<Page>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<Table>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
</Table>
<Table>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL MUNICIPAL BOND FUND
PRUDENTIAL MUNICIPAL SERIES FUND
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
PRUDENTIAL SHORT-TERM BOND FUND, INC.
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
- ----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- ----------------------------------------------------------------------------
(Name of Person(s)Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by
/ / Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------
</Table>
<Page>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA MONEY MARKET SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
NEW JERSEY SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK SERIES
NEW YORK MONEY MARKET SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
PRUDENTIAL SHORT-TERM BOND FUND, INC.
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND
DRYDEN ULTRA SHORT BOND FUND
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
------------------------
IMPORTANT PROXY MATERIALS
PLEASE VOTE NOW!
JUNE 6, 2003
Dear Shareholder:
I am inviting you to vote on several proposals relating to the management
and operation of your Fund. A shareholder meeting of each of the Funds
identified above is scheduled for July 17, 2003. This package contains
information about the proposals and includes materials you will need to vote.
The Board of Directors/Trustees of each Fund have reviewed the proposals and
have recommended that the proposals be presented to you for consideration.
Although the Directors/Trustees have determined that the proposals are in your
best interest, the final decision is yours.
Shareholders of each Fund are being asked to approve many of the same
proposals, so in order to save money for your Fund, one proxy statement has been
prepared for all of the Funds listed above. To help you understand the
proposals, we are including a section that answers commonly asked questions. The
accompanying proxy statement includes a detailed description of each of the
proposals relating to your Fund.
Please read the enclosed materials carefully and cast your vote. Remember,
your vote is extremely important, no matter how large or small your holdings. By
voting now, you can help avoid additional costs that are incurred with follow-up
letters and calls.
<Page>
TO VOTE, YOU MAY USE ANY OF THE FOLLOWING METHODS:
- BY MAIL. Please complete, date and sign your proxy card before mailing it
in the enclosed postage-paid envelope.
- BY INTERNET. Have your proxy card available. Go to the web site:
www.proxyvote.com. Enter your 12-digit control number from your proxy
card. Follow the simple instructions found on the web site.
- BY TELEPHONE. If your Fund shares are held in your own name, call
1-800-690-6903 toll free. If your Fund shares are held on your behalf in a
brokerage account with Prudential Securities Incorporated or another
broker, call 1-800-454-8683 toll free. Enter your 12-digit control number
from your proxy card. Follow the simple instructions.
If you have any questions before you vote, please call us at 1-866-665-7684.
We're glad to help you understand the proposals and assist you in voting. Thank
you for your participation.
/s/ Judy A. Rice
Judy A. Rice
PRESIDENT
<Page>
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND AND VOTE ON THE
PROPOSALS
Please read the enclosed proxy statement for a complete description of the
proposals. However, as a quick reference, the following questions and answers
provide a brief overview of the proposals.
Q. WHAT PROPOSALS AM I BEING ASKED TO VOTE ON?
A. The purpose of the proxy is to ask you to vote on five primary issues:
- to elect a new Board of Directors or Trustees,
- to permit the Manager of your Fund (other than Dryden Ultra Short Bond
Fund of Prudential Short-Term Bond Fund, Inc.) to enter into or make
material changes to your Fund's subadvisory agreements without shareholder
approval,
- to approve an amended management agreement for your Fund (other than
Dryden Ultra Short Bond Fund),
- to approve changes to your Fund's fundamental investment restrictions
(other than Dryden Ultra Short Bond Fund), and
- to approve amendments to the articles of incorporation or declaration of
trust for your Fund.
Q. WHY AM I RECEIVING PROXY INFORMATION FOR A FUND THAT I DO NOT OWN?
A. Shareholders of all of the Funds are being asked to approve many of the same
proposals, so most of the information that must be included in a proxy
statement for your Fund needs to be included in a proxy statement for the
other Funds as well. Therefore, in order to save money for your Fund, one
proxy statement has been prepared.
Q. WHY AM I RECEIVING MORE THAN ONE PROXY STATEMENT OR MAILING?
A. You may receive a separate proxy statement for each Fund that you own. Also,
if you hold shares in more than one account--for example, in an individual
account and in an IRA--you may receive multiple proxy statements. Each proxy
card should be voted and returned.
Q. ARE YOU RECOMMENDING A NEW BOARD FOR THE FUNDS?
A. Yes. The Board of each of the Funds has nominated for election Independent
and Interested Directors or Trustees. Most of the nominees already serve as
Directors or Trustees on some, but not all of the Funds in the Prudential
mutual fund complex.
