIFM's compliance personnel responsible for ensuring compliance of the Fund with the applicable 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 a portion of the Fund and will place orders with or through such persons, brokers, dealers or futures commission merchants (including, but not limited to, Prudential Securities Incorporated) to carry out the policy with respect to brokerage as set forth in the Trust's Registration Statement and the Fund's Prospectus or as the Board of Trustees may direct from time to time. In providing the Fund with investment advice, it is recognized that the Subadviser will give primary consideration to securing the most favorable price and efficient execution under the circumstances. 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 Trust's Board of Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers or futures commission merchants may be useful to the Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security or futures contract to be in the best interest of the Fund as well as other clients of the Subadviser, the Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or futures contracts to be sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund 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 Board of Trustees such
periodic and special reports as the Trustees may reasonably request.
(v) The Subadviser shall provide the Trust's Custodian on each business day with information relating to all transactions concerning the Fund's assets and shall provide the Manager and the Sub-Manager with such information upon request of the Manager and the Sub-Manager, respectively.
(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 partners, officers and employees who may be elected as Trustees or officers of the Trust to serve in the capacities in which they are elected. Services to be furnished by the Subadviser under this 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 or the Sub-Manager all information relating to the Subadviser's services hereunder needed by the Manager or the Sub- 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. The Sub- Manager shall continue to have responsibility for all services to be provided to the Manager pursuant to the Sub-Management Agreement. The Manager and Sub-Manager shall oversee and review the Subadviser's performance of its duties under this Agreement.
3. For the services provided in this Agreement, the Sub-Manager will pay to the Subadviser as full compensation therefor a fee at an annual rate of .30 of 1% of the average daily net assets of the portion of the Fund advised by the Subadviser on total Fund assets up to and including $1 billion and .25 of 1% of the average daily net assets of the portion of Fund advised by the Subadviser on total Fund assets in excess of $1 billion. This fee will be computed daily and paid to the Subadviser monthly.
4. The Subadviser shall not be liable for any error of judgment or for any loss suffered by the Fund, the Manager or the Sub-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 Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, or
by the Manager, the Sub-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 or the Sub-Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of the Subadviser's directors, officers, or employees 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 Sub-Manager agrees to furnish the Subadviser at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature or other material prepared for distribution to shareholders of the Trust or the public, which refer to the Subadviser in any way, prior to use thereof and not to use material if the Subadviser reasonably objects in writing five business days (or such other time as may be mutually agreed) after receipt thereof. Sales literature may be furnished to the Subadviser hereunder by first-class or overnight mail, facsimile transmission equipment or hand delivery.
8. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Sub-Manager at Prudential Plaza, Newark, NJ 07102, Attention: Secretary; or (2) to the Subadviser at 466 Lexington Avenue, New York, NY 10017, Attention: Secretary.
9. This Agreement may be amended by mutual consent, but the consent of the Trust must be obtained in conformity with the requirements of the 1940 Act.
10. 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.
THE PRUDENTIAL INVESTMENT CORPORATION
JENNISON ASSOCIATES LLC
BY: ___________________________
Karen E. Kohler
Senior Vice President
Exhibit 99.(d)(4)
STRATEGIC PARTNERS SERIES
STRATEGIC PARTNERS FOCUSED GROWTH FUND
Agreement made as of this ____ day of _____________, 2000, between Prudential Investments Fund Management LLC, a New York limited liability company (PIFM or the Manager), and Alliance Capital Management L.P., a __________________________ (the Subadviser).
WHEREAS, the Manager has entered into a Management Agreement, dated ________________, 2000 (the Management Agreement), with Strategic Partners Series (the Trust), a Delaware business trust and an open-end, management investment company registered under the Investment Company Act of 1940 (the 1940 Act), on behalf of its series the Strategic Partners Focused Growth Fund (the Fund), pursuant to which PIFM will act as Manager of the Fund.
WHEREAS, PIFM desires to retain the Subadviser to provide investment advisory services to the Fund in connection with the management of a portion of its assets 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 Trustees of the Trust, the Subadviser shall manage the investment operations of a portion of the Fund and the composition of a portion of the Fund's portfolio, including the purchase, retention and disposition thereof, in accordance with the Fund's investment objective, 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 a portion 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
Agreement and Declaration of Trust and By-Laws of the Trust and the Prospectus of the Fund and with the instructions and directions of the Manager and of the Board of Trustees of the Trust and will conform to and comply with the applicable 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 a portion of the Fund and will place orders with or through such persons, brokers, dealers or futures commission merchants (including, but not limited to, Prudential Securities Incorporated) to carry out the policy with respect to brokerage as set forth in the Trust's Registration Statement and the Fund's Prospectus or as the Board of Trustees may direct from time to time. In providing the Fund with investment advice, it is recognized that the Subadviser will give primary consideration to securing the most favorable price and efficient execution under the circumstances. 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 Trust's Board of Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers or futures commission merchants may be useful to the Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security or futures contract to be in the best interest of the
Fund as well as other clients of the Subadviser, the Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or futures contracts to be sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund 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 Board of Trustees such
periodic and special reports as the Trustees may reasonably request.
(v) The Subadviser shall provide the Trust's Custodian on each business day with information relating to all transactions concerning the Fund's assets and shall provide the Manager with such information upon request of the Manager.
(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 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. For the services provided in this Agreement, the Manager will pay to the Subadviser as full compensation therefor a fee at an annual rate of .60 of 1% of the average daily net assets of the portion of the Fund advised by the Subadviser on total Fund assets up to and including $1 billion and .55 of 1% of the average daily net assets of the portion of the Fund advised by the Subadviser on total Fund assets in excess of $1 billion. This fee will be computed daily and paid to the Subadviser monthly.
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 Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at any time, without the payment of any penalty, on not more than 60 days' nor less than 30 days' written notice to the other party. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of the Subadviser's partners, officers, or employees 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 shareholders, sales literature or other material prepared for distribution to shareholders of the Trust or the public, which refer to the Subadviser in any way, prior to use thereof and not to use material until
the Subadviser provides affirmative approval of such use. Sales literature may be furnished to the Subadviser hereunder by first-class or overnight mail, facsimile transmission equipment or hand delivery.
8. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the Subadviser at 1345 Avenue of the Americas, New York, NY 10105, Attention: Secretary.
9. This Agreement may be amended by mutual consent, but the consent of the Trust must be obtained in conformity with the requirements of the 1940 Act.
10. 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
BY: ____________________________
Robert F. Gunia
Executive Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation,
general partner
BY: ___________________________
Mark R. Manley
Assistant Secretary
Exhibit 99.(e)(1)
STRATEGIC PARTNERS SERIES
Agreement made as of _________________, 2000, between Strategic Partners Series (the Fund), and Prudential Investment Management Services LLC, a Delaware limited liability company (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (the Investment Company Act), as an open-end, management investment company and it is in the interest of the Fund to offer its shares for sale continuously;
WHEREAS, the shares of the Fund are currently divided into classes and series (all such shares being referred to herein as Shares) and the Fund currently is authorized to offer Class A, Class B, Class C and Class Z Shares;
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 Shares from and after the date hereof in order to promote the growth of the Fund and facilitate the distribution of its Shares; and
WHEREAS, the Fund has adopted plans of distribution pursuant to Rule 12b-1 under the Investment Company Act with respect to certain of its classes and/or series of Shares (the Plans) authorizing payments by the Fund to the Distributor with respect to the distribution of such classes and/or series of Shares and the maintenance of related shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
The Fund hereby appoints the Distributor as the principal underwriter and distributor of the Shares of the Fund to sell Shares to the public on behalf of the Fund, and the Distributor hereby accepts such appointment and agrees to act hereunder. The Fund hereby agrees during the term of this Agreement to sell Shares of the Fund through the Distributor on the terms and conditions set forth
below.
The Distributor shall be the exclusive representative of the Fund to act as principal underwriter and distributor of the Fund's Shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Shares of the Fund shall not apply to 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 Shares issued by the Fund pursuant to reinvestment of dividends or capital gains distributions or through the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to 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. The term "Prospectus" shall mean the Prospectus and Statement of Additional Information of the applicable series that is 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.
3.1 The Distributor shall have the right to buy from the Fund on behalf of investors the Shares needed, but not more than the Shares needed (except for clerical errors in transmission) to fill unconditional orders for Shares placed with the Distributor by investors or registered and qualified securities dealers and other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the Fund and delivered 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.
3.3 The Fund shall have the right to suspend the sale of any or all
classes and/or series of its 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. The Fund shall also have the right to suspend the sale of any or all classes and/or series of its Shares if a banking moratorium shall have been declared by federal or New Jersey 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 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 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 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).
4.1 Any of the outstanding Shares may be tendered for redemption at any time, and the Fund agrees to repurchase or redeem the Shares so tendered in accordance with its Declaration of Trust 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 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 Shares shall be paid by the Fund as follows: (i) in the case of Shares subject to a contingent deferred sales charge, any applicable contingent deferred sales charge shall be paid to the Distributor, and 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; and (ii) in the case of all other Shares, proceeds 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 any class and/or series of 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 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.
5.1 Subject to the possible suspension of the sale of Shares as provided herein, the Fund agrees to sell its Shares so long as it has Shares of the respective class and/or series 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 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, all necessary action to register Shares under the Securities Act, to the end that there will be available for sale such number of 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 notify such states as the Distributor and the Fund may approve of its intention to sell any appropriate number of its Shares; provided that the Fund shall not be required to amend its Declaration of Trust 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 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 Shares. Any such notification may be withheld, terminated or withdrawn by the Fund at any time in its discretion. As provided in Section 9 hereof, the expense of notification and maintenance of notification shall be borne by the Fund. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Fund in connection with such notifications.
6.1 The Distributor shall devote reasonable time and effort to effect sales of Shares, but shall not be obligated to sell any specific number of Shares. Sales of the 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 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 Securities Exchange Act Rule 10b-10 and the rules 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 Shares, provided that the Fund shall approve the forms of such agreements. Within the United States, the Distributor shall offer and sell Shares only to such selected dealers as are members in good standing of the NASD or are institutions exempt from registration under applicable federal securities laws. Shares sold to selected dealers shall be for resale by such dealers only at the offering price determined as set forth in the Prospectus.
7.1 With respect to classes and/or series of Shares which impose a front-end sales charge, the Distributor shall receive and may retain any portion of any front-end sales charge which is imposed on such sales and not reallocated to selected dealers as set forth in the Prospectus, subject to the limitations of Rule 2830 of the Conduct Rules of the NASD. Payment of these amounts to the Distributor is not contingent upon the adoption or continuation of any applicable Plans.
7.2 With respect to classes and/or series of Shares which impose a contingent deferred sales charge, the Distributor shall receive and may retain any contingent deferred sales charge which is imposed on such sales as set forth in the Prospectus, subject to the limitations of Rule 2830 of the Conduct Rules of the NASD. Payment of these amounts to the Distributor is not contingent upon the adoption or continuation of any Plan.
8.1 The Fund shall pay to the Distributor as compensation for services under any Plans adopted by the Fund and this Agreement a distribution and service fee with respect to the Fund's classes and/or series of Shares as described in each of the Fund's respective Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in effect, the Distributor shall inform the Board of the commissions and account servicing fees with respect to the relevant class and/or series of Shares to be paid by the Distributor to account executives of the Distributor and to broker-dealers, financial institutions and investment advisers which have dealer agreements with the Distributor. So long as a Plan (or any amendment thereto) is in effect, at the request of the Board 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 with respect to the relevant class and/or series of Shares.
The Fund shall bear all costs and expenses of the continuous offering of its Shares (except for those costs and expenses borne by the Distributor pursuant to a Plan and subject to the requirements of Rule 12b-1 under the Investment Company Act), 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 all amendments and supplements thereto, 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 or expense of making notice filings for the 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 notification therein until the Fund decides to discontinue such notification pursuant to Section 5.4 hereof. As set forth in Section 8 above, the Fund shall also bear the expenses it assumes pursuant to any Plan, so long as such Plan is in effect.
10.1 The Fund agrees to indemnify, defend and hold the Distributor, its officers and members 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 reasonable counsel fees incurred in connection therewith) which the Distributor, its officers, members 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 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, member 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 Trustees 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 members 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 members, 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 the Fund or any of its officers or directors in connection with the issue and sale of any Shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Trustees 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 reasonable counsel fees incurred in connection therewith) which the Fund, its officers and Trustees 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 Trustees 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 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 Trustees 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.
11.1 This Agreement shall become effective as of the date first above written and shall remain in force only so long as such continuance is specifically approved at least annually by (a) the Board of the Fund, or by the vote of a majority of the outstanding voting securities of the applicable class and/or series of the Fund, and (b) by the vote of a majority of those Trustees 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 any of the Fund's Plans or in any agreement related thereto (Independent Trustees), 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 Independent Trustees or by vote of a majority of the outstanding voting securities of the applicable class and/or series 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.
This Agreement may be amended by the parties only if such amendment is specifically approved by (a) the Board of the Fund, or by the vote of a majority of the outstanding voting securities of the applicable class and/or series of the Fund, and (b) by the vote of a majority of the Independent Trustees cast in person at a meeting called for the purpose of voting on such amendment.
The amendment or termination of this Agreement with respect to any class and/or series shall not result in the amendment or termination of this Agreement with respect to any other class and/or series unless explicitly so provided.
The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New Jersey 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 Jersey, 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 Investment Management Services LLC
By: ____________________
Robert F. Gunia
President
Strategic Partners Series
By: ____________________
John R. Strangfeld
President
Exhibit 99.(e)(2)
DEALER AGREEMENT
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
Prudential Investment Management Services LLC ("Distributor") and _________________ ("Dealer") have agreed that Dealer will participate in the distribution of shares ("Shares") of all the funds and series thereof (as they may exist from time to time) comprising the Prudential Mutual Fund Family (each a "Fund" and collectively the "Funds") and any classes thereof for which Distributor now or in the future serves as principal underwriter and distributor, subject to the terms of this Dealer Agreement ("Agreement"). Any such additional Funds will be included in this Agreement upon Distributor's written notification to Dealer.
a. Dealer represents and warrants that it is: (i) a broker-dealer registered with the Securities and Exchange Commission ("SEC"); (ii) a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); and (iii) licensed by the appropriate regulatory agency of each state or other jurisdiction in which Dealer will offer and sell Shares of the Funds, to the extent necessary to perform the duties and activities contemplated by this Agreement.
b. Dealer represents and warrants that each of its partners, directors, officers, employees, and agents who will be utilized by Dealer with respect to its duties and activities under this Agreement is either appropriately licensed or exempt from such licensing requirements by the appropriate regulatory agency of each state or other jurisdiction in which Dealer will offer and sell Shares of the Funds.
c. Dealer agrees that: (i) termination or suspension of its registration with the SEC; (ii) termination or suspension of its membership with the NASD; or (iii) termination or suspension of its license to do business by any state or other jurisdiction or federal regulatory agency shall immediately cause the termination of this Agreement. Dealer further agrees to immediately notify Distributor in writing of any such action or event.
d. Dealer agrees that this Agreement is in all respects subject to the Conduct Rules of the NASD and such Conduct Rules shall control any provision to the contrary in this Agreement.
e. Dealer agrees to be bound by and to comply with all applicable state and federal laws and all rules and regulations promulgated thereunder generally affecting the sale or distribution of mutual fund shares.
a. Dealer agrees to offer and sell Shares of the Funds (including those of each of its classes) only at the regular public offering price applicable to such Shares and in effect at the time of each transaction. The procedures relating to all orders and the handling of each order (including the manner of computing the net asset value of Shares and the effective time of orders
received from Dealer) are subject to: (i) the terms of the then current prospectus and statement of additional information (including any supplements, stickers or amendments thereto) relating to each Fund, as filed with the SEC ("Prospectus"); (ii) the new account application for each Fund, as supplemented or amended from time to time; and (iii) Distributor's written instructions and multiple class pricing procedures and guidelines, as provided to Dealer from time to time. To the extent that the Prospectus contains provisions that are inconsistent with this Agreement or any other document, the terms of the Prospectus shall be controlling.
b. Distributor reserves the right at any time, and without notice to Dealer, to suspend the sale of Shares or to withdraw or limit the offering of Shares. Distributor reserves the unqualified right not to accept any specific order for the purchase or sale of Shares.
c. In all offers and sales of the Shares to the public, Dealer is not authorized to act as broker or agent for, or employee of, Distributor, any Fund or any other dealer, and Dealer shall not in any manner represent to any third party that Dealer has such authority or is acting in such capacity. Rather, Dealer agrees that it is acting as principal for Dealer's own account or as agent on behalf of Dealer's customers in all transactions in Shares, except as provided in Section 3.i. hereof. Dealer acknowledges that it is solely responsible for all suitability determinations with respect to sales of Shares of the Funds to Dealer's customers and that Distributor has no responsibility for the manner of Dealer's performance of, or for Dealer's acts or omissions in connection with, the duties and activities Dealer provides under this Agreement.
d. All orders are subject to acceptance by Distributor in its sole discretion and become effective only upon confirmation by Distributor.
e. Distributor agrees that it will accept from Dealer orders placed through a remote terminal or otherwise electronically transmitted via the National Securities Clearing Corporation ("NSCC") Fund/Serv Networking program, provided, however, that appropriate documentation thereof and agreements relating thereto are executed by both parties to this Agreement, including in particular the standard NSCC Networking Agreement and any other related agreements between Distributor and Dealer deemed appropriate by Distributor, and that all accounts opened or maintained pursuant to that program will be governed by applicable NSCC rules and procedures. Both parties further agree that, if the NSCC Fund/Serv Networking program is used to place orders, the standard NSCC Networking Agreement will control insofar as there is any conflict between any provision of the Dealer Agreement and the standard NSCC Networking Agreement.
a. Dealer agrees to purchase Shares only from Distributor or from Dealer's customers.
b. Dealer agrees to enter orders for the purchase of Shares only from Distributor and only for the purpose of covering purchase orders Dealer has already received from its customers or for Dealer's own bona fide investment.
c. Dealer agrees to date and time stamp all orders received by Dealer and promptly, upon receipt of any and all orders, to transmit to Distributor all orders received prior to the time described in the Prospectus for the calculation of each Fund's net asset value so as to permit Distributor to process all orders at the price next determined after receipt by Dealer, in accordance with the Prospectus. Dealer agrees not to withhold placing orders for Shares with Distributor so as to profit itself as a result of such inaction.
d. Dealer agrees to maintain records of all purchases and sales of Shares made through Dealer and to furnish Distributor or regulatory authorities with copies of such records upon request. In that regard, Dealer agrees that, unless Dealer holds Shares as nominee for its customers or participates in the NSCC Fund/Serv Networking program, at certain matrix levels, it will provide Distributor with all necessary information to comply properly with all federal, state and local reporting requirements and backup and nonresident alien withholding requirements for its customer accounts including, without limitation, those requirements that apply by treating Shares issued by the Funds as readily tradable instruments. Dealer represents and agrees that all Taxpayer Identification Numbers ("TINs") provided are certified, and that no account that requires a certified TIN will be established without such certified TIN. With respect to all other accounts, including Shares held by Dealer in omnibus accounts and Shares purchased or sold through the NSCC Fund/Serv Networking program, at certain matrix levels, Dealer agrees to perform all federal, state and local tax reporting with respect to such accounts, including without limitation redemptions and exchanges.
e. Dealer agrees to distribute or cause to be delivered to its customers Prospectuses, proxy solicitation materials and related information and proxy cards, semi-annual and annual shareholder reports and any other materials in compliance with applicable legal requirements, except to the extent that Distributor expressly undertakes to do so in writing.
f. Dealer agrees that if any Share is repurchased by any Fund or is tendered for redemption within seven (7) business days after confirmation by Distributor of the original purchase order from Dealer, Dealer shall forfeit its right to any concession or commission received by Dealer with respect to such Share and shall forthwith refund to Distributor the full concession allowed to Dealer or commission paid to Dealer on the original sale. Distributor agrees to notify Dealer of such repurchase or redemption within a reasonable time after settlement. Termination or cancellation of this Agreement shall not relieve Dealer from its obligation under this provision.
g. Dealer agrees that payment for Shares ordered from Distributor
shall be in Fed Funds, New York clearinghouse or other immediately available
funds and that such funds shall be received by Distributor by the earlier of:
(i) the end of the third (3/rd/) business day following Dealer's receipt of the
customer's order to purchase such Shares; or (ii) the settlement date
established in accordance with Rule 15c6-1 under the Securities Exchange Act of
1934, as amended. If such payment is not received by Distributor by such date,
Dealer shall forfeit its right to any concession or commission with respect to
such order, and Distributor reserves the right, without notice, forthwith to
cancel the sale, or, at its option, to sell the Shares ordered back to the Fund,
in which case Distributor may hold Dealer responsible for any loss, including
loss of profit, suffered by Distributor resulting from Dealer's failure to make
payment as aforesaid. If a purchase is made by check, the purchase is deemed
made upon conversion of the purchase instrument into Fed Funds, New York
clearinghouse or other immediately available funds.
h. Dealer agrees that it: (i) shall assume responsibility for any loss to the Fund caused by a correction to any order placed by Dealer that is made subsequent to the trade date for the order, provided such order correction was not based on any negligence on Distributor's part; and (ii) will immediately pay such loss to the Fund upon notification.
i. Dealer agrees that in connection with orders for the purchase of Shares on behalf of any IRAs, 401(k) plans or other retirement plan accounts, by mail, telephone, or wire, Dealer shall act as agent for the custodian or trustee of such plans (solely with respect to the time of receipt of the application and payments), and Dealer shall not place such an order with Distributor until it has received from its customer payment for such purchase and, if such purchase represents the first contribution to such a retirement plan account, the completed documents necessary to establish the retirement plan. Dealer agrees to indemnify Distributor and its affiliates for any claim, loss, or liability resulting from incorrect investment instructions received by Distributor from Dealer.