Q. WILL THE PROPOSED CHANGES RESULT IN HIGHER MANAGEMENT FEES?
A. No. The rate of the management fees charged to each Fund will not change as
a result of any of the proposed changes.
Q. WILL THE PROPOSED CHANGES RESULT IN HIGHER DIRECTORS' OR TRUSTEES' FEES FOR
A FUND?
A. No. Although the number of Independent Directors or Trustees of most of the
Funds will increase from 5 to 8, the aggregate amount of fees paid by the
Funds will not increase, because the same Independent Directors or Trustees
have been elected to the Boards of the American Skandia Funds, which will
share in paying the fees.
Q. WHAT ARE "FUNDAMENTAL" INVESTMENT RESTRICTIONS, AND WHY ARE THEY PROPOSED TO
BE CHANGED?
A. "Fundamental" investment restrictions are limitations placed on a Fund's
investment policies that can be changed only by a shareholder vote--even if
the changes are minor. The law requires certain investment policies to be
designated as fundamental. Each Fund adopted a number of fundamental
investment restrictions, and some of those fundamental restrictions reflect
regulatory, business or
<Page>
industry conditions, practices or requirements that are no longer in effect.
Others reflect regulatory requirements that, while still in effect, do not
need to be classified as fundamental restrictions.
The Boards believe that certain fundamental investment restrictions that are
not legally required should be eliminated. The Boards also believe that
other fundamental restrictions should be modernized and made more uniform.
The reason for these changes is to provide greater investment flexibility
for the Funds.
Q. DO THE PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS MEAN THAT MY
FUND'S INVESTMENT OBJECTIVE IS BEING CHANGED?
A. No.
Q. WHAT WILL BE THE EFFECT OF THE PROPOSED CHANGES TO MY FUND'S FUNDAMENTAL
RESTRICTIONS?
A. The Boards do not believe that the proposed changes to fundamental
investment restrictions will result in a major restructuring of any Fund's
investment portfolio. The changes will allow each Fund greater flexibility
to respond to investment opportunities and permit the Boards to make changes
in the future that they consider desirable without the necessity of a
shareholder vote and the related additional expenses. If implemented, some
of the changes may result in greater risk. A shareholder vote is not
necessary for changes to non-fundamental investment policies or
restrictions.
Q. HOW MANY VOTES DO YOU NEED TO APPROVE THESE PROPOSALS?
A. The number of votes needed to approve each Proposal varies, due to different
requirements imposed by federal and state laws. The descriptions of each
Proposal in the enclosed proxy statement identify the number of votes
required for each Fund to approve each Proposal.
Q. WHAT IF YOU DO NOT HAVE ENOUGH VOTES TO MAKE THIS DECISION BY THE SCHEDULED
SHAREHOLDER MEETING DATE?
A. If we do not receive sufficient votes to hold the meeting, we or Georgeson
Shareholder Communications Inc., a proxy solicitation firm, may contact you
by mail or telephone to encourage you to vote. Shareholders should review
the proxy materials and cast their vote to avoid additional mailings or
telephone calls. If we do not have enough votes to approve the proposals by
the time of the joint shareholder meeting at 10 a.m. on July 17, 2003, the
meeting may be adjourned to permit further solicitation of proxy votes.
Q. HAS EACH FUND'S BOARD APPROVED THE PROPOSALS?
Yes. Your Fund's Board has approved the proposals and recommends that you
vote to approve them.
Q. HOW MANY VOTES AM I ENTITLED TO CAST?
A. As a shareholder, you are entitled to one vote for each share you own of
your Fund on the record date. The record date is May 16, 2003.
Q. HOW DO I VOTE MY SHARES?
A. You may vote in any of several different ways. You may vote by attending the
Meeting scheduled for July 17, 2003, or you can vote your shares by
completing and signing the enclosed proxy card, and mailing it in the
enclosed postage paid envelope. If you need any assistance, or have any
questions regarding a proposal or how to vote your shares, please call
Prudential at 1-866-665-7684.
You may also vote via the Internet. To do so, have your proxy card available
and go to the web site: www.proxyvote.com. Enter your 12-digit control
number from your proxy card and follow the instructions found on the web
site.
Finally, you can vote by telephone. If your Fund shares are held in your own
name, call 1-800-690-6903 toll free. If your Fund shares are held on your
behalf in a brokerage account with
<Page>
Prudential Securities Incorporated or another broker, call 1-800-454-8683
toll free. Enter your 12-digit control number from your proxy card and
follow the simple instructions given.
Q. HOW DO I SIGN THE PROXY CARD?
A. INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names appear
on the account registration shown on the card.
JOINT ACCOUNTS: Both owners must sign and the signatures should conform
exactly to the names shown on the account registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her capacity.