j. Dealer agrees that it will not make any conditional orders for the purchase or redemption of Shares and acknowledges that Distributor will not accept conditional orders for Shares.
k. Dealer agrees that all out-of-pocket expenses incurred by it in connection with its activities under this Agreement will be borne by Dealer.
l. Dealer agrees that it will keep in force appropriate broker's blanket bond insurance policies covering any and all acts of Dealer's partners, directors, officers, employees, and agents adequate to reasonably protect and indemnify the Distributor and the Funds against any loss which any party may suffer or incur, directly or indirectly, as a result of any action by Dealer or Dealer's partners, directors, officers, employees, and agents.
m. Dealer agrees that it will maintain the required net capital as specified by the rules and regulations of the SEC, NASD and other regulatory authorities.
a. On each purchase of Shares by Dealer from Distributor, the total sales charges and dealer concessions or commissions, if any, payable to Dealer shall be as stated on Schedule A to this Agreement, which may be amended by Distributor from time to time. Distributor reserves the right, without prior notice, to suspend or eliminate such dealer concession or commissions by amendment, sticker or supplement to the then current Prospectus for each Fund. Such sales charges and dealer concessions or commissions, are subject to reduction under a variety of circumstances as described in each Fund's then current Prospectus. For an investor to obtain any reduction, Distributor must be notified at the time of the sale that the sale qualifies for the reduced sales charge. If Dealer fails to notify Distributor of the applicability of a reduction in the sales charge at the time the trade is placed, neither Distributor nor any Fund will be liable for amounts necessary to reimburse any investor for the reduction that should have been effected. Dealer acknowledges that no sales charge or concession or commission will be paid to Dealer on the reinvestment of dividends or capital gains reinvestment or on Shares acquired in exchange for
Shares of another Fund, or class thereof, having the same sales charge structure as the Fund, or class thereof, from which the exchange was made, in accordance with the Prospectus.
b. In accordance with the Funds' Prospectuses, Distributor or any affiliate may, but is not obligated to, make payments to dealers from Distributor's own resources as compensation for certain sales that are made at net asset value ("Qualifying Sales"). If Dealer notifies Distributor of a Qualifying Sale, Distributor may make a contingent advance payment up to the maximum amount available for payment on the sale. If any of the Shares purchased in a Qualifying Sale are redeemed within twelve (12) months of the end of the month of purchase, Distributor shall be entitled to recover any advance payment attributable to the redeemed Shares by reducing any account payable or other monetary obligation Distributor may owe to Dealer or by making demand upon Dealer for repayment in cash. Distributor reserves the right to withhold advances to Dealer, if for any reason Distributor believes that it may not be able to recover unearned advances from Dealer.
c. With respect to any Fund that offers Shares for which distribution plans have been adopted under Rule 12b-1 under the Investment Company Act of 1940, as amended ("Rule 12b-1 Plans"), Distributor also is authorized to pay the Dealer continuing distribution and/or service fees, as specified in Schedule A and the relevant Fund Prospectus, with respect to Shares of any such Fund, to the extent that Dealer provides distribution, marketing, administrative and other services and activities regarding the promotion of such Shares and the maintenance of related shareholder accounts.
d. In connection with the receipt of distribution fees and/or service fees under Rule 12b-1 Plans applicable to Shares purchased by Dealer's customers, Distributor directs Dealer to provide enhanced shareholder services such as: processing purchase and redemption transactions; establishing shareholder accounts; and providing certain information and assistance with respect to the Funds. (Redemption levels of shareholder accounts assigned to Dealer will be considered in evaluating Dealer's continued ability to receive payments of distribution and/or service fees.) In addition, Dealer agrees to support Distributor's marketing efforts by, among other things, granting reasonable requests for visits to Dealer's office by Distributor's wholesalers and marketing representatives, including all Funds covered by a Rule 12b-1 Plan on Dealer's "approved," "preferred" or other similar product lists, if applicable, and otherwise providing satisfactory product, marketing and sales support. Further, Dealer agrees to provide Distributor with supporting documentation concerning the shareholder services provided, as Distributor may reasonably request from time to time.
e. All Rule 12b-1 Plan distribution and/or servicing fees shall be based on the value of Shares attributable to Dealer's customers and eligible for such payment, and shall be calculated on the basis of and at the rates set forth in the compensation schedule then in effect. Without prior approval by a majority of the outstanding shares of a Fund, the aggregate annual fees paid to Dealer pursuant to any Rule 12b-1 Plan shall not exceed the amounts stated as the "annual maximums" in each Fund's Prospectus, which amount shall be a specified percent of the value of the Fund's net assets held in Dealer's customers' accounts that are eligible for payment pursuant to the Rule 12b-1 Plans (determined in the same manner as each Fund uses to compute its net assets as set forth in its then current Prospectus).
f. The provisions of any Rule 12b-1 Plan between the Funds and the Distributor shall control over this Agreement in the event of any inconsistency. Each Rule 12b-1 Plan in effect on the date of this Agreement is described in the relevant Fund's Prospectus. Dealer hereby acknowledges that all payments under Rule 12b-1 Plans are subject to limitations contained in such Rule 12b-1 Plans and may be varied or discontinued at any time.
a. The Prospectus for each Fund describes the provisions whereby the Fund, under all ordinary circumstances, will redeem Shares held by shareholders on demand. Dealer agrees that it will not make any representations to shareholders relating to the redemption of their Shares other than the statements contained in the Prospectus and the underlying organizational documents of the Fund, to which it refers, and that Dealer will pay as redemption proceeds to shareholders the net asset value, minus any applicable deferred sales charge or redemption fee, determined after receipt of the order as discussed in the Prospectus.
b. Dealer agrees not to repurchase any Shares from its customers at a price below that next quoted by the Fund for redemption or repurchase, i.e., at the net asset value of such Shares, less any applicable deferred sales charge, or redemption fee, in accordance with the Fund's Prospectus. Dealer shall, however, be permitted to sell Shares for the account of the customer or record owner to the Funds at the repurchase price then currently in effect for such Shares and may charge the customer or record owner a fair service fee or commission for handling the transaction, provided Dealer discloses the fee or commission to the customer or record owner. Nevertheless, Dealer agrees that it shall not under any circumstances maintain a secondary market in such repurchased Shares.
c. Dealer agrees that, with respect to a redemption order it has made, if instructions in proper form, including any outstanding certificates, are not received by Distributor within the time customary or the time required by law, the redemption may be canceled forthwith without any responsibility or liability on Distributor's part or on the part of any Fund, or Distributor, at its option, may buy the shares redeemed on behalf of the Fund, in which latter case Distributor may hold Dealer responsible for any loss, including loss of profit, suffered by Distributor resulting from Distributor's failure to settle the redemption.
d. Dealer agrees that it will comply with any restrictions and limitations on exchanges described in each Fund's Prospectus, including any restrictions or prohibitions relating to frequent purchases and redemptions (i.e., market timing).
Distributor may, from time to time, provide Dealer with written guidelines or standards relating to the sale or distribution of Funds offering multiple classes of Shares with different sales charges and distribution-related operating expenses.
a. Dealer agrees that neither it nor any of its partners, directors, officers, employees, and agents is authorized to give any information or make any representations
concerning Shares of any Fund except those contained in the Fund's then current Prospectus or in materials provided by Distributor.
b. Distributor will supply to Dealer Prospectuses, reasonable
quantities of sales literature, sales bulletins, and additional sales
information as provided by Distributor. Dealer agrees to use only advertising or
sales material relating to the Funds that: (i) is supplied by Distributor, or
(ii) conforms to the requirements of all applicable laws or regulations of any
government or authorized agency having jurisdiction over the offering or sale of
Shares of the Funds and is approved in writing by Distributor in advance of its
use. Such approval may be withdrawn by Distributor in whole or in part upon
written notice to Dealer, and Dealer shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales bulletins and
advertising. Dealer is not authorized to modify or translate any such materials
without Distributor's prior written consent.
a. Distributor acts solely as agent for the Fund and Distributor shall have no obligation or responsibility with respect to Dealer's right to purchase or sell Shares in any state or jurisdiction.
b. Distributor shall periodically furnish Dealer with information identifying the states or jurisdictions in which it is believed that all necessary notice, registration or exemptive filings for Shares have been made under applicable securities laws such that offers and sales of Shares may be made in such states or jurisdictions. Distributor shall have no obligation to make such notice, registration or exemptive filings with respect to Shares in any state or jurisdiction.
c. Dealer agrees not to transact orders for Shares in states or jurisdictions in which it has been informed that Shares may not be sold or in which it and its personnel are not authorized to sell Shares.
d. Distributor shall have no responsibility, under the laws regulating the sale of securities in the United States or any foreign jurisdiction, with respect to the qualification or status of Dealer or Dealer's personnel selling Fund Shares. Distributor shall not, in any event, be liable or responsible for the issue, form, validity, enforceability and value of such Shares or for any matter in connection therewith.
e. Dealer agrees that it will make no offers or sales of Shares in any foreign jurisdiction, except with the express written consent of Distributor.
a. Dealer agrees to indemnify, defend and hold harmless Distributor and the Funds and their predecessors, successors, and affiliates, each current or former partner, officer, director, employee, shareholder or agent and each person who controls or is controlled by Distributor from any and all losses, claims, liabilities, costs, and expenses, including attorney fees, that may be assessed against or suffered or incurred by any of them howsoever they arise, and as they are incurred, which relate in any way to: (i) any alleged violation of any statute or regulation (including without limitation the securities laws and regulations of the United States or any state
or foreign country) or any alleged tort or breach of contract, related to the offer or sale by Dealer of Shares of the Funds pursuant to this Agreement (except to the extent that Distributor's negligence or failure to follow correct instructions received from Dealer is the cause of such loss, claim, liability, cost or expense); (ii) any redemption or exchange pursuant to instructions received from Dealer or its partners, affiliates, officers, directors, employees or agents; or (iii) the breach by Dealer of any of its representations and warranties specified herein or the Dealer's failure to comply with the terms and conditions of this Agreement, whether or not such action, failure, error, omission, misconduct or breach is committed by Dealer or its predecessor, successor, or affiliate, each current or former partner, officer, director, employee or agent and each person who controls or is controlled by Dealer.
b. Distributor agrees to indemnify, defend and hold harmless Dealer and its predecessors, successors and affiliates, each current or former partner, officer, director, employee or agent, and each person who controls or is controlled by Dealer from any and all losses, claims, liabilities, costs and expenses, including attorney fees, that may be assessed against or suffered or incurred by any of them which arise, and which relate to any untrue statement of or omission to state a material fact contained in the Prospectus or any written sales literature or other marketing materials provided by the Distributor to the Dealer, required to be stated therein or necessary to make the statements therein not misleading.
c. Dealer agrees to notify Distributor, within a reasonable time, of any claim or complaint or any enforcement action or other proceeding with respect to Shares offered hereunder against Dealer or its partners, affiliates, officers, directors, employees or agents, or any person who controls Dealer, within the meaning of Section 15 of the Securities Act of 1933, as amended.
d. Dealer further agrees promptly to send Distributor copies of (i) any report filed pursuant to NASD Conduct Rule 3070, including, without limitation quarterly reports filed pursuant to Rule 3070(c), (ii) reports filed with any other self-regulatory organization in lieu of Rule 3070 reports pursuant to Rule 3070(e) and (iii) amendments to Dealer's Form BD.
e. Each party's obligations under these indemnification provisions shall survive any termination of this Agreement.
a. In addition to the automatic termination of this Agreement specified in Section 1.c. of this Agreement, each party to this Agreement may unilaterally cancel its participation in this Agreement by giving thirty (30) days prior written notice to the other party. In addition, each party to this Agreement may terminate this Agreement immediately by giving written notice to the other party of that other party's material breach of this Agreement. Such notice shall be deemed to have been given and to be effective on the date on which it was either delivered personally to the other party or any officer or member thereof, or was mailed postpaid or delivered to a telegraph office for transmission to the other party's designated person at the addresses shown herein or in the most recent NASD Manual.
b. This Agreement shall terminate immediately upon the appointment of a Trustee under the Securities Investor Protection Act or any other act of insolvency by Dealer.
c. The termination of this Agreement by any of the foregoing means shall have no effect upon transactions entered into prior to the effective date of termination and shall not relieve Dealer of its obligations, duties and indemnities specified in this Agreement. A trade placed by Dealer subsequent to its voluntary termination of this Agreement will not serve to reinstate the Agreement. Reinstatement, except in the case of a temporary suspension of Dealer, will only be effective upon written notification by Distributor.
d. This Agreement is not assignable or transferable and will terminate automatically in the event of its "assignment," as defined in the Investment Company Act of 1940, as amended and the rules, regulations and interpretations thereunder. The Distributor may, however, transfer any of its duties under this Agreement to any entity that controls or is under common control with Distributor.
e. This Agreement may be amended by Distributor at any time by written notice to Dealer. Dealer's placing of an order or accepting payment of any kind after the effective date and receipt of notice of such amendment shall constitute Dealer's acceptance of such amendment.
Distributor represents and warrants that:
a. It is a limited liability company duly organized and existing and in good standing under the laws of the state of Delaware and is duly registered or exempt from registration as a broker-dealer in all states and jurisdictions in which it provides services as principal underwriter and distributor for the Funds.
b. It is a member in good standing of the NASD.
c. It is empowered under applicable laws and by Distributor's charter and by-laws to enter into this Agreement and perform all activities and services of the Distributor provided for herein and that there are no impediments, prior or existing, regulatory, self-regulatory, administrative, civil or criminal matters affecting Distributor's ability to perform under this Agreement.
d. All requisite actions have been taken to authorize Distributor to enter into and perform this Agreement.
In addition to the representations and warranties found elsewhere in this Agreement, Dealer represents and warrants that:
a. It is duly organized and existing and in good standing under the laws of the state, commonwealth or other jurisdiction in which Dealer is organized and that Dealer will not offer Shares of any Fund for sale in any state or jurisdiction where such Shares may not be legally sold or where Dealer is not qualified to act as a broker-dealer.
b. It is empowered under applicable laws and by Dealer's organizational documents to enter into this Agreement and perform all activities and services of the Dealer provided for herein and that there are no impediments, prior or existing, regulatory, self-regulatory, administrative, civil or criminal matters affecting Dealer's ability to perform under this Agreement.
c. All requisite actions have been taken to authorize Dealer to enter into and perform this Agreement.
d. It is not, at the time of the execution of this Agreement, subject to any enforcement or other proceeding with respect to its activities under state or federal securities laws, rules or regulations.
a. Should any of Dealer's concession accounts with Distributor have a debit balance, Distributor shall be permitted to offset and recover the amount owed from any other account Dealer has with Distributor, without notice or demand to Dealer.
b. In the event of a dispute concerning any provision of this Agreement, either party may require the dispute to be submitted to binding arbitration under the commercial arbitration rules and procedures of the NASD. The parties agree that, to the extent permitted under such arbitration rules and procedures, the arbitrators selected shall be from the securities industry. Judgment upon any arbitration award may be entered by any state or federal court having jurisdiction.
c. This Agreement shall be governed and construed in accordance with the laws of the state of New Jersey, not including any provision which would require the general application of the law of another jurisdiction.
The parties to this Agreement agree to cooperate fully in any securities regulatory investigation or proceeding or judicial proceeding with respect to each's activities under this Agreement and promptly to notify the other party of any such investigation or proceeding.
All captions used in this Agreement are for convenience only, are not a party hereof, and are not to be used in construing or interpreting any aspect hereof.
This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and supersedes all previous agreements. This Agreement shall be binding upon the parties hereto when signed by Dealer and accepted by Distributor.
Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. If, however, any provision of this Agreement is held under applicable law to be invalid, illegal, or unenforceable in any respect, such provision shall be ineffective only to the extent of such invalidity, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired in any way.
This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and supersedes all previous agreements and/or understandings of the parties. This Agreement shall be binding upon the parties hereto when signed by Dealer and accepted by Distributor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year set forth below.
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
By: _________________________________
Name:________________________________
Title:_______________________________
Date:________________________________
DEALER: _____________________________
Date: ______________________________
Exhibit 99.(g)(1)
FORM OF
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES INDICATED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
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 Trust 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-
3.9 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-
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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. Interpretive and Additional Provisions..................................... -32-
16. Massachusetts Law to Apply................................................. -32-
17. Prior Contracts............................................................ -32-
18. The Parties................................................................ -32-
19. Limitation of Liability.................................................... -33-
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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 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:
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 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.
(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;
(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;
the Fund prior to the receipt of such collateral;
(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;
(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
offers.
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.
(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 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;
(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;
(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 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 (ii.) 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.
(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.
(1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions;
(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;
such securities.
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.
(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.
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.
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).
(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.
(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.
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.
Proper Instructions as used herein means a writing signed or initialed 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.
The Custodian may in its discretion, without express authority from 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.
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 Fund 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.
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 officer 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.
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 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.
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.
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.
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 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, 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 willful 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.
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.
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.
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.
This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of the Commonwealth of Massachusetts.
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.
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.
Each Fund listed on Appendix A that is referenced as a Massachusetts Business Trust is the designation of the Trustees under a 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 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 /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE] ------------------------- ---------------------------------------- Assistant Secretary Vice President ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A /s/ S. Jane Rose By /s/ R.F. Gunia --------------------------- ---------------------------------------- S. Jane Rose R.F. Gunia Secretary Vice President |
EXHIBIT 99.(G)(2)
AMENDMENT TO CUSTODIAN CONTRACT/AGREEMENT
This Amendment to the respective Custodian Contract/Agreement is made as of February 22, 1999 by and between each of the funds listed on Schedule D (including any series thereof, each, a "Fund") and State Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Custodian Contract/Agreement referred to below.
WHEREAS, each Fund and the Custodian have entered into a Custodian Contract/Agreement dated as of the dates set forth on Schedule D (each contract, as amended, a "Contract"); and
WHEREAS, each Fund and the Custodian desire to amend certain provisions of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, each Fund and the Custodian desire to amend and restate certain other provisions of the Contract relating to the custody of assets of each of the Funds held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, to add the following new provisions which supersede the provisions in the existing contracts relating to the custody of assets of the Funds outside the United States.
Capitalized terms in this Article 3 shall have the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment; economic and financial infrastructure; systemic custody and securities settlement practices; and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act, except that the term does not include Mandatory Securities Depositories.
"Foreign Assets" means any of the Funds' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Funds' transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with systemic
custodial or market practices.
Each Fund, by resolution adopted by its Board of Trustees/Directors (the "Board"), hereby delegates to the Custodian subject to Section (b) of Rule 17f- 5, the responsibilities set forth in this Article 3 with respect to Foreign Assets of the Fund held outside the United States, and the Custodian hereby accepts such delegation, as Foreign Custody Manager with respect to the Funds.
The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Contract, which list of countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Funds which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. Mandatory Securities Depositories are listed on Schedule B to this Contract, which Schedule B may be amended from time to time by the Foreign Custody Manager upon reasonable notice to the Fund. The Foreign Custody Manager will provide amended versions of Schedules A and B in accordance with Section 3.7 of this Article 3.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by a Fund of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by that Fund's Board responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Amendment by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the
Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Fund with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by that Fund's Board to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Fund with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period as to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn.
Subject to the provisions of this Article 3, the Fund's Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
The Foreign Custody Manager shall determine that the contract (or the rules or established practices or procedures in the case of an Eligible Foreign Custodian that is a foreign securities depository or clearing agency) governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules or established practices and procedures in the case of an Eligible Foreign Custodian selected by the Foreign
Custody Manager which is a foreign securities depository or clearing agency that is not a Mandatory Securities Depository). The Foreign Custody Manager shall provide the Board at least annually with information as to the factors used in such monitoring system. If the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.7 hereunder and withdraw the Foreign Assets from such Eligible Foreign Custodian as soon as reasonably practicable.
For purposes of this Article 3, the Foreign Custody Manager shall have no responsibility for Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios. The Fund and the Custodian each expressly acknowledge that the Foreign Custody Manager shall not be delegated any responsibilities under this Article 3 with respect to Mandatory Securities Depositories.
In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
The Foreign Custody Manager shall report the placement of Foreign Assets with an Eligible Foreign Custodian, the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board amended Schedules A or B at the end of the calendar quarter in which an amendment to either Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Funds described in this Article 3 promptly after the occurrence of the material change.
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5.
The Board's delegation to the Custodian as Foreign Custody Manager of the Funds shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective sixty (60) days after receipt by the non-terminating party of such notice.
The provisions of Section 3.3 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Funds with respect to designated countries.
If at any time prior to termination of this Amendment, the Custodian, as a matter of standard business practice, accepts delegation as Foreign Custody Manager for its U.S. mutual fund clients on terms of materially greater benefit to the Funds than set forth in this Amendment, the Custodian hereby agrees to negotiate with the Funds in good faith with respect thereto.
Capitalized terms in this Article 4 shall have the following meanings:
"Foreign Securities System" means either a clearing agency or a securities depository listed on Schedule A hereto or a Mandatory Securities Depository listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution (including a foreign branch of the Custodian or another Bank (as defined in Section 2(a)(5) of the 1940 Act)) serving as an Eligible Foreign Custodian.
Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub- Custodian in such country pursuant to the terms of this Contract.
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Funds held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Fund in accordance with customary market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign securities;
(iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vii) for exchange or conversion 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;
(viii) in the case of warrants, rights or similar foreign 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;
(ix) for delivery as security in connection with any borrowing by the Funds requiring a pledge of assets by the Funds;
(x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Fund in the following cases only:
(i) upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, in accordance with reasonable market settlement practice in the country where such foreign securities are held or traded, including, without limitation, (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign securities of the Fund;
(iii) for the payment of any expense or liability of the Fund, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including delivery as
original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of securities sold short;
(vii) in connection with the borrowing or lending of foreign securities; and
Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of the Funds and delivery of Foreign Assets maintained for the account of the Funds may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs generally accepted by Institutional Clients, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
For purposes of this Agreement, the term "Institutional Clients" means U.S. registered investment companies or major U.S. commercial banks, insurance companies, pension funds or substantially similar institutions which, as a part of their ordinary business operations, purchase or sell securities and make use of global custody services.
The Custodian shall provide to the Board information with respect to material changes in the custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian. The Custodian shall provide, without limitation, information relating to Foreign Securities Systems and other information described in Schedule C. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had previously been provided hereunder and provided further that the Custodian shall in any event provide to the Board at least annually the following information and opinions with respect to the Board approved countries listed on Schedule A:
(i) legal opinions relating to whether local law restricts with respect to U.S. registered mutual funds (a) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (b) a fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (c) a fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (d)
the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars;
(ii) summary of information regarding Foreign Securities Systems; and
(iii) country profile information containing market practice for (a) delivery versus payment, (b) settlement method, (c) currency restrictions, (d) buy-in practices, (e) foreign ownership limits, and (f) unique market arrangements.
The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable series or in the name of the Custodian or in the name of any Foreign Sub- Custodian or in the name of any nominee of the foregoing, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities, except to the extent that the Fund incurs loss or damage due to failure of such nominee to meet its standard of care set forth in the Contract. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Fund under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts opened and maintained outside the United States on behalf of a Fund with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of this Contract to hold cash received by or from or for the account of the Portfolio.
The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Funds shall be entitled and shall credit such income, as collected, to the applicable Fund. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.
With respect to the foreign securities held pursuant to this Article 4, the Custodian will use
reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights.
The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of the Funds. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. Subject to the standard of care to which the Custodian is held
under this Agreement, the Custodian shall not be liable for any untimely
exercise of any tender, exchange or other right or power in connection with
foreign securities or other property of the Funds at any time held by it unless
(i) the Custodian or the respective Foreign Sub-Custodian is in actual
possession of such foreign securities or property and (ii) the Custodian
receives Proper Instructions with regard to the exercise of any such right or
power, and both (i) and (ii) occur at least three business days prior to the
date on which the Custodian is to take action to exercise such right or power.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and, to the extent possible, to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At each Fund's election, a Fund shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that a Fund and any applicable series have not been made whole for any such loss, damage, cost, expense, liability or claim.
Except to the extent that imposition of any tax liability arises from the Custodian's failure to perform in accordance with the terms of this Section 4.11 or from the failure of any Foreign Sub-Custodian to perform in accordance with the terms of the applicable subcustody agreement, the Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on a Fund, a series thereof or the Custodian as custodian of the Fund by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed on the Fund or the Custodian as custodian of
the Fund by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information.
Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be without liability to a Fund for any loss, liability, claim or expense resulting from or caused by anything which is (A) part of Country Risk or (B) part of the "prevailing country risk" of the Fund, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other similar terms are now or in the future interpreted by the SEC or by the staff of the Division of Investment Management of the SEC.
The Custodian shall be liable for the acts or omissions of a Foreign Sub- Custodian to the same extent as set forth with respect to sub-custodians generally in the Contract and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, 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 other loss where the Sub-Custodian has otherwise acted with reasonable care.
III. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the event of any conflict between the provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written.
WITNESSED BY: STATE STREET BANK AND TRUST
COMPANY
/s/ Marc L. Parsons By: /s/ Ronald E. Logue
------------------- -------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Executive Vice President
Cash Accumulation Trust
Command Government Fund
Command Money Fund
Command Tax-Free Fund
Global Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Prudential 2020 Focus Fund
Prudential Balanced Fund
Prudential California Municipal Fund
Prudential Developing Markets Fund
Prudential Distressed Securities Fund, Inc.
Prudential Diversified Bond Fund, Inc.
Prudential Diversified Funds
Prudential Index Series Fund
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 Institutional Liquidity Portfolio, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
The Prudential Investment Portfolios Fund, Inc.
Prudential Mid-Cap Value Fund
Prudential MoneyMart Assets, Inc.
12
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Prudential Mortgage Income Fund, Inc.
Prudential Multi-Sector 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 Tax-Managed Equity Fund
Prudential Utility Fund, Inc.
Prudential World Fund, Inc.
The Global Total Return Fund, Inc.
The Target Portfolio Trust
The Asia Pacific Fund, Inc.
The High Yield Income Fund, Inc.
Witnessed By:
By: /s/ S. Jane Rose By: /s/ Grace Torres
---------------- ----------------
Grace Torres
Treasurer
First Financial Fund, Inc.
The High Yield Plus Fund, Inc.
Witnessed By:
By: /s/ Stephanie L. Bourque By: /s/ Arthur J. Brown
------------------------ -------------------
Arthur J. Brown
Secretary
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STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. Deposito Central de
Valores S.A.
People's The Hongkong and Shanghai --
Republic Banking Corporation Limited,
of China Shanghai and Shenzhen branches
|
Colombia Cititrust Colombia S.A. -- Sociedad Fiduciaria
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb d.d --
Cyprus Barclays Bank Plc. --
Cyprus Offshore Banking Unit
|
Czech Republic Ceskoslovenska Obchodni -- Banka, A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring
Transactions in
Securities in Book-Entry
Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
Iceland Icebank Ltd.
15
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
|
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Daiwa Bank, Limited Japan Securities
Depository Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking
Korea Corporation Limited
Latvia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
16
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
|
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
17
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
|
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
|
Slovak Republic Ceskoslovenska Obchodni Banka, A.S. --
Slovenia Bank Austria d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
|
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank -- Trinidad & Tobago Republic Bank Limited -- |
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
18
|
STATE STREET SCHEDULE A
|
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, -- London Branch
Uruguay Citibank, N.A. -- Venezuela Citibank, N.A. -- Zambia Barclays Bank of Zambia Limited -- Zimbabwe Barclays Bank of Zimbabwe Limited -- |
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
* The global custody network approved by each fund is set forth below on Schedules A-1 and A-2.
Schedule A-1
Prudential Mutual Funds
State Street Global Custody Network
Country Funds ------------------------------------------------------------------------------------------------------------ Argentina Mexico Global Utility Fund, Inc. Australia Morocco Prudential 20/20 Focus Fund Austria Netherlands Prudential Balanced Fund Bangladesh/+/ New Zealand Prudential Equity Fund, Inc. Belgium Norway Prudential Equity Income Fund Brazil Pakistan Prudential Developing Markets Fund Canada Peru Prudential Diversified Bond Fund, Inc. Chile Philippines Prudential Distressed Securities Fund, Inc. China Poland Prudential Diversified Funds Columbia Portugal Prudential Emerging Growth Fund, Inc. Cyprus Russia Prudential Global Genesis Fund, Inc. Czech Republic Singapore Prudential Global Limited Maturity Fund, Inc. Denmark Slovak Republic Prudential Index Series Fund Ecuador South Africa Prudential Intermediate Global Income Fund, Inc. Egypt Spain Prudential International Bond Fund, Inc., Finland Sri Lanka Prudential Mid-Cap Value Fund France Sweden Prudential Natural Resources Fund, Inc. Germany Switzerland Prudential Pacific Growth Fund, Inc. Ghana Taiwan Prudential Real Estate Securities Fund Greece Thailand Prudential Small-Cap Quantum Fund, Inc. Hong Kong Turkey Prudential Small Company Value Fund, Inc. Hungary Transnational Prudential Tax-Managed Equity Fund India United Kingdom Prudential Utility Fund, Inc. Indonesia Uruguay Prudential World Fund, Inc. Ireland Venezuela The Prudential Investment Portfolios Fund, Inc. Israel The Target Portfolio Trust Italy The Global Total Return Fund, Inc. Ivory Coast Japan Jordan Kenya Korea Lebanon Malaysia ----------------------------------------------------------------------------------------- + Countries marked by a dagger have been approved only for The Target Portfolio Trust. |
Schedule A-2
Prudential Mutual Funds
State Street Global Custody Network
Country Funds
-----------------------------------------------------------------------------------------
United Kingdom Cash Accumulation Trust
Command Government Fund
Command Money Fund
Prudential Government Income Fund, Inc.
Prudential High Yield Fund, Inc.
Prudential High Yield Income Fund, Inc.
Prudential Institutional Liquidity Portfolio, Inc.
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Prudential Structured Maturity Fund, Inc.
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de Depot et
de Virement de Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB clients presently use CBLC
Central de Custodia e de Liquidacao
Financeira de Titulos
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central Clearing
of China and Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
Croatia
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen
(the Danish Securities Center)
|
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Egypt Misr Company for Clearing, Settlement,
and Central Depository
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing
House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
|
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Lebanon The Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
Malaysia The Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Pakistan Central Depository Company of Pakistan
Limited
|
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Peru Caja de Valores y Liquidaciones S.A.
(CAVALI)
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
Sri Lanka Central Depository System
(Pvt) Limited
|
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
Venezuela Central Bank of Venezuela
|
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE C
MARKET INFORMATION
Publication/Type of Information Brief Description
------------------------------- -----------------
(Frequency)
The Guide to Custody in World Markets An overview of safekeeping and
-------------------------------------
settlement practices and
(annually) procedures in each market in which State
Street Bank and Trust Company offers
custodial services.
Global Custody Network Review Information relating to the operating history
-----------------------------
and structure of
(annually) depositories and subcustodians located in the markets
in which State Street Bank and Trust Company offers
custodial services, including transnational
depositories.
Global Legal Survey With respect to each market in which State Street Bank
-------------------
and
(annually) Trust Company offers custodial services, opinions
relating to whether local law restricts (i) access of a
fund's independent public accountants to books and
records of a Foreign Sub-Custodian or Foreign
Securities System, (ii) the Fund's ability to recover
in the event of bankruptcy or insolvency of a Foreign
Sub-Custodian or Foreign Securities System, (iii) the
Fund's ability to recover in the event of a loss by a
Foreign Sub-Custodian or Foreign Securities System, and
(iv) the ability of a foreign investor to convert cash
and cash equivalents to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts State Street Bank
-----------------------
and
(annually) Trust Company has entered into with each subcustodian
in the markets in which State Street Bank and Trust
Company offers subcustody services to its US mutual
fund clients.
Network Bulletins (weekly): Developments of interest to investors in the
markets in which State Street Bank and Trust Company
offers custodial services.
Foreign Custody Advisories With respect to markets in which State Street Bank
and Trust
(as necessary): Company offers custodial services which exhibit special
custody risks, developments which may impact State
Street's ability to deliver expected levels of service.
|
SCHEDULE D
LIST OF FUNDS,CONTRACTS AND AGREEMENTS
Fund Name Execution Date
--------- --------------
Cash Accumulation Trust December 12, 1997
Command Government Fund July 1, 1990
Command Money Fund July 1, 1990
Command Tax-Free Fund July 1, 1990
The Global Total Return Fund, Inc. September 5, 1990
(formerly The Global Yield Fund, Inc.)
Prudential 20/20 Focus Fund April 14, 1998
Prudential California Municipal Fund August 1, 1990
Prudential Developing Markets Fund June 1, 1998
Prudential Distressed Securities Fund, Inc. February 8, 1996
Prudential Diversified Bond Fund, Inc. January 3, 1995
Prudential Diversified Funds September 2, 1998
Prudential Emerging Growth Fund, Inc. October 21, 1996
Prudential Equity Fund, Inc. August 1, 1990
Prudential Global Limited Maturity Fund, Inc. October 25, 1990
(formerly Prudential Short-Term Global
Income Fund, Inc.)
Prudential Government Income Fund, Inc. July 31, 1990
(formerly Prudential Government Plus Fund)
Prudential Government Securities Trust July 26, 1990
Prudential High Yield Fund, Inc. July 26, 1990
Prudential High Yield Total Return Fund, Inc. May 30, 1997
Prudential International Bond Fund, Inc. January 16, 1996
(formerly The Global Government Plus Fund, Inc.)
The Prudential Investment Portfolios Fund, Inc. October 27, 1995
(formerly Prudential Jennison Series Fund, Inc.)
Prudential Mid-Cap Value Fund April 14, 1998
|
Prudential MoneyMart Assets, Inc. July 25, 1990 Prudential Mortgage Income Fund, Inc. August 1, 1990 (formerly Prudential GNMA Fund, Inc.) Prudential Multi-Sector Fund, Inc. June 1, 1990 Prudential Municipal Series Fund August 1, 1990 Prudential National Municipals Fund, Inc. July 26, 1990 Prudential Pacific Growth Fund, Inc. July 16, 1992 Prudential Real Estate Securities Fund February 18, 1998 Prudential Small Cap Quantum Fund, Inc. August 1, 1997 Prudential Small Company Value Fund, Inc. July 26, 1990 (formerly Prudential Growth Opportunity Fund, Inc.) Prudential Special Money Market Fund, Inc. January 12, 1990 Prudential Structured Maturity Fund, Inc. July 25, 1989 Prudential Tax-Free Money Fund, Inc. July 26, 1990 Prudential Utility Fund, Inc. June 6, 1990 Prudential World Fund, Inc. June 7, 1990 (formerly Prudential Global Fund, Inc.) The Target Portfolio Trust November 9, 1992 Global Utility Fund, Inc. December 21, 1989 Nicholas-Applegate Fund, Inc. April 10, 1987 Prudential Balanced Fund September 4, 1987 Prudential Equity Income Fund January 6, 1987 Prudential Global Genesis Fund, Inc. October 21, 1987 Prudential Institutional Liquidity Portfolio, Inc. November 20, 1987 Prudential Intermediate Global Income Fund, Inc. May 19, 1988 Prudential Municipal Bond Fund August 25, 1987 Prudential Natural Resources Fund, Inc. September 18, 1987 Prudential Tax-Managed Equity Fund December 8, 1998 The Asia Pacific Fund April 24, 1987 |
Duff & Phelps Utilities Tax-Free Income Fund, Inc. November 21, 1991 First Financial Fund, Inc. May 1, 1986 The High Yield Income Fund, Inc. November 6, 1987 The High Yield Plus Fund, Inc. March 15, 1988 |
Exhibit 99.(h)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
STRATEGIC PARTNERS SERIES
and
PRUDENTIAL MUTUAL FUND SERVICES LLC
Article 1 Terms of Appointment; Duties of the Agent ................ 1 Article 2 Fees and Expenses......................................... 5 Article 3 Representations and Warranties of PMFS.................... 5 Article 4 Representations of Warranties of the Fund................. 7 Article 5 Duty of Care and Indemnification.......................... 7 Article 6 Documents and Covenants of the Fund and PMFS.............. 10 Article 7 Termination of Agreement.................................. 11 Article 8 Assignment................................................ 12 Article 9 Affiliations.............................................. 12 Article 10 Amendment................................................. 13 Article 11 Applicable Law............................................ 13 Article 12 Miscellaneous............................................. 13 Article 13 Merger of Agreement....................................... 15 |
AGREEMENT made as of the __th day of ____________, 2000_ by and between STRATEGIC PARTNERS SERIES, a Delaware business trust having its principal office and place of business at Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102 (the Fund), and PRUDENTIAL MUTUAL FUND SERVICES LLC, a New Jersey limited liability 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:
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 beneficial interest of each series of the Trust, $.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 prospectuses and statement of additional 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 Declaration of Trust 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 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 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 notice 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.
Procedures applicable to certain of these services may be established from time to time by agreement between the Fund and PMFS.
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.
PMFS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing 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.
The Fund represents and warrants to PMFS that:
4.01 It is a business trust duly organized and existing and in good standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All proceedings required by said Declaration of Trust and By-Laws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an investment company registered or to be 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 of 1933 (the 1933 Act) is currently effective or is anticipated to become effective, and will remain effective, and appropriate state securities law notice filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale.
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.
(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 notice of such Shares be filed 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 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 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.
6.01 The Fund shall promptly furnish to PMFS the following:
(a) A certified copy of the resolution of the Board of Trustees of the Fund authorizing the appointment of PMFS and the execution and delivery of this Agreement;
(b) A certified copy of the Declaration of Trust 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 certificates for Shares of the Fund in the forms approved by the Board of Trustees, 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 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 for the failure to exhibit the Shareholder records to such person.
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.
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 a transfer agent pursuant to the 1934 Act
or (v) 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.
8.04 PMFS may enter into agreements with Prudential or any subsidiary or affiliate of Prudential whereby PMFS will maintain an omnibus account and the Fund will reimburse PMFS for amounts paid by PMFS to Prudential, or such subsidiary or affiliate, in an amount not in excess of the annual maintenance fee for each beneficial shareholder account and transactional fees and expenses with respect to such beneficial shareholder account as if each beneficial shareholder account were maintained by PMFS on the Fund's records, subject to the fee schedule attached hereto as Schedule A. Prudential, its subsidiary or affiliate, as the case may be, shall maintain records relating to each beneficial shareholder account that underlies the omnibus account maintained by PMFS.
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 trustees, 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 trustees, officers, employees, agents, Shareholders or otherwise, or in the investment adviser and/or distributor as officers, directors, employees, agents, shareholders or otherwise.
10.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Trustees of the Fund.
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.
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 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:
Strategic Partners Series
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Attention: President
To PMFS:
Prudential Mutual Fund Services LLC
100 Mulberry Street
Newark, New Jersey 07102
Attention: President
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.
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.
ATTEST: STRATEGIC PARTNERS SERIES
______________________ By: _____________________________________
David F. Connor John R. Strangfeld
Secretary President
ATTEST: PRUDENTIAL MUTUAL
FUND SERVICES LLC
______________________ By: _____________________________________
William V. Healey Brian Henderson
Secretary President
|
Prudential Mutual Fund Services LLC
Fee Schedule
Fee Information for Services as
Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent
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
|
STRATEGIC PARTNERS SERIES PRUDENTIAL MUTUAL FUND
SERVICES LLC
NAME: ___________________________ NAME: _______________________________
TITLE: __________________________ TITLE: ______________________________
DATE: __________________________ DATE: _______________________________
|
EXHIBIT 99(i)
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302)658-9200
Telecopy No. (302)658-3989
March 24, 2000
Strategic Partners Series
100 Mulberry Street
Gateway Center
Newark, NJ 07102-4077
Ladies and Gentlemen:
We have acted as special Delaware counsel to Strategic Partners Series, a Delaware business trust (the "Trust"), in connection with the formation of the Trust and certain matters relating to the proposed issuance of Shares of the Trust. Capitalized terms used herein and not otherwise herein defined are used as defined in the Agreement and Declaration of Trust of the Trust dated January 26, 2000 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following documents, each in the form provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on January 28, 2000 (the "Certificate"); the Governing Instrument; the By-laws of the Trust; a Unanimous Written Consent of the Board of Trustees of the Trust dated January 28, 2000 (the "Consent"); the Notification of Registration Filed Pursuant to Section 8(a) of the Investment Company Act of 1940 on Form N-8A of the Trust to be filed with the Securities and Exchange Commission on February 1, 2000; the Registration Statement on Form N-1A of the Trust filed with the Securities and Exchange Commission on February 1, 2000, as amended by Pre-Effective Amendment No. 1 thereto to be filed with the Securities and Exchange Commission on or about the date hereof (as amended, the "Registration Statement" and, together with the Governing Instrument, the By-laws of the Trust and the Consent, the "Operative Documents"); and a certification of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, and the legal capacity of natural persons to complete the execution of documents. We have further assumed for the purpose of this opinion: (i) the due adoption, authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above- referenced resolutions, instruments, certificates and other
Strategic Partners Series
March 24, 2000
Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that:
1. The Trust is a duly formed and validly existing business trust in good standing under the laws of the State of Delaware.
2. The issuance of the Shares has been duly authorized on behalf of the Trust and, when issued to Shareholders in accordance with the terms, conditions, requirements and procedures and for the consideration set forth in the Operative Documents, will constitute legally issued, fully paid and non- assessable Shares of beneficial interest in the Trust
3. Under the Delaware Act and the terms of the Governing Instrument, each Shareholder of the Trust, in such capacity, will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the general corporation law of the State of Delaware; provided, however, that we express no opinion with respect to the liability of any Shareholder who is, was or may become a named Trustee of the Trust. Neither the existence nor exercise of the voting rights granted to Shareholders under the Governing Instrument will, of itself, cause a Shareholder to be deemed a trustee of the Trust under the Delaware Act. Notwithstanding the foregoing or the opinion expressed in paragraph 2 above, we note that, pursuant
Strategic Partners Series
March 24, 2000
to Section 5 of Article IV of the Governing Instrument, the Trustees have the power to cause Shareholders, or Shareholders of a particular Series, to pay certain custodian, transfer, servicing or similar agent charges by setting off the same against declared but unpaid dividends or by reducing Share ownership (or by both means).
We hereby consent to the filing of a copy of this opinion with the Securities and Exchange Commission with the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts and our review of the above referenced documents and the application of Delaware law as the same exist on the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. Except as provided in this paragraph, the opinion set forth above is expressed solely for the benefit of the addressee hereof in connection with the matters contemplated hereby and may not be relied upon for any other purpose or by any other person or entity without our prior written consent.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
Exhibit 99.(J)
We hereby consent to the use in this Registration Statement on Form N-1A of our report dated March 21, 2000, relating to the financial statements of Prudential Strategic Partners Focused Growth Fund, which appear in such Registration Statement. We also consent to the references to us under the headings "Other Service Providers" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York March 21, 2000 |
Exhibit 99.(m)(1)
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 Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (NASD) has been adopted by Strategic Partners Series (the Company), on behalf of its series, Strategic Partners Focused Growth Fund (the Fund), and by Prudential Investment Management Services LLC, the Fund's distributor (the Distributor).
The Company has entered into a distribution agreement pursuant to which the Fund will employ the Distributor to distribute Class A shares issued by the Fund (Class A shares). Under the Plan, the Fund intends to pay to the Distributor, as compensation for its services, a distribution and service fee with respect to Class A shares.