For example, a trustee for a trust should include his or her title when he
or she signs, such as "Jane Doe, Trustee"; or an authorized officer of a
company should indicate his or her position with the company, such as "John
Smith, President" underneath the name of the company.
The attached proxy statement contains more detailed information about each of
the proposals relating to your Fund. Please read it carefully.
<Page>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA MONEY MARKET SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
NEW JERSEY SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK SERIES
NEW YORK MONEY MARKET SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
PRUDENTIAL SHORT-TERM BOND FUND, INC.
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND
DRYDEN ULTRA SHORT BOND FUND
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
------------------------
NOTICE OF
JOINT SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON
JULY 17, 2003
------------------------
TO OUR SHAREHOLDERS:
Joint meetings of the shareholders of each of the above-listed Funds (each,
a Meeting) will be held at the offices of Prudential Investments LLC (PI), 100
Mulberry Street, Gateway Center Three, 14th Floor, Newark, New Jersey on
July 17, 2003 at 10:00 a.m. Eastern Daylight Time. The purpose of the Meetings
is to consider and act upon the following proposals:
1. For each Fund, to elect 10 Directors or Trustees.
2. For each Fund, except Dryden Ultra Short Bond Fund, a series of
Prudential Short-Term Bond Fund, Inc., to permit PI to enter into or make
material changes to subadvisory agreements without shareholder approval.
3. For each Fund, except Dryden Ultra Short Bond Fund, a series of
Prudential Short-Term Bond Fund, Inc., to approve an amended management
agreement between each of the Funds and PI.
4. For each Fund, except Dryden Ultra Short Bond Fund, a series of
Prudential Short-Term Bond Fund, Inc., to approve changes to each Funds'
fundamental investment restrictions or policies, relating to the
following:
(a) fund diversification;
(b) issuing senior securities, borrowing money or pledging assets;
<Page>
(c) buying and selling real estate;
(d) buying and selling commodities and commodity contracts;
(e) fund concentration;
(f) making loans; and
(g) other investment restrictions, including investing in securities of
other investment companies.
5. For each Fund, to approve amendments to the articles of incorporation or
declaration of trust.
The Meeting will be a Special Meeting of shareholders of each Fund.
You are entitled to vote at the Meeting, and at any adjournments thereof, of
each Fund in which you owned shares at the close of business on May 16, 2003. If
you attend a Meeting, you may vote your shares in person. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN EACH ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE OR VOTE BY INTERNET OR
TELEPHONE.
By order of the Boards,
/s/ Deborah A. Docs
Deborah A. Docs
SECRETARY
Dated: June 6, 2003.
PROXY CARDS FOR YOUR FUND ARE ENCLOSED ALONG WITH THE PROXY STATEMENT. PLEASE
VOTE YOUR SHARES TODAY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARDS IN THE
POSTAGE PREPAID ENVELOPE PROVIDED. YOU CAN ALSO VOTE YOUR SHARES THROUGH THE
INTERNET OR BY TELEPHONE USING THE 12-DIGIT "CONTROL" NUMBER THAT APPEARS ON THE
ENCLOSED PROXY CARDS AND FOLLOWING THE SIMPLE INSTRUCTIONS. THE BOARD OF YOUR
FUND RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AND "FOR" EACH PROPOSAL AS
APPLICABLE.
<Page>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA MONEY MARKET SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
NEW JERSEY SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK SERIES
NEW YORK MONEY MARKET SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
PRUDENTIAL SHORT-TERM BOND FUND, INC.
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND
DRYDEN ULTRA SHORT BOND FUND
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
------------------------
PROXY STATEMENT
JOINT SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON JULY 17, 2003
------------------------
This proxy statement is being furnished to holders of shares of each of the
above-listed investment companies (each, a Company) and their series (each, a
Fund) in connection with the solicitation by their respective Boards of proxies
to be used at joint meetings (Meetings) of shareholders to be held at Gateway
Center Three, 100 Mulberry Street, 14th Floor, Newark, New Jersey 07102 on
July 17, 2003, at 10 a.m., Eastern Daylight Time, or at any adjournment or
adjournments thereof. The Meeting will be a special meeting of shareholders of
each Fund. (In this proxy statement, the term "Fund" will be used to refer to
the separate series of a Company that has multiple series, and also to a Company
that is not currently operated as a series company and has a single portfolio.)
This proxy statement is being first mailed to shareholders on or about June 9,
2003.