A majority of the Board of Trustees of the Company, including a majority of those Trustees who are not "interested persons" of the Company (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 Trustees), 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 material aspects of the Plan are as follows:
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 Distributor's 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 Prudential Securities Incorporated (Prudential Securities) and Pruco Securities Corporation (Prusec). Services provided and activities undertaken to distribute Class A shares of the Fund are referred to herein as "Distribution Activities."
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 Trustees may determine.
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 Trustees may determine. Amounts payable under the Plan shall be subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class A shares of the Fund will not be used to pay the distribution expenses incurred with respect to any other class of shares of the Fund except that distribution expenses attributable to the Fund as a whole will be allocated to the Class A shares according to the ratio of the sales of Class A shares to the total sales of the Fund's shares over the Fund's fiscal year or such other allocation method approved by the Board of Trustees. The allocation of distribution expenses among classes will be subject to the review of
the Board of Trustees.
The Distributor shall spend such amounts as it deems appropriate on Distribution Activities which include, among others:
(a) sales commissions and trailer commissions paid to, or on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with Distribution Activities, including central office and branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing services under a selected dealer agreement between Prudential Securities or 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;
(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 financial institutions (other than Prudential Securities or Prusec) which have entered into selected dealer agreements with the Distributor with respect to Class A shares of the Fund.
An appropriate officer of the Company will provide to the Board of Trustees of the Company 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 Trustees of the Company 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 Trustees of the Company 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.
The Plan shall not take effect until it has been approved by a vote of a majority of the outstanding voting securities (as defined in the Investment Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of the Class A shares of the Fund, the Plan shall, unless earlier terminated in accordance with its terms, continue in full force and effect thereafter for so long as such continuance is specifically approved at least annually by a majority of the Board of Trustees of the Company and a majority of the Rule 12b- 1 Trustees by votes cast in person at a meeting called for the purpose of voting on the continuation of the Plan.
This Plan may be terminated at any time, without the payment of any penalty, by a majority of the Rule 12b-1 Trustees, 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.
The Plan may not be amended to change the combined service and distribution fees 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 Trustees of the Company and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the Plan.
While the Plan is in effect, the selection and nomination of the Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
The Company 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: _________________, 2000
Exhibit 99.(m)(2)
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 Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (NASD) has been adopted by Strategic Partners Series (the Company), on behalf of its series, Strategic Partners Focused Growth Fund (the Fund), and by Prudential Investment Management Services LLC, the Fund's distributor (the Distributor).
The Company has entered into a distribution agreement pursuant to which the Fund will employ the Distributor to distribute Class B shares issued by the Fund (Class B shares). Under the Plan, the Fund intends to pay to the Distributor, as compensation for its services, a distribution and service fee with respect to Class B shares.
A majority of the Board of Trustees of the Company, including a majority who are not "interested persons" of the Company (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 Trustees), 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 material aspects of the Plan are as follows:
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 Distributor's 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 Prudential Securities Incorporated (Prudential Securities) and Pruco Securities Corporation (Prusec). Services provided and activities undertaken to distribute Class B shares of the Fund are referred to herein as "Distribution Activities."
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 Trustees may determine.
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 Trustees may determine. Amounts payable under the Plan shall be subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class B shares of the Fund will not be used to pay the distribution expenses incurred with respect to any other class of shares of the Fund except that distribution expenses attributable to the Fund as a whole will be allocated to the Class B shares according to the ratio of the sale of Class B shares to the total sales of the Fund's shares over the Fund's fiscal year or such other allocation method approved by the Board of Trustees. The allocation of distribution expenses among classes will be subject to the review of the Board of
Trustees. Payments hereunder will be applied to distribution expenses in the order in which they are incurred, unless otherwise determined by the Board of Trustees.
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 Prudential Securities or Prusec for performing services under a selected dealer agreement between Prudential Securities or 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 Prudential Securities or Prusec) which have entered into selected dealer agreements with the Distributor with respect to Class B shares of the Fund.
An appropriate officer of the Company will provide to the Board of Trustees of the Company 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 Trustees of the Company 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 Trustees of the Company 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.
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 Trustees of the Company and a majority of the Rule 12b- 1 Trustees by votes cast in person at a meeting called for the purpose of voting on the continuation of the Plan.
This Plan may be terminated at any time, without the payment of any penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting securities (as defined in the Investment Company Act) of the Class B shares of the Fund.
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 Trustees of the Company and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the Plan.
While the Plan is in effect, the selection and nomination of the Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
The Company 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: __________________, 2000
Exhibit 99.(m)(3)
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 Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (NASD) has been adopted by Strategic Partners Series (the Company), on behalf of its series, Strategic Partners Focused Growth Fund (the Fund), and by Prudential Investment Management Services LLC, the Fund's distributor (the Distributor).
The Company 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 intends 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 Trustees of the Company, including a majority who are not "interested persons" of the Company (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 Trustees), 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 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 material aspects of the Plan are as follows:
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 Distributor's 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 Prudential Securities Incorporated (Prudential Securities) and Pruco Securities Corporation (Prusec). Services provided and activities undertaken to distribute Class C shares of the Fund are referred to herein as "Distribution Activities."
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 Trustees may determine.
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 Trustees may determine. Amounts payable under the Plan shall be subject to the limitations of Rule 2830 of the NASD Conduct Rules.
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 Fund's fiscal year or such other allocation method approved by the Board of Trustees. The allocation of distribution expenses among classes will be subject to the review of the Board
of Trustees. Payments hereunder will be applied to distribution expenses in the order in which they are incurred, unless otherwise determined by the Board of Trustees.
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 Prudential Securities or Prusec for performing services under a selected dealer agreement between Prudential Securities or 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 Prudential Securities or Prusec) which have entered into selected dealer agreements with the Distributor with respect to Class C shares of the Fund.
An appropriate officer of the Company will provide to the Board of Trustees of the Company 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 Trustees of the Company 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 Trustees of the Company 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.
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 Trustees of the Company and a majority of the Rule 12b- 1 Trustees by votes cast in person at a meeting called for the purpose of voting on the continuation of the Plan.
This Plan may be terminated at any time, without the payment of any penalty, by a majority of the Rule 12b-1 Trustees, 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.
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 Trustees of the Company and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the Plan.
While the Plan is in effect, the selection and nomination of the Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
The Company 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: March 1, 2000
Exhibit 99.(n)
STRATEGIC PARTNERS SERIES
(the Fund)
PLAN PURSUANT TO RULE 18F-3
The Fund hereby adopts this plan pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the 1940 Act), setting forth the separate arrangement and expense allocation of each class of shares in each investment portfolio (each a Portfolio). Any material amendment to this plan is subject to prior approval of the Board of Trustees, including a majority of the independent Trustees.
CLASS CHARACTERISTICS
CLASS A SHARES: Class A shares are subject to a high initial sales charge
-------------- and a distribution and/or service fee pursuant to Rule 12b-1
under the 1940 Act (Rule 12b-1 fee) not to exceed .30 of 1%
per annum of the average daily net assets of the class. The
initial sales charge is waived or reduced for certain
eligible investors.
CLASS B SHARES: Class B shares are not subject to an initial sales charge
-------------- but are subject to a high contingent deferred sales charge
(declining from 5% to zero over a six-year period) which
will be imposed on certain redemptions and a Rule 12b-1 fee
not to exceed 1% per annum of the average daily net assets
of the class. The contingent deferred sales charge is waived
for certain eligible investors. Class B shares automatically
convert to Class A shares approximately seven years after
purchase.
CLASS C SHARES: Class C shares are subject to a low initial sales charge and
-------------- a 1% contingent deferred sales charge which will be imposed
on certain redemptions within the first 18 months after
purchase and a Rule 12b-1 fee not to exceed 1% per annum of
the average daily net assets of the class.
CLASS Z SHARES: Class Z shares are not subject to either an initial or
-------------- contingent deferred sales charge, nor are they subject to
any Rule 12b-1 fee.
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INCOME AND EXPENSE ALLOCATIONS
Income, any realized and unrealized capital gains and losses, and expenses not allocated to a particular class of a Portfolio will be allocated to each class of such Portfolio on the basis of the net asset value of that class in relation to the net asset value of the Portfolio.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each Portfolio to each class of shares, to the extent paid, will be paid on the same day and at the same time, and will be determined in the same manner and will be in the same amount, except that the amount of the dividends and other distributions declared and paid by a particular class of the Portfolio may be different from that paid by another class of the Portfolio because of Rule 12b-1 fees and other expenses borne exclusively by that class.
EXCHANGE PRIVILEGE
Holders of Class A Shares, Class B Shares, Class C Shares and Class Z Shares shall have such exchange privileges as set forth in the Fund's current prospectus. Exchange privileges may vary among classes and among holders of a Class.
CONVERSION FEATURES
Class B shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Conversions will be effected at relative net asset value without the imposition of any additional sales charge.
GENERAL
A. Each class of shares shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class.
B. On an ongoing basis, the Directors, pursuant to their fiduciary responsibilities under the 1940 Act and otherwise, will monitor the Fund for the existence of any material conflicts among the interests of its several classes. The Trustees, including a majority of the independent Trustees, shall take such action as is reasonably necessary to eliminate any such conflicts that may develop. Prudential Investments Fund Management LLC,
the Fund's Manager, will be responsible for reporting any potential or existing conflicts to the Trustees.
C. For purposes of expressing an opinion on the financial statements of each Portfolio of the Fund, the methodology and procedures for calculating the net asset value and dividends/distributions of the Fund's several classes and the proper allocation of income and expenses among such classes will be examined annually by the Fund's independent auditors who, in performing such examination, shall consider the factors set forth in the relevant auditing standards adopted, from time to time, by the American Institute of Certified Public Accountants.
Date: March 1, 2000
EXHIBIT 99.(P)(1)
STRATEGIC PARTNERS SERIES
(the Fund)
Code of Ethics Adopted Pursuant to Rule 17j-1 Under the Investment Company Act of 1940
(the Code)
The Code has been adopted by the Board of Directors/Trustees of the Fund, in accordance with Rule 17j-1(c) under the Investment Company Act of 1940 (the Act) and in accordance with the following general principles:
(1) The duty at all times to place the interests of shareholders first.
Investment company personnel should scrupulously avoid serving their own personal interests ahead of shareholders' interests in any decision relating to their personal investments.
(2) The requirement that all personal securities transactions be conducted consistent with the Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility.
Investment company personnel must not only seek to achieve technical compliance with the Code but should strive to abide by its spirit and the principles articulated herein.
(3) The fundamental standard that investment company personnel should not take inappropriate advantage of their positions.
Investment company personnel must avoid any situation that might compromise, or call into question, their exercise of fully independent judgment in the interest of shareholders, including, but not limited to the receipt of unusual investment opportunities, perquisites, or gifts of more than a de minimis value from persons doing or seeking business with the Fund.
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative practices with respect to a purchase or sale of a security held or to be acquired (as such term is defined in Section 2.) by an investment company, if effected by an associated person of such company.
The purpose of the Code is to establish procedures consistent with the Act and Rule 17j-1 to give effect to the following general prohibitions as set forth in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or Principal Underwriter for a registered investment company, or any affiliated person of an investment adviser of or principal underwriter for a registered investment company in connection with the purchase or sale, directly or indirectly, by such person of a security held or to be acquired, by such registered investment company:
(1) To employ any device, scheme or artifice to defraud such registered investment company;
(2) To make to such registered investment company any untrue statement of a material fact or omit to state to such registered investment company a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any such registered investment company; or
(4) To engage in any manipulative practice with respect to such registered investment company.
(a) "Access Person" means any director/trustee, officer, general partner or Advisory Person (including any Investment Personnel, as that term is defined herein) of the Fund, the Manager, the Adviser/Subadviser, or the Principal Underwriter.
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or Adviser/Subadviser (or of any company in a control relationship to the Fund, Manager or Adviser/Subadviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (ii) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a security.
(e) "Complex" means the group of registered investment companies for which Prudential Investments Fund Management LLC serves as Manager; provided, however, that with respect to Access Persons of the Subadviser (including any unit or subdivision thereof), "Complex" means the group of registered investment companies in the Complex advised by the Subadviser or unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager, the Adviser/Subadviser, or Principal Underwriter (including his or her designee) as having responsibility for compliance with the requirements of the Code.
(g) "Control" will have the same meaning as that set forth in Section 2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
An interested Director/Trustee who would not otherwise be deemed to be an Access Person, shall be treated as a Disinterested Director/Trustee for purposes of compliance with the provisions of the
Code.
(i) "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other Advisory Persons who provide investment information and/or advice to the Portfolio Manager(s) and/or help execute the Portfolio Manager's(s') investment decisions, including securities analysts and traders ; and (b) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
(l) "Portfolio Manager" means any Advisory Person who has the direct responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of
the Act, except that it will not include shares of registered open-end
investment companies, direct obligations of the Government of the United
States, , short-term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Act, bankers' acceptances,
bank certificates of deposit, commercial paper and such other money market
instruments as are designated by the Compliance Officer. For purposes of
the Code, an "equivalent Security" is one that has a substantial economic
relationship to another Security. This would include, among other things,
(1) a Security that is exchangeable for or convertible into another
Security, (2) with respect to an equity Security, a Security having the
same issuer (including a private issue by the same issuer) and any
derivative, option or warrant relating to that Security and (3) with
respect to a fixed-income Security, a Security having the same issuer,
maturity, coupon and rating.
(o) "Security held or to be acquired" means any Security or any equivalent Security which, within the most recent 15 days: (1) is or has
been held by the Fund; or (2) is being considered by the Fund or its investment adviser for purchase by the Fund.
The Code applies to all Access Persons and the Compliance Officer shall provide each Access Person with a copy of the Code. The prohibitions described below will only apply to a transaction in a Security in which the designated Access Person has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership. The Compliance Officer will maintain a list of all Access Persons who are currently, and within the past five years, subject to the Code.
A. Initial Public Offerings
No Investment Personnel may acquire any Securities in an initial public offering. For purposes of this restriction, "Initial Public Offerings" shall not include offerings of government and municipal securities.
B. Private Placements
No Investment Personnel may acquire any Securities in a private placement without prior approval.
(i) Prior approval must be obtained in accordance with the preclearance procedure described in Section 6 below. Such approval will take into account, among other factors, whether the investment opportunity should be reserved for the Fund and its shareholders and whether the opportunity is being offered to the Investment Personnel by virtue of his or her position with the Fund. The Adviser/Subadviser shall
maintain a record of such prior approval and reason for same, for at least 5 years after the end of the fiscal year in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire Securities in a private placement must disclose that investment to the chief investment officer (including his or her designee) of the Adviser/Subadviser (or of any unit or subdivision thereof) or the Compliance Officer when they play a part in any subsequent consideration of an investment by the Fund in the issuer. In such circumstances, the Fund's decision to purchase Securities of the issuer will be subject to an independent review by appropriate personnel with no personal interest in the issuer.
C. Blackout Periods
(i) Except as provided in Section 5 below, Access Persons are prohibited from executing a Securities transaction on a day during which any investment company in the Complex has a pending "buy" or "sell" order in the same or an equivalent Security and until such time as that order is executed or withdrawn; provided, however, that this prohibition shall not apply to Disinterested Directors/Trustees except if they have actual knowledge of trading by any fund in the Complex and, in any event, only with respect to those funds on whose boards they sit.
This prohibition shall also not apply to Access Persons of the Subadviser who do not, in the ordinary course of fulfilling his or her official duties, have
access to information regarding the purchase and sale of Securities for the Fund and are not engaged in the day-to-day operations of the Fund; provided that Securities investments effected by such Access Persons during the proscribed period are not effected with knowledge of the purchase or sale of the same or equivalent Securities by any fund in the Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a Security within seven calendar days before or after the Fund trades in the same or an equivalent Security. Nevertheless, a personal trade by any Investment Personnel shall not prevent a Fund in the same Complex from trading in the same or an equivalent security. However, such a transaction shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
(ii) above, except as provided in (iv) below with respect to (i) above, any
profits realized on such trades will be promptly required to be disgorged
to the Fund.
(iv) A transaction by Access Persons (other than Investment Personnel) inadvertently effected during the period proscribed in (i) above will not be considered a violation of the Code and disgorgement will not be required so long as the transaction was effected in accordance with the preclearance procedures described in Section 6 below and without prior knowledge of trading by any fund
in the Complex in the same or an equivalent Security.
D. Short-Term Trading Profits
Except as provided in Section 5 below, Investment Personnel are prohibited from profiting from a purchase and sale, or sale and purchase, of the same or an equivalent Security within any 60 calendar day period. If trades are effected during the proscribed period, any profits realized on such trades will be immediately required to be disgorged to the Fund.
E. Short Sales
No Access Person may sell any security short which is owned by any Fund in the Complex. Access Persons may, however make short sales when he/she owns an equivalent amount of the same security.
F. Options
No Access Person may write a naked call option or buy a naked put option on a security owned by any Fund in the Complex. Access Persons may purchase options on securities not held by any Fund in the Complex, or purchase call options or write put options on securities owned by any Fund in the Complex, subject to preclearance and the same restrictions applicable to other Securities. Access Persons may write covered call options or buy covered put options on a Security owned by any Fund in the Complex at the discretion of the Compliance Officer.
G. Investment Clubs
No Access Person may participate in an investment club.
Subject to preclearance in accordance with Section 6 below with respect to subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C) and 4(D) will not apply to the following:
(a) Purchases or sales of Securities effected in any account over which the Access Person has no direct or indirect influence or control or in any account of the Access Person which is managed on a discretionary basis by a person other than such Access Person and with respect to which such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the part of either the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
(f) Any equity Securities transaction, or series of related transactions effected over a 30 calendar day period, involving 500 shares or less in the aggregate, if (i) the Access Person has no prior knowledge of activity in such security by any fund in the Complex and (ii) the issuer is listed on The New York Stock Exchange or has a market capitalization (outstanding shares multiplied by the current price per share) greater than $1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related transactions effected over a 30 calendar day period, involving 100 units ($100,000 principal amount) or less in the aggregate, if the Access Person has no prior knowledge of transactions in such Securities by any fund in the Complex.
(h) Any transaction in index options effected on a broad-based
index (See Exhibit B.)/1/
(i) Purchases or sales of Securities which receive the prior approval of the Compliance Officer (such person having no personal interest in such purchases or sales), based on a determination that no abuse is involved and that such purchases and sales are not likely to have any economic impact on any fund in the Complex or on its ability to purchase or sell Securities of the same class or other Securities of the same issuer.
(j) Purchases or sales of Unit Investment Trusts.
Access Persons (other than Disinterested Directors/Trustees) must preclear all personal Securities investments with the exception of those identified in subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer for approval. All approved orders must be executed no later than 5:00 p.m. local time on the business day following the date preclearance is granted. If any order is not timely executed, a request for preclearance must be resubmitted.
Fund, should have known that, during the 15-day period immediately preceding or subsequent to the date of the transaction in a Security by such Director/Trustee, such Security is or was purchased or sold by the Fund or was being considered for purchase or sale by the Fund, the Manager or Adviser/Subadviser; provided, however, that a Disinterested Director/Trustee is not required to make a report with respect to transactions effected in any account over which such Director/Trustee does not have any direct or indirect influence or control or in any account of the Disinterested Director/Trustee which is managed on a discretionary basis by a person other than such Director/Trustee and with respect to which such Director/Trustee does not in fact influence or control such transactions. The Secretary of the Fund or the Compliance Officer shall maintain such reports and such other records to the extent required by Rule 17j-1 under the Act.
(b) Every report required by Section 7(a) hereof shall be made not later than ten days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and the principal amount of each Security involved;
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates.
Access Persons (other than Disinterested Directors/Trustees) are required to direct their brokers to supply, on a timely basis, duplicate copies of confirmations of all personal Securities transactions and copies of periodic statements for all Securities accounts in which such Access Persons have a Beneficial Ownership interest to the Compliance Officer. Such instructions must be made upon becoming an Access Person and promptly as new accounts are established, but no later than ten days after the end of a calendar quarter, with respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect beneficial interest of the Access Person. Notification must be made in writing and a copy of the notification must be submitted to Compliance. This notification will include the broker, dealer or bank with which the account was established and the date the account was established.
Compliance with this Code requirement will be deemed to satisfy the reporting requirements imposed on Access Persons under Rule 17j-1(d), provided, however, that such confirmations and statements contain all the information required by Section 7. b. hereof and are furnished within the time period required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
Within ten days after an individual first becomes an Access Person and thereafter on an annual basis, each Access Person (other than Disinterested Directors/Trustees) must disclose all personal Securities holdings. Such disclosure must be made in writing and be as of the date the individual first became an Access Person with respect to the initial report and by January 30 of each year, including holdings information as of December 31, with respect to the annual report. All such reports shall include the following: title, number of shares and principal amount of each security held, name of broker, dealer or bank with whom these securities are held and the date of submission by the Access Person.
Access Persons are prohibited from receiving any gift or other thing of more than $100 in value from any person or entity that does business with or on behalf of the Fund. Occasional business meals or entertainment (theatrical or sporting events, etc.) are permitted so long as they are not excessive in number or cost.
Investment Personnel are prohibited from serving on the boards of directors of publicly traded companies, absent prior authorization based upon a determination that the board service would be consistent with the interests of the Fund and its shareholders. In the limited instances that such board service is authorized, Investment Personnel will be isolated from those making investment decisions affecting transactions in Securities issued by any publicly traded company on whose board such
Investment Personnel serves as a director through the use of "Chinese Wall" or other procedures designed to address the potential conflicts of interest.
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
(ii) that they recognize that they are subject to the Code;
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities transactions required to be disclosed or reported pursuant to the requirements of the Code.
All violations of the Code will be reported to the Board of Directors/Trustees of the Fund on a quarterly basis. The Board of Directors/Trustees may take such action as it deems appropriate.
The Board of Directors/Trustees will be provided with an annual report which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any changes in the procedures made during the preceding year;
(iii) identifies material Code or procedural violations and sanctions imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or procedures based upon the Fund's experience under the Code, evolving industry practices, or developments in applicable laws and regulations.
The Board will review such report and determine if any further action is required.
1. No comparable Code requirements have been imposed upon Prudential Mutual Fund Services LLC, the Fund's transfer agent, or those of its directors or officers who are not Directors/Trustees or Officers of the Fund since they are deemed not to constitute Access Persons or Advisory Persons as defined in paragraphs (e)(1) and (2) of Rule 17j-1.
Dated: February 29, 2000
Exhibit A
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Definition of Beneficial Ownership
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The term "beneficial ownership" of securities would include not only ownership of securities held by an access person for his or her own benefit,whether in bearer form or registered in his or her own name or otherwise, but also ownership of securities held for his or her benefit by other (regardless of whether or how they are registered) such as custodians, brokers, executors, administrators, or trustees (including trusts in which he or she has only a remainder interest), and securities held for his or her account by pledges, securities owned by a partnership in which he or she should regard as a personal holding corporation. Correspondingly, this term would exclude securities held by an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or administrators in estates in which an access person is a legatee or beneficiary unless there is a specific legacy to such person of such securities or such person is the sole legatee or beneficiary and there are other assets in the estate sufficient to pay debts ranking ahead of such legacy, or the securities are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the
final determination of beneficial ownership is a question to be determined in
the light of the facts of the particular case, generally a person is regarded as
the beneficial owner of securities held in the name of his or her spouse and
their minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities held in the name of another person, if by reason of any contact, understanding, relationship, agreement or other arrangement, he obtains therefrom benefits substantially equivalent to those of ownership. Moreover, the fact that the holder is a relative or relative of a spouse and sharing the same home as an access person may in itself indicate that the access person would obtain benefits substantially equivalent to those of ownership from securities held in the name of such relative. Thus, absent countervailing facts, it is expected that securities held by relatives who share the same home as an access person will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities held in the name of a spouse, minor children or other person, even though he does not obtain therefrom the aforementioned benefits of ownership, if he can vest or revest title in himself at once or at some future time.
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION
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NIK Nikkei 300 Index CI/Euro
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OEX S&P 100 Close/Amer Index
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OEW S&P 100 Close/Amer Index
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OEY S&P 100 Close/Amer Index
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SPB S&P 500 Index
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SPZ S&P 500 Open/Euro Index
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SPX S&P 500 Open/Euro Index
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SXZ S&P 500 (Wrap)
--------------------------------------------------------------------------------
SXB S&P 500 Open/Euro Index
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RUZ Russell 2000 Open/Euro Index
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RUT Russell 2000 Open/Euro Index
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MID S&P Midcap 400 Open/Euro Index
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NDX NASDAQ- 100 Open/Euro Index
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NDU NASDAQ- 100 Open/Euro Index
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NDZ NASDAQ- 100 Open/Euro Index
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NDV NASDAQ- 100 Open/Euro Index
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NCZ NASDAQ- 100 Open/Euro Index
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SML S&P Small Cap 600
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TPX U.S. Top 100 Sector
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SPL S&P 500 Long-Term Close
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ZRU Russell 2000 L-T Open./Euro
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VRU Russell 2000 Long-Term Index
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EXHIBIT 99.(P)(2)
Prudential Investment Corporation
Prudential Investments Fund Management LLC Prudential Investment Management Services LLC
Code of Ethics Adopted Pursuant to Rule 17j-1 Under the Investment Company Act of 1940
(the Code)
The Code has been adopted by the Board of Directors/Trustees or the Duly Appointed Officer-In-Charge of the Prudential Mutual Fund (hereinafter, referred to as the "Fund"), the Manager, the Adviser/Subadviser, and the Principal Underwriter in accordance with Rule 17j-1(c) under the Investment Company Act of 1940 (the Act) and in accordance with the following general principles:
(1) The duty at all times to place the interests of shareholders first.
Investment company personnel should scrupulously avoid serving their own personal interests ahead of shareholders' interests in any decision relating to their personal investments.
(2) The requirement that all personal securities transactions be conducted consistent with the Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility.
Investment company personnel must not only seek to achieve technical compliance with the Code but should strive to abide by its spirit and the principles articulated herein.
(3) The fundamental standard that investment company personnel should not take inappropriate advantage of their positions.
Investment company personnel must avoid any situation that might compromise, or call into question, their exercise of fully independent
judgment in the interest of shareholders, including, but not limited to the receipt of unusual investment opportunities, perquisites, or gifts of more than a de minimis value from persons doing or seeking business with the Fund.
Rule 17j-1 under the Act generally proscribes fraudulent or manipulative practices with respect to a purchase or sale of a security held or to be acquired (as such term is defined in Section 2.) by an investment company, if effected by an associated person of such company.
The purpose of the Code is to establish procedures consistent with the Act and Rule 17j-1 to give effect to the following general prohibitions as set forth in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or Principal Underwriter for a registered investment company, or any affiliated person of an investment adviser of or principal underwriter for a registered investment company in connection with the purchase or sale, directly or indirectly, by such person of a security held or to be acquired, by such registered investment company:
(1) To employ any device, scheme or artifice to defraud such registered investment company;
(2) To make to such registered investment company any untrue statement of a material fact or omit to state to such registered investment company a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any such registered investment company; or
(4) To engage in any manipulative practice with respect to such registered investment company.
(a) "Access Person" means any director/trustee, officer, general partner or Advisory Person (including any Investment Personnel, as that term is defined herein) of the Fund, the Manager, the Adviser/Subadviser, or the Principal Underwriter.
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or Adviser/Subadviser (or of any company in a control relationship to the Fund, Manager or Adviser/Subadviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (ii) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a security.
(e) "Complex" means the group of registered investment companies for which Prudential Investments Fund Management LLC serves as Manager; provided, however, that with respect to Access Persons of the Subadviser (including any unit or subdivision thereof), "Complex" means the group of registered investment companies in the Complex advised by the Subadviser or unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager, the Adviser/Subadviser, or Principal Underwriter (including his or her designee) as having responsibility for compliance with the requirements of the Code.
(g) "Control" will have the same meaning as that set forth in Section 2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
An interested Director/Trustee who would not otherwise be deemed to be an Access Person, shall be treated as a Disinterested Director/Trustee for purposes of compliance with the provisions of the Code.
(i) "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other Advisory Persons who provide investment information and/or advice to the Portfolio Manager(s) and/or help execute the Portfolio Manager's(s') investment decisions, including securities analysts and traders ; and (b) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
(l) "Portfolio Manager" means any Advisory Person who has the direct responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of the Act, except that it will not include shares of registered open-end investment companies, direct obligations of the Government of the United States, , short-term debt securities which are "government securities" within the meaning of Section 2(a)(16) of the Act, bankers' acceptances, bank certificates of deposit, commercial paper and such other money
market instruments as are designated by the Compliance Officer. For purposes of the Code, an "equivalent Security" is one that has a substantial economic relationship to another Security. This would include, among other things, (1) a Security that is exchangeable for or convertible into another Security, (2) with respect to an equity Security, a Security having the same issuer (including a private issue by the same issuer) and any derivative, option or warrant relating to that Security and (3) with respect to a fixed-income Security, a Security having the same issuer, maturity, coupon and rating.
(o) "Security held or to be acquired" means any Security or any equivalent Security which, within the most recent 15 days: (1) is or has been held by the Fund; or (2) is being considered by the Fund or its investment adviser for purchase by the Fund.
The Code applies to all Access Persons and the Compliance Officer shall provide each Access Person with a copy of the Code. The prohibitions described below will only apply to a transaction in a Security in which the designated Access Person has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership. The Compliance Officer will maintain a list of all Access Persons who are currently, and within the past five years, subject to the Code.
A. Initial Public Offerings
No Investment Personnel may acquire any Securities in an initial public offering. For purposes of this restriction, "Initial Public Offerings" shall not include offerings of government and municipal securities.
B. Private Placements
No Investment Personnel may acquire any Securities in a private placement
without prior approval.
(i) Prior approval must be obtained in accordance with the preclearance procedure described in Section 6 below. Such approval will take into account, among other factors, whether the investment opportunity should be reserved for the Fund and its shareholders and whether the opportunity is being offered to the Investment Personnel by virtue of his or her position with the Fund. The Adviser/Subadviser shall maintain a record of such prior approval and reason for same, for at least 5 years after the end of the fiscal year in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire Securities in a private placement must disclose that investment to the chief investment officer (including his or her designee) of the Adviser/Subadviser (or of any unit or subdivision thereof) or the Compliance Officer when they play a part in any subsequent consideration of an investment by the Fund in the issuer. In such circumstances, the Fund's decision to purchase Securities of the issuer will be subject to an independent review by appropriate personnel with no personal interest in the issuer.
C. Blackout Periods
(i) Except as provided in Section 5 below, Access Persons are prohibited from executing a Securities transaction on a day during which any investment
company in the Complex has a pending "buy" or "sell" order in the same or an equivalent Security and until such time as that order is executed or withdrawn; provided, however, that this prohibition shall not apply to Disinterested Directors/Trustees except if they have actual knowledge of trading by any fund in the Complex and, in any event, only with respect to those funds on whose boards they sit.
This prohibition shall also not apply to Access Persons of the Subadviser who do not, in the ordinary course of fulfilling his or her official duties, have access to information regarding the purchase and sale of Securities for the Fund and are not engaged in the day-to-day operations of the Fund; provided that Securities investments effected by such Access Persons during the proscribed period are not effected with knowledge of the purchase or sale of the same or equivalent Securities by any fund in the Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a Security within seven calendar days before or after the Fund trades in the same or an equivalent Security. Nevertheless, a personal trade by any Investment Personnel shall not prevent a Fund in the same Complex from trading in the same or an equivalent security. However, such a transaction shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
above, except as provided in (iv) below with respect to (i) above, any profits realized on such trades will be promptly required to be disgorged to the Fund.
(iv) A transaction by Access Persons (other than Investment Personnel) inadvertently effected during the period proscribed in (i) above will not be considered a violation of the Code and disgorgement will not be required so long as the transaction was effected in accordance with the preclearance procedures described in Section 6 below and without prior knowledge of trading by any fund in the Complex in the same or an equivalent Security.
D. Short-Term Trading Profits
Except as provided in Section 5 below, Investment Personnel are prohibited from profiting from a purchase and sale, or sale and purchase, of the same or an equivalent Security within any 60 calendar day period. If trades are effected during the proscribed period, any profits realized on such trades will be immediately required to be disgorged to the Fund.
E. Short Sales
No Access Person may sell any security short which is owned by any Fund in the Complex. Access Persons may, however make short sales when he/she owns an equivalent amount of the same security.
F. Options
No Access Person may write a naked call option or buy a naked put option on a security owned by any Fund in the Complex. Access Persons may purchase options on securities not held by any Fund in the Complex, or purchase call options or write put
options on securities owned by any Fund in the Complex, subject to preclearance and the same restrictions applicable to other Securities. Access Persons may write covered call options or buy covered put options on a Security owned by any Fund in the Complex at the discretion of the Compliance Officer.
G. Investment Clubs
No Access Person may participate in an investment club.
Subject to preclearance in accordance with Section 6 below with respect to subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C) and 4(D) will not apply to the following:
(a) Purchases or sales of Securities effected in any account over which the Access Person has no direct or indirect influence or control or in any account of the Access Person which is managed on a discretionary basis by a person other than such Access Person and with respect to which such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the part of either the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
(f) Any equity Securities transaction, or series of related transactions effected over a 30 calendar day period, involving 500 shares or less in the aggregate, if (i) the Access Person has no prior knowledge
of activity in such security by any fund in the Complex and (ii) the issuer is listed on The New York Stock Exchange or has a market capitalization (outstanding shares multiplied by the current price per share) greater than $1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related transactions effected over a 30 calendar day period, involving 100 units ($100,000 principal amount) or less in the aggregate, if the Access Person has no prior knowledge of transactions in such Securities by any fund in the Complex.
(h) Any transaction in index options effected on a broad-based index (See Exhibit B.)/1/
(i) Purchases or sales of Securities which receive the prior approval of the Compliance Officer (such person having no personal interest in such purchases or sales), based on a determination that no abuse is involved and that such purchases and sales are not likely to have any economic impact on any fund in the Complex or on its ability to purchase or sell Securities of the same class or other Securities of the same issuer.
(j) Purchases or sales of Unit Investment Trusts.
Access Persons (other than Disinterested Directors/Trustees) must preclear all personal Securities investments with the exception of those identified in subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer for approval. All approved orders must be executed no later than 5:00 p.m. local time on the business day following the date preclearance is granted. If any order is not timely executed, a request for preclearance must be resubmitted.
(b) Every report required by Section 7(a) hereof shall be made not later than ten days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and the principal amount of each Security involved;
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates.
Access Persons (other than Disinterested Directors/Trustees) are required to direct their brokers to supply, on a timely basis, duplicate copies of confirmations of all personal Securities transactions and copies of periodic statements for all Securities accounts in which such Access Persons have a Beneficial Ownership interest to the Compliance Officer. Such instructions must be made upon becoming an Access Person and promptly as new accounts are established, but no later than ten days after the end of a calendar quarter, with respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect beneficial interest of the Access Person. Notification must be made in writing and a copy of the notification must be submitted to Compliance. This notification will include the broker, dealer or bank with which the account was established and the date the account was established.
Compliance with this Code requirement will be deemed to satisfy the reporting requirements imposed on Access Persons under Rule 17j-1(d), provided, however, that such confirmations and statements contain all the information required by Section 7. b. hereof and are furnished within the time period required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
Within ten days after an individual first becomes an Access Person and thereafter on an annual basis, each Access Person (other than Disinterested Directors/Trustees) must disclose all personal Securities holdings. Such disclosure must be made in writing and be as of the date the individual first became an Access Person with respect to the initial report and by January 30 of each year, including holdings information as of December 31, with respect to the annual report. All such reports shall include the following: title, number of shares and principal amount of each security held, name of broker, dealer or bank with whom these securities are held and the date of submission by the Access Person.
Access Persons are prohibited from receiving any gift or other thing of more than $100 in value from any person or entity that does business with or on behalf of the Fund. Occasional business meals or entertainment (theatrical or sporting events, etc.) are permitted so long as they are not excessive in number or cost.
Investment Personnel are prohibited from serving on the boards of directors of publicly traded companies, absent prior authorization based upon a determination that the board service would be consistent with the interests of the Fund and its shareholders. In the limited instances that such board service is authorized, Investment Personnel will be isolated from those making investment decisions affecting transactions in Securities issued by any publicly traded company on whose board such Investment Personnel serves as a director through the use of "Chinese Wall" or other procedures designed to address the potential conflicts of interest.
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
(ii) that they recognize that they are subject to the Code;
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities transactions required to be disclosed or reported pursuant to the requirements of the Code.
All violations of the Code will be reported to the Board of Directors/Trustees of the Fund on a quarterly basis. The Board of Directors/Trustees may take such action as it deems appropriate.
The Board of Directors/Trustees will be provided with an annual report which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any changes in the procedures made during the preceding year;
(iii) identifies material Code or procedural violations and sanctions imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or procedures based upon the Fund's experience under the Code, evolving industry practices, or developments in applicable laws and regulations.
The Board will review such report and determine if any further action is required.
1. No comparable Code requirements have been imposed upon Prudential Mutual Fund Services LLC, the Fund's transfer agent, or those of its directors or officers who are not Directors/Trustees or Officers of the Fund since they are deemed not to constitute Access Persons or Advisory Persons as defined in paragraphs (e)(1) and (2) of Rule 17j-1.
Dated: February 29, 2000
The term "beneficial ownership" of securities would include not only ownership of securities held by an access person for his or her own benefit, whether in bearer form or registered in his or her own name or otherwise, but also ownership of securities held for his or her benefit by other (regardless of whether or how they are registered) such as custodians, brokers, executors, administrators, or trustees (including trusts in which he or she has only a remainder interest), and securities held for his or her account by pledges, securities owned by a partnership in which he or she should regard as a personal holding corporation. Correspondingly, this term would exclude securities held by an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or administrators in estates in which an access person is a legatee or beneficiary unless there is a specific legacy to such person of such securities or such person is the sole legatee or beneficiary and there are other assets in the estate sufficient to pay debts ranking ahead of such legacy, or the securities are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the
final determination of beneficial ownership is a question to be determined in
the light of the facts of the particular case, generally a person is regarded as
the beneficial owner of securities held in the name of his or her spouse and
their minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities held in the name of another person, if by reason of any contact, understanding, relationship, agreement or other arrangement, he obtains therefrom benefits substantially equivalent to those of ownership. Moreover, the fact that the holder is a relative or relative of a spouse and sharing the same home as an access person may in itself indicate that the access person would obtain benefits substantially equivalent to those of ownership from securities held in the name of such relative. Thus, absent countervailing facts, it is expected that securities held by relatives who share the same home as an access person will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities held in the name of a spouse, minor children or other person, even though he does not obtain therefrom the aforementioned benefits of ownership, if he can vest or revest title in himself at once or at some future time.
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION -------------------------------------------------------------------------------- NIK Nikkei 300 Index CI/Euro -------------------------------------------------------------------------------- OEX S&P 100 Close/Amer Index -------------------------------------------------------------------------------- OEW S&P 100 Close/Amer Index -------------------------------------------------------------------------------- OEY S&P 100 Close/Amer Index -------------------------------------------------------------------------------- SPB S&P 500 Index -------------------------------------------------------------------------------- SPZ S&P 500 Open/Euro Index -------------------------------------------------------------------------------- SPX S&P 500 Open/Euro Index -------------------------------------------------------------------------------- SXZ S&P 500 (Wrap) -------------------------------------------------------------------------------- SXB S&P 500 Open/Euro Index -------------------------------------------------------------------------------- RUZ Russell 2000 Open/Euro Index -------------------------------------------------------------------------------- RUT Russell 2000 Open/Euro Index -------------------------------------------------------------------------------- MID S&P Midcap 400 Open/Euro Index -------------------------------------------------------------------------------- NDX NASDAQ- 100 Open/Euro Index -------------------------------------------------------------------------------- NDU NASDAQ- 100 Open/Euro Index -------------------------------------------------------------------------------- NDZ NASDAQ- 100 Open/Euro Index -------------------------------------------------------------------------------- NDV NASDAQ- 100 Open/Euro Index -------------------------------------------------------------------------------- NCZ NASDAQ- 100 Open/Euro Index -------------------------------------------------------------------------------- SML S&P Small Cap 600 -------------------------------------------------------------------------------- TPX U.S. Top 100 Sector -------------------------------------------------------------------------------- SPL S&P 500 Long-Term Close -------------------------------------------------------------------------------- ZRU Russell 2000 L-T Open./Euro -------------------------------------------------------------------------------- VRU Russell 2000 Long-Term Index -------------------------------------------------------------------------------- |
EXHIBIT 99.(P)(3)
August 1999
Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions
(a) Alliance Capital Management L.P. ("Alliance", "we" or "us") is a registered investment adviser and acts as investment manager or adviser to investment companies and other Clients. In this capacity, we serve as fiduciaries and owe our Clients an undivided duty of loyalty. We must avoid even the appearance of a conflict that may compromise the trust Clients have placed in us and must insist on strict adherence to fiduciary standards and compliance with all applicable federal and state securities laws. Adherence to this Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions (the "Code and Statement") is a fundamental condition of service with us, any of our subsidiaries or our general partner (the "Alliance Group").
(b) The Code and Statement is intended to comply with Rule 17j-1 under the Investment Company Act which applies to us because we serve as an investment adviser to registered investment companies. Rule 17j-1 specifically requires us to adopt a code of ethics that contains provisions reasonably necessary to prevent our "access persons" (defined in Rule 17j-1 to cover persons such as officers, directors, portfolio managers, traders, research analysts and others) from engaging in fraudulent conduct, including insider trading. Each investment company we advise has also adopted a code of ethics with respect to its access persons. As set forth in Section 3 below, our Code and Statement applies to all Employees and all other individuals who are Access Persons. The Code and Statement is also intended to comply with the provisions of Rule 204-2 under the Investment Advisers Act of 1940 (the "Advisers Act") which requires us to maintain records of securities transactions in which certain of our personnel have any Beneficial Ownership.
(c) All Employees and all other individuals who are Access Persons (collectively, "you") also serve as fiduciaries with respect to our Clients and in this capacity you owe an undivided duty of loyalty to our Clients. As part of this duty and as expressed throughout the Code and Statement, you must at all times:
(i) Place the interests of our Clients first;
(ii) Conduct all personal securities transactions consistent with this Code and Statement and in such a manner that avoids any actual or potential
conflict of interest or any abuse of your responsibility and position of trust; and
(iii) Abide by the fundamental standard that you not take inappropriate advantage of your position.
(d) This Code and Statement does not attempt to identify all possible conflicts of interests and literal compliance with each of the specific procedures will not shield you from liability for personal trading or other conduct which violates your fiduciary duties to our Clients. In addition to the specific prohibitions contained in this Code and Statement, you are also subject to a general requirement not to engage in any act or practice that would defraud our Clients. This general prohibition includes, in connection with the purchase or sale of a Security held or to be acquired or sold (as this phrase is defined below in Section 2(k)) by a Client:
(i) Making any untrue statement of a material fact;
(ii) Creating materially misleading impressions by omitting to state or failing to provide any information necessary to make any statements made, in light of the circumstances in which they are made, not misleading;
(iii) Making investment decisions, changes in research ratings and trading decisions other than exclusively for the benefit of and in the best interest of our Clients;
(iv) Using information about investment or trading decisions or changes in research ratings (whether considered, proposed or made) to benefit or avoid economic injury to you or anyone other than our Clients;
(v) Taking, delaying or omitting to take any action with respect to any research recommendation, report or rating or any investment or trading decision for a Client in order to avoid economic injury to you or anyone other than our Clients;
(vi) Purchasing or selling a Security on the basis of knowledge of a possible trade by or for a Client;
(vii) Revealing to any other person (except in the normal course of your duties on behalf of a Client) any information regarding Securities transactions by any Client or the consideration by any Client of Alliance of any such Securities transactions; or
(viii) Engaging in any manipulative practice with respect to any Client.
The following definitions apply for purposes of the Code and Statement in addition to the definitions contained in the text itself.
(a) "Access Person" means any director or officer of the general partner of Alliance, as well as any of the following persons:
(i) any Employee who, in connection with his or her regular functions or duties --
(A) makes, participates in, or obtains information regarding the purchase or sale of a Security by a Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales;
(B) obtains information from any source regarding any change, or consideration of any change in Alliance's internal research coverage, a research rating or an internally published view on a Security or issuer; or
(C) obtains information from any source regarding the placing or execution of an order for a Client account; and
(ii) any natural person having the power to exercise a controlling influence over the management or policies of Alliance (unless that power is solely the result of his or her position with Alliance) who:
(A) obtains information concerning recommendations made to a Client with regard to the purchase or sale of a Security;
(B) obtains information from any source regarding any change, or consideration of any change in research coverage, research rating or a published view on a Security or issuer; and
(C) obtains information from any source regarding the placing or execution of an order for a Client account.
(b) A Security is "being considered for purchase or sale" when:
(i) an Alliance research analyst issues research information (including as part of the daily morning call) regarding initial coverage of, or changing a rating with respect to, a Security;
(ii) a portfolio manager has indicated (during the daily morning call or otherwise) his or her intention to purchase or sell a Security;
(iii) a portfolio manager places an order for a Client; or
(iv) a portfolio manager gives a trader discretion to execute an order for a Client over a specified period of time.
(c) "Beneficial Ownership" is interpreted in the same manner as in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"), Rule 16a-1 and the other rules and regulations thereunder and includes ownership by any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in a Security. For example, an individual has an indirect pecuniary interest in any Security owned by the individual's spouse. Beneficial Ownership also includes, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, having or sharing "voting power" or "investment power," as those terms are used in Section 13(d) of the Exchange Act and Rule 13d-3 thereunder.
(d) "Client" means any person or entity, including an investment company, for which Alliance serves as investment manager or adviser.
(e) "Compliance Officer" refers to Alliance's Compliance Officer.
(f) "Employee" refers to any person who is an employee of any member of the Alliance Group, including both part-time employees, as well as consultants (acting in the capacity of a portfolio manager, trader or research analyst) under the control of Alliance who, but for their status as consultants, would otherwise come within the definition of Access Person.
(g) "Investment Personnel" refers to any Employee who:
(i) acts in the capacity of a portfolio manager, research analyst or trader;
(ii) assists someone acting in the capacity of a portfolio manager, research analyst or trader and as an assistant has access to information generated or used by portfolio managers, research analysts and traders (including,
for example, assistants who have access to the Alliance Investment Review or the Alliance International Investment Review); or
(iii) receives the Alliance Investment Review or the Alliance International Investment Review.
(h) "Personal Account" refers to any account (including, without limitation, a custody account, safekeeping account and an account maintained by an entity that may act in a brokerage or a principal capacity) in which an Access Person or Employee has any Beneficial Ownership and any such account maintained by or for a financial dependent. For example, this definition includes Personal Accounts of:
(i) an Access Person's or Employee's spouse, including a legally separated or divorced spouse who is a financial dependent,
(ii) financial dependents residing with the Access Person or Employee, and
(iii) any person financially dependent on an Access Person or Employee who does not reside with that person, including financially dependent children away at college.
(i) "Purchase or Sale of a Security" includes, among other transactions, the writing or purchase of an option to sell a Security and any short sale of a Security.
(j) "Security" has the meaning set forth in Section 2(a)(36) of the Investment Company Act and any derivative thereof, commodities, options or forward contracts, except that it shall not include shares of open-end investment companies registered under the Investment Company Act, securities issued by the Government of the United States, short-term debt securities that are government securities within the meaning of Section 2(a)(16) of the Investment Company Act, bankers' acceptances, bank certificates of deposit, commercial paper, and such other money market instruments as are designated by the Compliance Officer.
(k) "Security held or to be acquired or sold" means:
(i) any Security which, within the most recent 15 days (1) is or has been held by a Client or (2) is being or has been considered by a Client (to the extent known by Alliance) or Alliance for purchase by the Client; and
(ii) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security.
(l) "Subsidiary" refers to either of the following types of entities with respect to which Alliance, directly or indirectly, through the ownership of voting securities, by contract or otherwise has the power to direct or cause the direction of management or policies of such entity:
(i) any U.S. entity engaged in money management; and
(ii) any non-U.S. entity engaged in money management for U.S. accounts.
(a) This Code and Statement applies to all Employees and to all other individuals who are Access Persons. Please note that certain provisions apply to all Employees while other provisions apply only to Access Persons and others apply only to certain categories of Access Persons who are also Investment Personnel (e.g., portfolio managers and research analysts).
(b) Alliance will provide a copy of this Code and Statement to all Employees and all individuals who are Access Persons. In addition, the Compliance Officer will maintain lists of Access Persons and Investment Personnel, including a separate list of portfolio managers and research analysts.
It is the responsibility of each Employee to ensure that all personal securities transactions are made in strict compliance with the restrictions and procedures in the Code and Statement and otherwise comply with all applicable legal and regulatory requirements.
Employees must hold all Securities in a Personal Account. This requirement applies to all types of personal securities transactions including, for example, the purchase of Securities in a private placement or other direct investment. In addition, Employees may not take physical possession of certificates or other formal evidence of ownership.
Personal securities transactions for Employees may be effected only in a Personal Account and in accordance with the following provisions:
All Personal Accounts of an Employee that are maintained as brokerage accounts must be held only at the following designated broker-dealers:
Donaldson, Lufkin & Jenrette, Merrill Lynch & Co., and Charles Schwab.
An Employee may not purchase or sell a Security, or engage in any short sale of a Security, in a Personal Account if, at the time of the transaction, the Security is being considered for purchase or sale for a Client or is being purchased or sold for a Client. The following non-exhaustive list of examples illustrates this restriction:
. An Alliance research analyst issues research information (including as part of the daily morning call) regarding initial coverage of, or changing a rating with respect to, a Security.
. A portfolio manager has, during the daily morning call, indicated his or her intention to purchase or sell a Security.
. A portfolio manager places an order in the Security to purchase or sell the Security for a Client.
. An open order in the Security exists on the trading desk.
. An open limit order exists on the trading desk, and it is reasonably likely that the Security will reach that limit price in the near future.
A Security may not be purchased or sold in a Personal Account if, at the time of the transaction, the Security appears on the Alliance Daily Restricted List and is restricted for Employee transactions. The Daily Restricted List is made available each business day to all Employees via Lotus Notes and the Alliance Alert.
An Employee may not purchase or sell, directly or indirectly, any Security in which the Employee has (or after such transaction would have) any Beneficial Ownership unless the Employee obtains the prior written approval to the transaction from the Compliance Department
and, in the case of Investment Personnel, the head of the business unit in which the Employee works. A request for preclearance must be made in writing in advance of the contemplated transaction and must state:
a. the name of the Security involved,
b. the number of shares or principal amount to be purchased or sold, and
c. a response to all questions contained in the appropriate pre-clearance form.
Preclearance requests will be acted on only between the hours of 10:00 a.m. and 3:30 p.m. Any approval given under this paragraph will remain in effect only until the end of the trading day on which the approval was granted.
When a Security is being considered for purchase or sale for a Client or is being purchased or sold for a Client following the approval on the same day of a personal trading request form with respect to the same security, the Compliance Department is authorized to cancel the personal order if (x) it has not been executed and the order exceeds a market value of $50,000 or (y) the Compliance Department determines, after consulting with the trading desk and the appropriate business unit head (if available), that the order, based on market conditions, liquidity and other relevant factors, could have an adverse impact on a Client or on a Client's ability to purchase or sell the Security or other Securities of the issuer involved.
No more than an aggregate of 20 securities transactions may occur in an Employee's Personal Accounts in any consecutive thirty-day period.
An Employee may not buy or sell any Security that is the subject of "significantly new" or "significantly changed" research during a forty-eight hour period commencing with the first publication or release of the research. The terms "significantly new" and "significantly changed" include:
a. the initiation of coverage by an Alliance research analysts;
b. any change in a research rating or position by an Alliance research analyst (unless the research analyst who makes the change advises the Compliance Department in writing that the change is the result of an unanticipated widely disseminated announcement or market event, e.g., the announcement of a major earnings warning as opposed to the research analysts independently rethinking his or her subjective assessment of the security); and
c. any other rating, view, opinion, or advice from an Alliance research analyst, the issuance (or reissuance) of which in the opinion of such research analyst or head of research would be reasonably likely to have a material effect on the price of the security.
In addition to the requirements set forth in paragraph (a) of this
Section 4, the following restrictions apply to all Access Persons:
No Access Person shall engage in any short sale of a Security if, at the time of the transaction, any Client has a long position in such Security (except that an Access Person may engage in short sales against the box and covered call writing provided that these personal securities transactions do not violate the prohibition against short-term trading).
All Access Persons are subject to a mandatory buy and hold of all Securities for 60 calendar days. An Access Person may, however, after 30 calendar days, sell a Security if the sale price is lower than the original purchase price (i.e., at a loss on the original investment). Any trade made in violation of this paragraph shall be unwound, or, if that is not practicable, all profits from the short-term trading must be disgorged as directed by the Compliance Officer.
Any non-Employee Access Person with actual knowledge that a Security is being considered for purchase or sale for a Client may not purchase or sell such Security.
In addition to the requirements set forth in paragraphs (a) and (b) of this Section 4, the following restrictions apply to all Investment Personnel:
No Investment Personnel shall acquire any direct or indirect Beneficial Ownership in any Securities in any initial public offering.
No Investment Personnel shall acquire any Beneficial Ownership in any Securities in any private placement of Securities unless the Compliance Officer and the business unit head give express prior written approval and document the basis for granting or denying approval after due inquiry. The Compliance Officer, in determining whether approval should be given, will take into account, among other factors, whether the investment opportunity should be reserved for a Client and whether the opportunity is being offered to the individual by virtue of his or her position with the Alliance Group. Investment Personnel so authorized to acquire Securities in a private placement must disclose that investment when they play a part in any Client's subsequent consideration of an investment in the issuer, and in such a case, the decision of Alliance to purchase Securities of that issuer for a Client will be subject to an independent review by Investment Personnel with no personal interest in such issuer.
No Investment Personnel shall serve on any board of directors or trustees or in any other management capacity of any private or public company without prior written authorization from the Compliance Officer based upon a determination that such service would not be inconsistent with the interests of any Client. This prohibition does not include non-profit corporations, charities or foundations; however, approval from the Investment Personnel's supervisor is necessary.
No Investment Personnel shall receive any gift or other thing of more than de minimis value from any person or entity, other than a member of the Alliance Group, that does business with Alliance on behalf of a Client, provided, however, that receipt of the following shall not be prohibited:
a. an occasional breakfast, luncheon, dinner or reception, ticket to a sporting event or the theater, or comparable entertainment, that is not so frequent, so costly, nor so extensive as to raise any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail party in conjunction with a bona fide business meeting; and
c. a gift approved in writing by the Compliance Officer.
In addition to the requirements set forth in paragraphs (a), (b) and
(c) of this Section 4, the following restrictions apply to all persons
acting in the capacity of a portfolio manager of a Client account:
No person acting in the capacity of a portfolio manager shall buy or sell a Security for a Personal Account within seven calendar days before and after a Client trades in that Security. In the case of Client accounts managed by more than one portfolio manager, this restriction will apply to the portfolio manager who makes the decision to purchase or sell the relevant Security. If a portfolio manager engages in such a personal securities transaction during a blackout period, the Compliance Officer will break the trade or, if the trade cannot be broken, the Compliance Officer will direct that any profit realized on the trade be disgorged.
No person acting in the capacity of a portfolio manager shall delay or accelerate a Client trade due to a previous purchase or sale of a Security for a Personal Account. In the event that a portfolio manager determines that it is in the best interest of a Client to buy or sell a Security for the account of the Client within seven days of the purchase or sale of the same Security in a Personal Account, the portfolio manager should contact the Compliance Officer immediately who may direct that the trade in the Personal Account be canceled or take other appropriate relief.
No person acting in the capacity of a portfolio manager shall purchase or sell a Security in a Personal Account contrary to investment decisions made on behalf of a Client, unless the portfolio manager represents and warrants in the personal trading request form that (x) it is appropriate for the Client account to buy, sell or continue to hold that Security and (y) the decision to purchase or sell the Security for the Personal Account arises from the need to raise or invest cash or some other valid reason specified by the portfolio manager and approved by the Compliance Officer and is not otherwise based on the portfolio manager's view of how the Security is likely to perform.
In addition to the requirements set forth in paragraphs (a), (b), (c) of this Section 4, the following restrictions apply to all persons acting in the capacity of a research analyst:
No person acting as a research analyst shall buy or sell a Security within seven calendar days before and after making a change in a rating or other published view with respect to that Security. If a research analyst engages in such a personal securities transaction during a blackout period, the Compliance Officer will break the trade or, if the trade cannot be broken, the Compliance Officer will direct that any profit realized on the trade be disgorged.
No person acting as a research analyst shall delay or accelerate a rating or other published view with respect to any Security because of a previous purchase or sale of a Security in such person's Personal Account. In the event that a research analyst determines that it is appropriate to make a change in a rating or other published view within seven days of the purchase or sale of the same Security in a Personal Account, the research analyst should contact the Compliance Officer immediately who may direct that the trade in the Personal Account be canceled or take other appropriate relief.
No person acting as a research analyst shall purchase or sell a Security (to the extent such Security is included in the research analyst's research universe) contrary to an outstanding rating or a pending ratings change, unless (x) the research analyst represents and warrants in the personal trading request form that (as applicable) there is no reason to change the outstanding rating and (y) the research analyst's personal trade arises from the need to raise or invest cash or some other valid reason specified by the research analyst and approved by the Compliance Officer and is not otherwise based on the research analyst's view of how the security is likely to perform.
(a) The pre-clearance requirements, as described in Section 4(a)(iv) of this Code and Statement, do not apply to:
Purchases or sales that are non-volitional (including, for example, any Security received as part of an individual's compensation) on the part of an Employee (and any Access Person who is not an Employee) or are pursuant to a dividend reinvestment plan (up to an amount equal to the cash value of a regularly declared dividend, but not in excess of this amount).
Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of the issuer's Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired. This exemption applies only to the exercise or sale of rights that are issued in connection with a specific upcoming public offering on a specified date, as opposed to rights acquired from the issuer (such as warrants or options), which may be exercised from time- to-time up until an expiration date. This exemption does not apply to the sale of stock acquired pursuant to the exercise of rights.
(b) The restrictions on effecting transactions in a (1) Security being considered for purchase or sale, as described in Sections 4(a)(ii) and 4(b)(iii) or (2) that is the subject of "significantly new" or "significantly changed" research, as described in Section 4(a)(vi) of this Code and Statement, do not apply to:
Purchases or sales that are non-volitional (including, for example, any Security received as part of an individual's compensation) on the part of an Access Person or are pursuant to a dividend reinvestment plan (up to an amount equal to the cash value of a regularly declared dividend, but not in excess of this amount).
Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of the issuer's Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired. This exemption applies only to the exercise or sale of rights
that are issued in connection with a specific upcoming public offering on a specified date, as opposed to rights acquired from the issuer (such as warrants or options), which may be exercised from time-to-time up until an expiration date. This exemption does not apply to the sale of stock acquired pursuant to the exercise of rights.
Any of the following Securities, if at the time of the transaction, the Access Person has no actual knowledge that the Security is being considered for purchase or sale by a Client, that the Security is being purchased or sold by the Client or that the Security is the subject of significantly new or significantly changed research:
a. Fixed income securities transaction involving no more than 100 units or having a principal amount not exceeding $25,000; or
b. Non-convertible debt securities and non-convertible preferred stocks which are rated by at least one nationally recognized statistical rating organization ("NRSRO") in one of the three highest investment grade rating categories.
Any equity Securities transaction, or series of related transactions, involving shares of common stock and excluding options, warrants, rights and other derivatives, provided
a. any orders are entered after 10:00 a.m. and before 3:00
p.m. and are not designated as "market on open" or "market
on close";
b. the aggregate value of the transactions do not exceed (1) $10,000 for securities with a market capitalization of less than $1 billion; (2) $25,000 for securities with a market capitalization of $1 billion to $5 billion and (3) $50,000 for securities with a market capitalization of greater than $5 billion; and
c. the Access Person has no actual knowledge that the Security is being considered for purchase or sale by a Client, that the Security is being purchased or sold by or for the Client or that the Security is the subject of significantly new or significantly changed research.
The restrictions on Employees and Access Persons, as described in Sections 4(a) and 4(b) of this Code and Statement, do not apply to non-Employee Access Persons, if at the time of the transaction involved, such person has no actual knowledge that the Security involved is being considered for purchase or sale.
In addition to the exceptions contained in Section 5(a) and (b), the Compliance Officer may, in very limited circumstances, grant other exceptions under any Section of the Code and Statement on a case-by- case basis, provided:
(i) The individual seeking the exception furnishes to the Compliance Officer:
a. a written statement detailing the efforts made to comply with the requirement from which the individual seeks an exception;
b. a written statement containing a representation and warranty that (1) compliance with the requirement would impose a severe undue hardship on the individual and (2) the exception would not, in any manner or degree, harm or defraud the Client or compromise the individual's or Alliance's fiduciary duty to any Client; and
c. any supporting documentation that the Compliance Officer may request;
(ii) The Compliance Officer conducts an interview with the individual or takes such other steps the Compliance Officer deems appropriate in order to verify that granting the exception will not in any manner or degree, harm or defraud the Client or compromise the individual's or Alliance's fiduciary duty to any Client; and
(iii) The Compliance Officer maintains, along with statements provided by the individual, a written record that contains:
a. the name of the individual;
b. the specific requirement of Section 4 from which the individual sought an exception;
c. the name of the Security involved, the number of shares or principal amount purchased or sold, and the date or dates on which the Securities were purchased or sold;
d. the reason(s) the individual sought an exception from the requirements of Section 4;
e. the efforts the individual made to comply with the requirements of Section 4 from which the individual sought to be excepted; and
f. the independent basis upon which the Compliance Officer believes that the exemption should be granted.
(e) Any Employee or Access Person who acquires an interest in any private investment fund (including a "hedge fund") or any other Security that cannot be purchased and held in a Personal Account shall be excepted from the requirement that all Securities be held in a Personal Account, as described in Section 4(a) of this Code and Statement. Such Employee or Access Person shall provide the Compliance Officer with a written statement detailing the reason why such Security cannot be purchased and held in a Personal Account. Transactions in these Securities nevertheless remain subject to all other requirements of this Code and Statement, including applicable private placement procedures, preclearance requirements and blackout period trading restrictions.
Upon commencement of employment with a member of the Alliance Group, an Employee must:
(i) file with the Compliance Officer a list of all Personal Accounts by completing the Employee Compliance Statement (a copy of which is attached as Appendix A), and while so employed maintain the list on a current basis; and
(ii) Disclose to the Compliance Officer all Securities holdings in which the Employee has any Beneficial Ownership, and thereafter on an annual basis, to the extent these Securities do not appear on the Employee's account statements.
Every Access Person who is not an Employee of Alliance, shall report to the Compliance Officer the information described in Section 6(d) below with respect to transactions in any Security in which such Access Person has, or by reason of such transaction acquires, any Beneficial Ownership in the Security; provided, however, that such Access Person is not required to make a report with respect to transactions effected in any account over which the Access Person does not
have any direct or indirect influence or control, including such an account in which an Access Person has any Beneficial Ownership.
Every report of a non-Employee Access Person required by Section 6(b) above shall be in writing and shall be delivered not later than ten days after the end of the calendar quarter in which a transaction to which the report relates was effected, and shall contain the following information:
(i) the date of the transaction, the title and the number of shares, and the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the transaction was effected.
Any such report may contain a statement that the report is not to be construed as an admission by the person making the report that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates.
The Compliance Officer shall maintain the statements required by paragraph (a) above, the reports required by paragraph (c) above and such other records, if any, as are required by Rule 17j-1 under the Investment Company Act and Rule 204-2 under the Advisers Act. All reports furnished pursuant to this Section will be kept confidential, subject to the rights of inspection by the Compliance Officer, the Transaction Compliance Committee, the Securities and Exchange Commission and by other third parties pursuant to applicable law.
Each person subject to this Code and Statement must certify annually that he or she has read and understands this Code and Statement, recognizes that he or she is subject thereto and has complied with its provisions and disclosed or reported all personal Securities transactions required to be disclosed or reported by this Code and Statement. Such certificates and reports are to be given to the Compliance Officer.
Upon learning of a violation of this Code and Statement, any member of the Alliance Group, with the advice of the Compliance Officer, may impose such sanctions as it deems appropriate, including, among other things, censure, suspension or termination of service. Individuals subject to this Code and Statement who fail to comply with this Code and Statement may also be violating the federal securities laws or other federal and state laws. Any such person who is suspected of violating this Code and Statement should be reported immediately to the Compliance Officer.
I hereby acknowledge receipt of the Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions (the "Code and Statement") of Alliance Capital Management L.P. and its Subsidiaries. I certify that I have read and understand the Code and Statement and recognize that I am subject to its provisions. I also certify that I have complied with the requirements of the Code and Statement and have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the Code and Statement.
APPENDIX A
EMPLOYEE COMPLIANCE STATEMENT
I hereby certify that I have read and understand the Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions (the "Code and Statement"), dated August 1999 and hereby agree, in consideration of my continued employment by Alliance Capital Management L.P. or one of its subsidiaries, to comply with the policies and procedures contained in the Code and Statement.
1 . In connection therewith, I agree to:
c. be personally responsible for determining if any security transaction for my Personal Account(s) is prohibited by the Code and Statement or any other Alliance policy statement.
2. The following Personal Account(s) are maintained at the broker-dealer(s) and/or financial institution(s) named below (if none write "none"):
a. registered in my name at the following broker-dealer(s) and/or financial institution(s):
b. registered in the name of my spouse at the following broker-dealer(s) and/or financial institution(s):
c. registered in the name of a family member who resides with me at the following broker-dealer(s) and/or financial institution(s):
name of family member name of broker-dealer and/or financial
institution(s)
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d. registered in the name of any other person who resides with me and is financially dependent on me at the following broker-dealer(s) and/or financial institution(s):
name of person name of broker-dealer and/or financial
institution(s)
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e. registered in the name of any other person who does not reside with me, but who is financially dependent on me, at the following broker- dealer(s) and/or financial institution(s):
name of person name of broker-dealer and/or financial
institution(s)
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Client accounts):
name and description of account name of broker-dealer and/or
financial institution(s)
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4. I will notify the Compliance Officer if a Personal Account is opened or closed. If the answers to paragraphs a through e of Section 2 above are all "none", I certify that neither I nor any member of my family who resides with me, any other person who resides with me currently and is financially dependent on me, or any other person who is financially dependent on me maintains a brokerage account or other type of financial account.
____________________ ___________________________________
Date Employee Signature
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Type or print name
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EXHIBIT 99.(P)(4)
JENNISON ASSOCIATES LLC
CODE OF ETHICS,
POLICY ON INSIDER TRADING
AND
PERSONAL TRADING POLICY
SECTION I
CODE OF ETHICS
FOR
JENNISON ASSOCIATES LLC
This Code sets forth rules, regulations and standards of conduct for the employees of Jennison Associates LLC. It bears the approval of the Corporation's Board of Directors and applies to Jennison Associates and all subsidiaries.
The Code incorporates The Prudential Insurance Company of America's ethics policies as well as additional policies specific to Jennison Associates LLC. Prudential's Code of Ethics, "Making the Right Choices", may be found as Exhibit Q in Jennison Associates' Compliance Manual.
The prescribed guidelines assure that the high ethical standards long maintained by Jennison continue to be applied. The purpose of the Code is to preclude circumstances which may lead to or give the appearance of conflicts of interest, insider trading, or unethical business conduct. The rules prohibit certain activities and personal financial interests as well as require disclosure of personal investments and related business activities of all directors, officers and employees.
ERISA and the federal securities laws define an investment advisor as a fiduciary who owes his clients a duty of undivided loyalty, who shall not engage in any activity in conflict with the interests of the client. As a fiduciary, our personal and corporate ethics must be above reproach. Actions which expose any of us or the organization to even the appearance of impropriety must not occur.
The excellent name of our firm continues to be a direct reflection of the conduct of each of us in everything we do.
Being fully aware of and strictly adhering to the Code of Ethics is the responsibility of each Jennison Associates employee.
CONFIDENTIAL INFORMATION
Employees may become privy to confidential information (information not generally available to the public) concerning the affairs and business transactions of Jennison, companies researched by us for investment, our present and prospective clients, suppliers, officers and other staff members. Confidential information also includes trade secrets and other proprietary information of the Corporation such as business or product plans, systems, methods, software, manuals and client lists. Safeguarding confidential information is essential to the conduct of our business. Caution and discretion are required in the use of such information and in sharing it only with those who have a legitimate need to know.
A) Personal Use: Confidential information obtained or developed as a result of employment with the Corporation is not to be used or disclosed for the purpose of furthering any private interest or as a means of making any personal gain. Use or disclosure of such information could result in civil or criminal penalties against the Corporation or the individual responsible for disclosing such information.
Further guidelines pertaining to confidential information are contained in the "Policy Statement on Insider Trading." (Set forth on page 8 in the section dedicated specifically to Insider Trading.)
B) Release of Client Information: Information concerning a client which has been requested by third persons, organizations or governmental bodies may only be released with the consent of the client involved. All requests for information concerning a client (other than routine credit inquiries), including requests pursuant to the legal process (such as subpoenas or court orders) must be promptly referred to Karen E. Kohler. No information may be released, nor should the client involved be contacted, until so directed by Karen E. Kohler.
In order to preserve the rights of our clients and to limit the firm's liability concerning the release of client proprietary information, care must be taken to:
* Limit use and discussion of information obtained on the job to normal business activities.
* Request and use only information which is related to our business needs.
* Restrict access to records to those with proper authorization and legitimate business needs.
* Include only pertinent and accurate data in files which are used as a basis for taking action or making decisions.
CONFLICTS OF INTEREST
You should avoid actual or apparent conflicts of interest - that is, any personal interest outside the Company which could be placed ahead of your obligations to our clients, Jennison Associates or The Prudential Insurance Company of America. Conflicts may exist even when no wrong is done. The opportunity to act improperly may be enough to create the appearance of a conflict.
We recognize and respect an employee's right of privacy concerning personal affairs, but we must require a full and timely disclosure of any situation which could result in a conflict of interest or even the appearance of a conflict. Whether or not a conflict exists will be determined by the Company, not by the employee involved.
To reinforce our commitment to the avoidance of potential conflicts of interest, the following rules have been adopted:
1) YOU MAY NOT, without first having secured prior approval from the Board of Directors, serve as a director, officer, employee, partner or trustee - nor hold any other position of substantial interest - in any outside business enterprise. You do not need prior approval, however, if the following three conditions are met: one, the enterprise is a family firm owned principally by other members of your family; two, the family business is not doing business with Jennison or The Prudential; and three, the services required will not interfere with your duties or your independence of judgment. Significant involvement by employees in outside business activity is generally unacceptable. In addition to securing prior approval for outside business activities, you will be required to disclose all relationships with outside enterprises annually.
* Note - The above deals only with positions in business enterprises. It does not effect Jennison's practice of permitting employees to be associated with governmental, educational, charitable, religious or other civic organizations. These activities may be entered into without prior consent, but must still be disclosed on an annual basis.
2) YOU MAY NOT act on behalf of Jennison in connection with any transaction in which you have a personal interest. This rule does not apply to any personal interest resulting from your participation in any Jennison or Prudential plan in the nature of incentive compensation, or in the case of a plan which provides for direct participation in specific transactions by Jennison's Board of Directors.
3) YOU MAY NOT, without prior approval from the Board of Directors, have a substantial interest in any outside business which, to your knowledge, is involved currently in a business transaction with Jennison or The Prudential, or is engaged in businesses similar to any business engaged in by Jennison. A substantial interest includes any investment in the outside business involving an amount greater than 10 percent of your gross assets, or $10,000 if that amount is larger, or involving an ownership interest greater than 2 percent of the outstanding equity interests. You do not need approval to invest in open- ended registered investment companies such as investments in mutual funds and similar enterprises which are publicly owned.
4) YOU MAY NOT, without prior approval of the Board of Directors, engage in any transaction involving the purchase of products and/or services from Jennison, except on the same terms and conditions as they are offered to the public. Plans offering services to employees approved by the Board of Directors are exempt from this rule.
5.) YOU MAY NOT purchase an equity interest in any competitor. Employees and their immediate families are also prohibited from investing in securities of a client or supplier with whom the staff member regularly deals even if the securities are widely traded.
OTHER BUSINESS ACTIVITIES
ISSUES REGARDING THE RETENTION OF SUPPLIERS: The choice of our suppliers must be based on quality, reliability, price, service, and technical advantages.
GIFTS: Jennison employees and their immediate families should not solicit, accept, retain or provide any gifts or favors which might influence decisions you or the recipient must make in business transactions involving Jennison or which others might reasonably believe could influence those decisions. Even a nominal gift should not be accepted if, to a reasonable observer, it might appear that the gift would influence your business decisions.
Modest gifts and favors, which would not be regarded by others as improper, may be accepted or given on an occasional basis. Examples of such gifts are those received as normal business courtesies (i.e. meals or golf games); non- cash gifts of nominal value (such as received at Holiday time); gifts received because of kinship, marriage or social relationships entirely beyond and apart from an organization in which membership or an official position is held as approved by the Corporation. Entertainment which satisfies these requirements and conforms to generally accepted business practices also is permissible. Please reference the Gifts and Entertainment section of Jennison Associates' Compliance Manual for a more detailed explanation of Jennison's policy towards gifts and entertainment.
IMPROPER PAYMENTS - KICKBACKS: In the conduct of the Corporation's business, no bribes, kickbacks, or similar remuneration or consideration of any kind are to be given or offered to any individual or organization or to any intermediaries such as agents, attorneys or other consultants, for the purpose of influencing such individual or organization in obtaining or retaining business for, or directing business to, the Corporation.
BOOKS, RECORDS AND ACCOUNTS: The integrity of the accounting records of the Corporation is essential. All receipts and expenditures, including personal expense statements must be supported by documents that accurately and properly describe such expenses. Staff members responsible for approving expenditures or for keeping books, records and accounts for the Corporation are required to approve and record all expenditures and other entries based upon proper supporting documents so that the accounting records of the Corporation are maintained in reasonable detail, reflecting accurately and fairly all transactions of the Corporation including the
disposition of its assets and liabilities. The falsification of any book, record or account of the Corporation, the submission of any false personal expense statement, claim for reimbursement of a non-business personal expense, or false claim for an employee benefit plan payment are prohibited. Disciplinary action will be taken against employees who violate these rules, which may result in dismissal.
LAWS AND REGULATIONS: The activities of the Corporation must always be in full compliance with applicable laws and regulations. It is the Company's policy to be in strict compliance with all laws and regulations applied to our business. We recognize, however, that some laws and regulations may be ambiguous and difficult to interpret. Good faith efforts to follow the spirit and intent of all laws is expected. To ensure compliance, the Corporation intends to educate its employees on laws related to Jennison's activities which may include periodically issuing bulletins, manuals and memoranda. Staff members are expected to read all such materials and be familiar with their content.
OUTSIDE ACTIVITIES & POLITICAL AFFILIATIONS: Jennison Associates does not contribute financial or other support to political parties or candidates for public office except where lawfully permitted and approved in advance in accordance with procedures adopted by Jennison's Board of Directors. Employees may, of course, make political contributions, but only on their own behalf; they will not be reimbursed by the Company for such contributions.
Legislation generally prohibits the Corporation or anyone acting on its behalf from making an expenditure or contribution of cash or anything else of monetary value which directly or indirectly is in connection with an election to political office; as, for example granting loans at preferential rates or providing non-financial support to a political candidate or party by donating office facilities. Otherwise, individual participation in political and civic activities conducted outside of normal business hours is encouraged, including the making of personal contributions to political candidates or activities.
Employees are free to seek and hold an elective or appointive public office, provided you do not do so as a representative of the Company. However, you must conduct campaign activities and perform the duties of the office in a manner that does not interfere with your responsibilities to the firm.
COMPLIANCE WITH THE CODE & CONSEQUENCES IF VIOLATION
OF THE CODE OCCURS:
Each year all employees will be required to complete a form certifying that they have read this booklet, understand their responsibilities, and are in compliance with the requirements set forth in this statement.
This process should remind us of the Company's concern with ethical issues and its desire to avoid conflicts of interest or their appearance. It should also prompt us to examine our personal circumstances in light of the Company's philosophy and policies regarding ethics.
Certain key employees will be required to complete a form verifying that they have complied with all company procedures and filed disclosures of significant personal holdings and corporate affiliations.
If any staff member has reason to believe that any situation may have resulted in a violation of any provision of the Code of Ethics, whether by that staff member or by another, the matter must be reported promptly to Karen E. Kohler.
Violation of any provision of the Code of Ethics by any staff member may constitute grounds for disciplinary action, including dismissal.
SECTION II
INSIDER TRADING
As a result of recent legislative events, particularly the enactment of the Insider Trading and Securities Fraud Enforcement Act of 1988, the Securities Exchange Acts and the Investment Advisors Act of 1940 require that all investment advisors establish, maintain and enforce policies and supervisory procedures designed to prevent the misuse of material, non-public information by such investment advisor, and any associated person.
This section of the Code sets forth Jennison Associates' policy statement on insider trading. It explains some of the terms and concepts associated with insider trading, as well as the civil and criminal penalties for insider trading violations. In addition, it sets forth the necessary procedures required to implement Jennison Associates' Insider Trading Policy Statement.
This policy applies to all Jennison Associates' employees, as well as the employees of all affiliated companies.
JENNISON ASSOCIATES' POLICY STATEMENT
AGAINST INSIDER TRADING
When contemplating a transaction for your personal account, or an account in which you may have a direct or indirect personal or family interest, we must be certain that such transaction is not in conflict with the interests of our clients. Specific rules in this area are difficult, and in the final analysis, each of us must make our own determination as to whether a transaction is in conflict with client interests. Although it is not possible to anticipate all potential conflicts of interest, we have tried to set a standard that protects the firm's clients, yet is also practical for our employees. The Company recognizes the desirability of giving its corporate personnel reasonable freedom with respect to their investment activities, on behalf of themselves, their families, and in some cases non-client accounts (i.e. charitable or educational organizations on whose boards of directors corporate personnel serve). However, personal investment activity may conflict with the interests of the Company's clients. In order to avoid such conflicts -- or even the appearance of conflicts -- the Company has adopted the following policy:
Jennison Associates LLC forbids any director, officer or employee from trading, either personally or on behalf of clients or others, on material, non- public information or communicating material, non-public information to others in violation of the law. Said conduct is deemed to be "insider trading." Such policy applies to every director, officer and employee and extends to activities within and outside their duties at Jennison Associates.
Every director, officer, and employee is required to read and retain this policy statement. Questions regarding Jennison Associates' Insider Trading policy and procedures should be referred to Karen E. Kohler or John H. Hobbs.
EXPLANATION OF RELEVANT TERMS AND CONCEPTS
Although insider trading is illegal, Congress has not defined "insider", "material" or "non-public information". Instead the courts have developed definitions of these terms. Set forth below are very general descriptions of these terms. However, it is usually not easily determined whether information is "material" or "non-public" and, therefore, whenever you have any questions as to whether information is material or non-public, consult with Karen E. Kohler. Do not make this decision yourself.
The concept of an "insider" is broad. It includes officers, directors and employees of a company. A person may be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs and as a result is given access to information solely for the company's purposes. Examples of temporary insiders are the company's attorneys, accountants, consultants and bank lending officers, as well as the employees of such organizations. Jennison Associates and its employees may become "temporary insiders" of a company in which we invest, in which we advise, or for which we perform any other service. An outside individual may be considered an insider, according to the Supreme Court, if the company expects the outsider to keep the disclosed non-public information confidential or if the relationship suggests such a duty of confidentiality.
Trading on inside information is not a basis for liability unless the information is material. Material Information is defined, as:
* Information, for which there is a substantial likelihood, that a
reasonable investor would consider important in making his or her investment
decisions, or
* Information that is reasonably certain to have a substantial effect on
the price of a company's securities.
Information that directors, officers and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, a significant increase or decline in orders, significant new products or discoveries, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.
In addition, knowledge about Jennison Associates' trading information and patterns may be deemed material.
theory can be used to reach a variety of individuals not previously thought to be encompassed under the fiduciary duty theory.
"Controlling persons" include not only employers, but any person with power to influence or control the direction of the management, policies or activities of another person. Controlling persons may include not only the Company, but its directors and officers.
PENALTIES FOR INSIDER TRADING VIOLATIONS
Penalties for trading on or communicating material non-public information are more severe than ever. The individuals involved in such unlawful conduct may be subject to both civil and criminal penalties. A controlling person may be subject to civil or criminal penalties for failing to establish, maintain and enforce Jennison Associates' Policy Statement against Insider Trading and/or if such failure permitted or substantially contributed to an insider trading violation.
Individuals can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include:
a. CIVIL INJUNCTIONS
b. TREBLE DAMAGES
c. DISGORGEMENT OF PROFITS
d. JAIL SENTENCES - Under the new laws, the maximum jail sentences for criminal securities law violations increased from 5 years to 10 years.
e. CIVIL FINES - Persons who committed the violation may pay up to three times the profit gained or loss avoided, whether or not the person actually benefited.
f. CRIMINAL FINES - The employer or other "controlling persons" may pay up to $2,500,000.
g. Violators will be barred from the securities industry.
IMPLEMENTATION PROCEDURES & POLICY
The following procedures have been established to assist the officers, directors and employees of Jennison Associates in preventing and detecting insider trading as well as to impose sanctions against insider trading. Every officer, director and employee must follow these procedures or risk serious sanctions, including possible dismissal, substantial personal liability and criminal penalties. If you have any questions about these procedures you should consult Karen E. Kohler or John H. Hobbs.
Before trading for yourself or others, including client accounts managed by Jennison Associates, in the securities of a company about which you may have potential inside information, ask yourself the following questions:
If, after consideration of the above, you believe that the information is material and non-public, or if you have questions as to whether the information is material and non-public, you should take the following steps:
i. Report the matter immediately to Karen E. Kohler or John H. Hobbs. If neither are available you should contact Mr. Louis Begley, our attorney at Debevoise and Plimpton ((212)909-6000).
ii. Do not repurchase or sell the securities on behalf of yourself or others, including client accounts managed by Jennison Associates.
iii. Do not communicate the information inside or outside Jennison Associates, other than to Karen E. Kohler, John H. Hobbs, or Mr. Begley our outside counsel.
iv. After Karen E. Kohler, John H. Hobbs, or Mr. Begley has reviewed the issue, you will be instructed to continue the prohibitions against trading and communication, or you will be allowed to trade and communicate the information.
Information that you identify as material and non-public may not be communicated to anyone, including persons within Jennison Associates LLC, except as provided above. In addition, care should be taken so that such information is secure. For example, files containing material non-public information should be locked; access to computer files containing non-public information should be restricted.
Jennison employees have no obligation to the clients of Jennison Associates to trade or recommend trading on the basis of material, non-public (inside) information in their possession. Jennison's fiduciary responsibility to its clients requires that the firm and its employees regard the limitations imposed by Federal securities laws.
To supplement its own research and analysis, to corroborate data compiled by its staff, and to consider the views and information of others in arriving at its investment decisions, Jennison Associates, consistent with its efforts to secure best price and execution, allocates brokerage business to those broker- dealers in a position to provide such services.
It is the firm's policy not to allocate brokerage in consideration of the attempted furnishing of material non-public (inside) information. Employees, in recommending the allocation of brokerage to broker-dealers, should not give consideration to the provision of any material non-public (inside) information. The policy of Jennison Associates as set forth in this statement should be brought to the attention of such broker-dealer.
If doubt remains as to whether information is material or non-public, or if there is any unresolved question as to the applicability or interpretation of the foregoing procedures and standards, or as to the propriety of any action, it must be discussed with Karen E. Kohler or John H. Hobbs before trading or communicating the information to anyone.
This code will be distributed to all Jennison Associates personnel. Periodically or upon request, Karen E. Kohler will meet with such personnel to review this statement of policy, including any developments in the law and to answer any questions of interpretation or application of this policy.
From time to time this statement of policy will be revised in the light of developments in the law, questions of interpretation and application, and practical experience with the procedures contemplated by the statement.
JENNISON ASSOCIATES PERSONAL TRADING POLICY
The management of Jennison Associates is fully aware of and in no way wishes to deter the security investments of its individual employees. The securities markets, whether equity, fixed income, international or domestic, offer individuals alternative methods of enhancing their personal investments.
Due to the nature of our business and our fiduciary responsibility to our client funds, we must protect the firm and its employees from the possibilities of both conflicts of interest and illegal insider trading in regard to their personal security transactions.
We have adopted the following policies and procedures on employee personal trading to insure against violations of the law. These policies and procedures are in addition to those set forth in the Code of Ethics and the Policy Statement Against Insider Trading.
Jennison Associates, as an investment advisor, is required by Rule 204-2 of the under the Investment Advisers Act of 1940, to keep records of every transaction in securities in which any of its personnel has any direct or indirect beneficial ownership, except transactions effected in any account over which neither the investment adviser nor any advisory representative of the investment adviser has any direct or indirect influence or control and transactions in securities which are direct obligations of the United States, mutual funds and high-quality short-term instruments. This includes transactions for the personal accounts of an employee, as well as, transactions for the accounts of other members of their immediate family (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control and trusts of which they are trustees or other accounts in which they have any direct or indirect beneficial interest or direct or indirect influence or control, unless the investment decisions for the account are made by an independent investment manager in a fully discretionary account. Jennison recognizes that some of its employees may, due to their living arrangements, be uncertain as to their obligations under this Personal Trading Policy. If an employee has any question or doubt as to whether they have direct or indirect influence or control over an account, he or she must consult with the Compliance Department as to their status and obligations with respect to the account in question.
In addition, Jennison, as a subadviser to investment companies registered under the Investment Company Act of 1940 (e.g., mutual funds), is required by Rule 17j-1 under the
Investment Company Act to review and keep records of personal investment
activities of "access persons" of these funds, unless the access person does not
have direct or indirect influence or control of the accounts. An "access person"
is defined as any director, officer, general partner or Advisory Person of a
Fund or Fund's Investment Adviser. "Advisory Person" is defined as any employee
of the Fund or investment adviser (or of any company in a control relationship
to the Fund or investment adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of investments by a Fund, or whose functions relate to the
making of any recommendations with respect to the purchases or sales. Therefore,
Jennison's "access persons" and "advisory persons" include the following:
portfolio managers, investment analysts, traders, officers and directors.
Access Persons are required to provide the Compliance Department with the following:
A) Initial Holdings Reports:
Within 10 days of commencement of employment, an initial holdings report detailing all personal investments (including private placements, and index futures contracts and options thereon, but excluding US Treasury securities, mutual fund shares, and short-term high quality debt instruments). The report should contain the following information:
1. the title, number of shares and principal amount of each investment in which the Access Person had any direct or indirect beneficial ownership;
2. The name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person; and
3. The date that the report is submitted by the Access Person.
B) Quarterly Reports:
1. Transaction Reporting:Within 10 days after the end of a calendar
quarter, with respect to any transaction during the quarter in
investments in which the Access Person had any direct or indirect
beneficial ownership:
a. The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each investment involved;
b. The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
c. The price of the investment at which the transaction was effected;
d. The name of the broker, dealer or bank with or through which the
transaction was effected; and
e. The date that the report is submitted by the Access Person.
2. Personal Securities Account Reporting:Within 10 days after the end of a calendar quarter, with respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person:
a. The name of the broker, dealer or bank with whom the Access
Person established the account;
b. The date the account was established; and
c. The date that the report is submitted by the Access Person.
To facilitate compliance with this reporting requirement, Jennison Associates requires that a duplicate copy of all trade confirmations and brokerage statements be supplied directly to Jennison Associates' Compliance Department and to the Prudential's Corporate Compliance Department. In addition, the Compliance Department must also be notified immediately upon the creation of any new personal investment accounts.
C) Annual Holdings Reports Annually, the following information (which information must be current as of a date no more than 30 days before the report is submitted):
1. The title, number of shares and principal amount of each investment
in which the Access Person had any direct or indirect beneficial
ownership;
2. The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct
or indirect benefit of the Access Person; and
3. The date that the report is submitted by the Access Person.
D) A copy of all discretionary investment advisory contracts or agreements between the officer, director or employee and his investment advisors.
E) A copy of Schedule B, Schedule D, and Schedule E from federal income tax returns on an annual basis.
In order to ensure compliance with these regulations, all other employees of Jennison Associates shall submit to the Compliance Department:
A.) Upon commencement of employment and no less than annually thereafter, a report of all personal securities holdings and a report of every personal brokerage account in which they have any direct or indirect beneficial interest. The Compliance Department must also be notified immediately upon the creation of any new personal investment accounts.
The report must disclose the following material:
* Name and type of account - single, joint, trust, partnership, etc.
* A statement disclosing the general purpose of the account (e.g.,
as a trustee of XYZ College, I have agreed in accordance with the
school's Board of Directors to invest funds on behalf of XYZ for
the benefit of its annual scholarship fund).
* The institution, bank, or otherwise, where the account is
maintained.
B.) A report, including confirmation and quarter-end brokerage statements, of every security transaction in which they, their immediate families (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control), and trusts of which they are trustees or any other account in which they have a beneficial interest and have participated or direct or indirect influence or control.
To facilitate this aspect of employee securities trading, Jennison Associates requires that a duplicate copy of all trade confirmations and brokerage statements be supplied directly to Jennison Associates' Compliance Department and to the Prudential's Corporate Compliance Department.
C.) A copy of all discretionary investment advisory contracts or agreements between the officer, director or employee and his investment advisors.
D.) A copy of Schedule B, Schedule D, and Schedule E from federal income tax returns on an annual basis.
A.) Jennison recognizes that a director not employed by Jennison (i.e., directors designated by The Prudential Insurance Company of America to sit on Jennison's Board of Directors) is subject to his or her employer's own code of ethics, a copy of which and any amendments thereto shall have been made available to Jennison's Compliance Department. The Compliance Department of the non-employee director's employer must represent quarterly to the Jennison Compliance Department that the non-employee director has complied with the recordkeeping and other procedures of its code of ethics during the most recent calendar quarter. Such representation shall also state that such policies and procedures shall be deemed adequate for compliance with both Prudential's and Jennison's Codes of Ethics. If there have been any violations of the employer's code of ethics by such non-employee director, the employer's Compliance Department must submit a detailed report of such violations and what remedial action, if any was taken.
B.) Non-employee directors shall be exempt from supplying a copy of Schedule B, D, and Schedule E from their federal income tax returns.
C.) Additionally, all non-employee directors shall be exempt from the pre-clearance procedures as described below.
All directors, officers, and employees of Jennison Associates may need to obtain clearance from the Personal Investment Committee prior to effecting any securities transaction in which they or their immediate families (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control, have a beneficial interest on behalf of a trust of which they are trustee, or for any other account in which they have a beneficial interest or direct or indirect influence or control. Determination as to whether or not a particular transaction requires pre-approval should be made by consulting the "Compliance and Reporting of Personal Transactions Matrix" found on Exhibit A.
Please note, voluntary tender offers are a recent addition to the "Compliance and Reporting of Personal Transactions" matrix. They are both a reportable transaction and one that requires pre-approval. Approval of tendering shares into a tender offer shall be determined on a case-by-case basis by the Personal Investment Committee.
The Personal Investment Committee will make its decision of whether to clear a proposed trade on the basis of the personal trading restrictions set forth -below. A member of the Compliance Department shall promptly notify the officer, director, or employee of approval or denial to trade the requested security. Notification of approval or denial to trade may be verbally given as soon as possible; however, it shall be confirmed in writing within 24 hours of the verbal notification. Please note that the approval granted will be valid
Only transactions where the investment decisions for the account are made by an independent investment manager in a fully discretionary account will be exempt from the pre-clearance procedures. Copies of the agreement of such discretionary accounts, as well as transaction statements or another comparable portfolio report, must be submitted on a quarterly basis to the Compliance Department for review and record retention.
The following rules, regulations and restrictions have been set forth by the Board of Directors and apply to the personal security transactions of all employees. These rules will govern whether clearance for a proposed transaction will be granted. These rules also apply to the sale of securities once the purchase of a security has been pre-approved and completed.
No director, officer or employee of the Company may effect for himself, an immediate family member (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control, or any trust of which they are trustee, or any other account in which they have a beneficial interest or direct or indirect influence or control any transaction in a security, or recommend any such transaction in a security, of which, to his/her knowledge, the Company has effected the same for any of its clients, if such transaction would in any way conflict with, or be detrimental to, the interests of such client, or if such transaction was effected with prior knowledge of material, non-public information.
Except in particular cases in which the Personal Investment Committee has determined in advance that proposed transactions would not conflict with the foregoing policy, the following rules shall govern all transactions (and recommendations) by all corporate personnel for their own accounts, for their immediate family's accounts (including accounts of the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control, and any trust of which they are trustee, or any other account in which they have a beneficial interest or direct or indirect influence or control. The provisions of the following paragraphs do not necessarily imply that the Personal Investment Committee will conclude that the transactions or recommendations to which they
A. Personal Trading by All Employee Directors, Officers, and Employees
(1.) Neither any security recommended, or proposed to be recommended to any client for purchase, nor any security purchased or proposed to be purchased for any client may be purchased by any corporate personnel if such purchase will interfere in any way with the orderly purchase of such security by any client.
(2.) Neither any security recommended, or proposed to be recommended to any client for sale, nor any security sold, or proposed to be sold, for any client may be sold by any corporate personnel if such sale will interfere in any way with the orderly sale of such security by any client.
(3.) No security may be sold after being recommended to any client for purchase or after being purchased for any client, and no security may be purchased after being recommended to any client for sale or after being sold for any client, if the sale or purchase is effected with a view to making a profit on the anticipated market action of the security resulting from such recommendation, purchase or sale.
B. Short-Term Trading Profits
All directors (both employees and non-employees), officers, and employees of Jennison Associates are prohibited from profiting in their own accounts and the accounts of their immediate families (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control or any trust of which they are a trustee, or for any other account in which they have a beneficial interest or direct or indirect influence or control from the purchase and
sale, or the sale and purchase of the same or equivalent securities within 60 calendar days . Any profits realized from the purchase and sale or the sale and purchase of the same (or equivalent) securities within the 60 day restriction period shall be disgorged to the firm, net of taxes.
"Profits realized" shall be calculated consistent with interpretations under section 16(b) of the Securities Exchange Act of 1934, as amended, and the regulations thereunder, which require matching any purchase and sale that occur with in a 60 calendar day period across all accounts over which a Jennison director, officer or employee has a direct or indirect beneficial interest (including accounts that hold securities held by members of a person's immediate family sharing the same household) over which the person has direct or indirect control or influence without regard to the order of the purchase or the sale during the period. As such, a person who sold a security and then repurchased the same (or equivalent) security would need to disgorge a profit if matching the purchase and the sale would result in a profit. Conversely, if matching the purchase and sale would result in a loss, profits would not be disgorged.
The prohibition on short-term trading profits shall not apply to trading of index options and index futures contracts and options on index futures contracts on broad based indices. However, such transactions remain subject to the pre-clearance procedures and other applicable procedures. A list of broad-based indices is provided on Exhibit B.
C. No purchase of a security by any of the corporate personnel shall be made if the purchase would deprive any of Jennison's clients of an investment opportunity, after taking into account (in determining whether such purchase would constitute an investment opportunity) the client's investments and investment objectives and whether the opportunity is being offered to corporate personnel by virtue of his or her position at Jennison.
D. None of the corporate personnel may purchase new issues of either common stock or convertible securities except in accordance with item E below. This prohibition does not apply to new issues of shares of open-end investment companies. All corporate personnel shall also obtain prior written approval of the Personal Investment Committee in the form of a completed "Request to Buy or Sell Securities" form before effecting any purchase of securities on a `private placement' basis. Such approval will take into account, among other factors, whether the investment opportunity should be reserved for Jennison's clients and whether the opportunity is being offered to corporate personnel by virtue of his or her position at Jennison.
approval of such transactions must be accompanied by a copy of the final prospectus. Additionally, trade confirmations of executions of such transaction must be received by the Compliance Department no later than the close of business on the day following execution of such trade. If such trade confirmation is not received, the employee may be requested to reverse (subject to pre-approval) the trade, and any profits or losses avoided must be disgorged to the firm.
G. Any transactions in index futures contracts and index options, including those effected on a broad-based index, are subject to the preclearance and reporting requirements.
H. No director, officer, or employee of Jennison Associates may profit in their personal securities accounts or the accounts of their immediate families (including the spouse, minor children, and adults living in the same household with the officer, director, or employee) for which they or their spouse have any direct or indirect influence or control or any trust of which they are a trustee, or for any other account in which they have a beneficial interest or direct or indirect influence or control by short selling or purchasing put options on securities that represent a position in any portfolios managed by Jennison on behalf of its clients. Any profits realized from such transactions shall be disgorged to the Firm, net of taxes. Put options, short sales and short sales against the box are subject to the preclearance rules.
I. No employee, director, or officer of Jennison Associates may participate in investment clubs.
J. While participation in employee stock purchase plans and employee stock option plans need not be pre-approved, copies of the terms of the plans should be provided to the Compliance Department as soon as possible so that the application of the various provisions of the Personal Trading Policy may be determined (e.g., pre-approval, reporting, short-term trading profits ban). Corporate personnel must obtain pre-approval for any discretionary disposition of securities or discretionary exercise of options acquired pursuant to participation in an employee stock purchase or employee stock option plan. Nondiscretionary dispositions of securities or exercise are not subject to pre-approval. Additionally, corporate personnel should report holdings of such securities and options on an annual basis.
K. Subject to pre-clearance, long-term investing through direct stock purchase plans is permitted. The terms of the plan, the initial investment, and any purchases through automatic debit must be provided to and approved by the Personal Investment Committee. Any changes to the original terms of approval, e.g., increasing, decreasing, or termination of participation in the plan, as well as any sales or discretionary purchase of securities in the plan must be submitted for pre-clearance. Provided that the automatic monthly purchases have been approved by the Personal Investment Committee, each automatic monthly purchase need not be submitted for pre-approval. "Profits realized" for purposes of applying the ban on short-term trading profits will be determined by matching the proposed discretionary purchase or sale transaction against the most recent discretionary purchase or sale, as applicable, not the most recent automatic purchase or sale (if applicable). Additionally, holdings should be disclosed quarterly.
Exceptions to the Personal Trading Policy
Notwithstanding the foregoing restrictions, exceptions to certain provisions (e.g., blackout period, pre-clearance procedures, and short-term trading profits) of the Personal Trading Policy may be granted on a case by case basis when no abuse is involved and the equities of the situation strongly support an exception to the rule.
Investments in the following instruments are not bound to the rules and restrictions as set forth above and may be made without the approval of the Investment Compliance Committee: governments, agencies, money markets, repurchase orders, reverse repurchase orders and open-ended registered investment companies.
All employees, on a quarterly basis, must sign a statement that they, during said period, have been in full compliance with all personal and insider trading rules and regulations set forth within Jennison Associates' Code of Ethics, Policy Statement on Insider Trading and Personal Trading Policy.
Violations of Jennison's Personal Trading Policy and Procedures, while in most cases may be inadvertent, must not occur. It is important that every employee abide by the policies established by the Board of Directors. Penalties will be assessed in accordance with the schedules set forth below. These, however, are minimum penalties. THE FIRM RESERVES THE RIGHT TO TAKE ANY OTHER APPROPRIATE ACTION, INCLUDING TERMINATION.
All violations and penalties imposed will be reported to Jennison's Compliance Committee on a monthly basis. In addition, the Compliance Committee will provide the Board of Directors with an annual report which at minimum:
(1) summarizes existing procedures concerning personal investing and any changes in procedures made during the preceding year;
(2) identifies any violations requiring significant remedial action during the preceding year; and
(3) identifies any recommended changes in existing restrictions or procedures based upon Jennison's experience under its policies and procedures, evolving industry practices, or developments in applicable laws and regulations.
A. Penalties for Failure to Secure Pre-Approval
The minimum penalties for failure to pre-clear personal securities transactions include possible reversal of the trade, possible disgorgement of profits, as well as the imposition of additional cash penalties. Please note that subsections 2 and 3 have been applied retroactively from its effective date.
Depending on the circumstances of the violation, the individual may be asked to reverse the trade (i.e., the securities must be sold). Any profits realized from the subsequent sale, net of taxes must be turned over to the firm. Please note: The sale or reversal of such trade must be submitted for pre-approval.
Depending on the circumstances of the violation, the firm may require that profits realized from the sale of securities that are defined as "long-term capital gains" by Internal Revenue Code (the "IRC") section 1222 and the rules thereunder, as amended, to be turned over to the firm, subject to the following maximum amounts:
JALLC Position Disgorgement Penalty
----------------------------------------------------------------------------------------------------------------
Senior Vice Presidents and above Realized long-term capital gain, net of
taxes, up to $10,000.00
----------------------------------------------------------------------------------------------------------------
Vice Presidents and Assistant Vice Presidents Realized long-term capital gain, net of
taxes, up to $5,000.00
----------------------------------------------------------------------------------------------------------------
All other JALLC Personnel 25% of the realized long-term gain,
irrespective of taxes, up to $3,000.00
----------------------------------------------------------------------------------------------------------------
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Depending on the nature of the violation, the firm may require that all profits realized from sales that result in profits that are defined as "short-term capital gains" by IRC section 1222 and the rules thereunder, as amended. Please note, however, any profits that result from violating the ban on short-term trading profits are addressed in section 5.C. "Penalties for Violation of Short-Term Trading Profit Rule."
4. Additional Cash Penalties
VP's and Above Other JALLC Personnel
------------------------------------ -------------------------------------
First Offense None/Warning None/Warning
Second Offense $1000 $200
Third Offense $2000 $300
Fourth Offense $3000 $400
Fifth Offense $4000 & Automatic Notification of $500 & Automatic Notification of the
Board of Directors Board of Directors
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Notwithstanding the foregoing, Jennison reserves the right to notify the Board of Directors for any violation.
Penalties shall be assessed over a rolling three year period. For example, if over a three year period (year 1 through year 3), a person had four violations, two in year 1, and one in each of the following years, the last violation in year 3 would be considered a fourth offense. However, if in the subsequent year (year 4), the person only had one violation of the policy, this violation would be penalized at the third offense level because over the subsequent three year period (from year 2 through year 4), there were only three violations. Thus, if a person had no violations over a three year period, a subsequent offense would be considered a first offense, notwithstanding the fact that the person may have violated the policy prior to the three year period.
B. Failure to Comply with Recordkeeping Requirements
Such violations occur if Jennison does not receive a broker confirmation within ten (10) business days following the end of the quarter in which a transaction occurs or if JACC does not routinely receive brokerage statements. Evidence of written notices to brokers of Jennison's requirement and assistance in resolving problems will be taken into consideration in determining the appropriateness of penalties.
VP's and Above Other JALLC Personnel
------------------------------- -------------------------------
First Offense None/Warning None/Warning
Second Offense $200 $ 50
Third Offense $500 $100
Fourth Offense $600 $200
Fifth Offense $700& Automatic Notification $300 & Automatic Notification
of the Board of the Board
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Notwithstanding the foregoing, Jennison reserves the right to notify the Board of Directors for any violation.
C. Penalty for Violation of Short-Term Trading Profit Rule
Any profits realized from the purchase and sale or the sale and purchase of the same (or equivalent) securities within 60 calendar days shall be disgorged to the firm, net of taxes. "Profits realized" shall be calculated consistent with interpretations under section 16(b) of the Securities Exchange Act of 1934, as amended, which requires matching any purchase and sale that occur with in a 60 calendar day period without regard to the order of the purchase or the sale during the period. As such, a person who sold a security and then repurchased the same (or equivalent) security would need to disgorge a profit if matching the purchase and the sale would result in a profit. Conversely, if matching the purchase and sale would result in a loss, profits would not be disgorged.
D. Other policy infringements will be dealt with on a case by case basis. Penalties will be commensurate with the severity of the violation.
Serious violations would include:
A. Failure to abide by the determination of the Personal Committee.
B. Failure to submit pre-approval for securities in which Jennison actively trades.
E. Disgorged Profits
Profits disgorged to the firm shall be donated to a charitable organization selected by the firm in the name of the firm. Such funds may be donated to such organization at such time as the firm determines.
EXHIBIT A
COMPLIANCE AND REPORTING OF PERSONAL TRANSACTIONS MATRIX
Investment Sub-Category Required Reportable If reportable,
Category/Method ------------- Pre-Approval (Y/N) minimum
-------------- (Y/N) ------ reporting
------ frequency
====================================================================================================================================
BONDS Treasury Bills, Notes, Bonds N N N/A
Agency N Y Quarterly
Corporates Y Y Quarterly
MBS N Y Quarterly
ABS N Y Quarterly
CMO's Y Y Quarterly
Municipals N Y Quarterly
Convertibles Y Y Quarterly
STOCKS Common Y Y Quarterly
Preferred Y Y Quarterly
Rights Y Y Quarterly
Warrants Y Y Quarterly
Automatic Dividend Reinvestments N N N/A
Optional Dividend Reinvestments Y Y Quarterly
Direct Stock Purchase Plans with automatic Y Y Quarterly
investments
Employee Stock Purchase/Option Plan Y* Y *
OPEN-END MUTUAL FUNDS
Affiliated Investments: N N N/A
Non-Affiliated Funds N N N/A
CLOSED END FUNDS & UNIT INVESTMENT
TRUSTS
All Affiliated & Non-Affiliated Funds N Y Quarterly
US Funds (including SPDRs, NASDAQ 100 Index N Y Quarterly
Tracking Shares)
Foreign Funds N Y Quarterly
DERIVATIVES Any exchange traded, NASDAQ, or OTC option or
futures contract, including, but not limited to:
Financial Futures ** Y Quarterly
Commodity Futures N Y Quarterly
Options on Futures ** Y Quarterly
Options on Securities ** Y Quarterly
Non-Broad Based Index Options Y Y Quarterly
Non Broad Based Index Futures Contracts and Y Y Quarterly
Options on Non-Broad Based Index Futures
Contracts
Broad Based Index Options N Y Quarterly
Broad Based Index Futures Contracts and Options N Y Quarterly
on Broad Based Index Futures Contracts
LIMITED PARTNERSHIPS, PRIVATE
PLACEMENTS, & PRIVATE INVESTMENTS
Y Y Quarterly
VOLUNTARY TENDER OFFERS Y Y Quarterly
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* Pre-approval of sales of securities or exercises of options acquired through employee stock purchase or employee stock option plans are required. Holdings are required to be reported annually; transactions subject to pre-approval are required to be reported quarterly. Pre-approval is not required to participate in such plans.
** Pre-approval of a personal derivative securities transaction is required if the underlying security requires pre-approval.
EXHIBIT B
BROAD-BASED INDICES
Nikkei 300 Index CI/Euro ------------------------------------------------------------------------- S&P 100 Close/Amer Index ------------------------------------------------------------------------- S&P 100 Close/Amer Index ------------------------------------------------------------------------- S&P 100 Close/Amer Index ------------------------------------------------------------------------- S&P 500 Index ------------------------------------------------------------------------- S&P 500 Open/Euro Index ------------------------------------------------------------------------- S&P 500 Open/Euro Index ------------------------------------------------------------------------- S&P 500 (Wrap) ------------------------------------------------------------------------- S&P 500 Open/Euro Index ------------------------------------------------------------------------- Russell 2000 Open/Euro Index ------------------------------------------------------------------------- Russell 2000 Open/Euro Index ------------------------------------------------------------------------- S&P Midcap 400 Open/Euro Index ------------------------------------------------------------------------- NASDAQ- 100 Open/Euro Index ------------------------------------------------------------------------- NASDAQ- 100 Open/Euro Index ------------------------------------------------------------------------- NASDAQ- 100 Open/Euro Index ------------------------------------------------------------------------- NASDAQ- 100 Open/Euro Index ------------------------------------------------------------------------- NASDAQ- 100 Open/Euro Index ------------------------------------------------------------------------- S&P Small Cap 600 ------------------------------------------------------------------------- U.S. Top 100 Sector ------------------------------------------------------------------------- S&P 500 Long-Term Close ------------------------------------------------------------------------- Russell 2000 L-T Open./Euro ------------------------------------------------------------------------- Russell 2000 Long-Term Index ------------------------------------------------------------------------- |