Each Company is an open-end, management investment company registered under
the Investment Company Act of 1940, as amended (the 1940 Act). Each of
Prudential Government Income Fund, Inc., Prudential High Yield Fund, Inc.,
Prudential National Municipals Fund, Inc., Prudential Short-Term Bond Fund, Inc.
and Prudential Total Return Bond Fund, Inc. is organized as a Maryland
corporation. Each of Prudential California Municipal Fund, Prudential Municipal
Bond Fund and Prudential Municipal Series Fund is organized as a Massachusetts
business trust. The shares of common stock of each of Prudential Government
Income Fund, Inc., Prudential High Yield Fund, Inc., Prudential National
Municipals Fund, Inc., Prudential Short-Term Bond Fund, Inc. and Prudential
Total Return Bond Fund, Inc. and the shares of beneficial interest of Prudential
California Municipal Fund, Prudential Municipal Bond Fund and Prudential
Municipal Series Fund are referred to as "Shares," the holders of the Shares are
"Shareholders," each Company's board of directors or trustees is referred to as
a "Board" and the
<Page>
directors or trustees are "Board Members" or "Directors" or "Trustees," as the
case may be (collectively referred to as Directors). A listing of the formal
name for each Company and Fund and the abbreviated name for each Company that is
used in this proxy statement is set forth below.
<Table>
<Caption>
ABBREVIATED
COMPANY AND FUND NAME NAME
- --------------------- -------------------------
Prudential California Municipal Fund........................ CMF
California Series
California Income Series
California Money Market Series
Prudential Government Income Fund, Inc...................... GIF
Prudential High Yield Fund, Inc............................. HYF
Prudential Municipal Bond Fund.............................. MBF
High Income Series
Insured Series
Prudential Municipal Series Fund............................ MSF
Florida Series
New Jersey Series
New Jersey Money Market Series
New York Series
New York Money Market Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.................... NMF
Prudential Short-Term Bond Fund, Inc........................ STBF
Prudential Short-Term Corporate Bond Fund
Dryden Ultra Short Bond Fund
Prudential Total Return Bond Fund, Inc...................... TRBF
</Table>
Prudential Investments LLC (PI or the Manager), Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102, serves as the Funds' Manager under a
management agreement with each Company (each, a Management Agreement).
Investment advisory services have been provided to the Funds by PI through its
affiliate, Prudential Investment Management, Inc. (PIM or Subadviser), Gateway
Center Two, 100 Mulberry Street, Newark, New Jersey 07102. PIM serves as
subadviser to each of the Funds.
PIM is a wholly-owned indirect subsidiary of Prudential Financial, Inc.
Prudential Investment Management Services LLC (PIMS or the Distributor), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102, serves as the
distributor of the Funds' shares. The Funds' transfer agent is Prudential Mutual
Fund Services LLC (PMFS), 194 Wood Avenue South, Iselin, New Jersey 08830. As of
March 31, 2003, PI served as the investment manager to all of the Prudential
U.S. and offshore open-end investment companies, and as the administrator to
closed-end investment companies, with aggregate assets of approximately
$83.5 billion. Each Fund has a Board of Directors or Trustees which, in addition
to overseeing the actions of the Fund's Manager and Subadviser, decides upon
matters of general policy.
VOTING INFORMATION
In the case of all of the Companies, except STBF, the presence, in person or
by proxy, of a majority of the Shares of the Company outstanding and entitled to
vote will constitute a quorum for the transaction of business at the Meeting of
that Company. In the case of STBF, the presence, in person or by proxy, of one-
third of the Shares of the Company outstanding and entitled to vote will
constitute a quorum for the transaction of business at the Meeting of the
Company.
2
<Page>
If a quorum is not present at a Meeting, or if a quorum is present at that
Meeting but sufficient votes to approve any of the Proposals are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any adjournment will require the
affirmative vote of a majority of those Shares present and entitled to vote at
the Meeting in person or by proxy. When voting on a proposed adjournment, the
persons named as proxies will vote those proxies which they are entitled to vote
FOR any Proposal in favor of the adjournment of that Proposal and will vote
those proxies required to be voted AGAINST any Proposal against the adjournment
of that Proposal. A shareholder vote may be taken on one or more of the
Proposals in this proxy statement prior to any such adjournment if sufficient
votes have been received and it is otherwise appropriate.
If a proxy that is properly executed and returned is accompanied by
instructions to withhold authority to vote (an abstention) or represents a
broker "non-vote" (that is, a proxy from a broker or nominee indicating that
such person has not received instructions from the beneficial owner or other
person entitled to vote Shares on a particular matter with respect to which the
broker or nominee does not have discretionary power), the Shares represented
thereby, with respect to matters to be determined by a majority or plurality of
the votes cast on such matters, will be considered present for purposes of
determining the existence of a quorum for the transaction of business, but, not
being cast, will have no effect on the outcome of such matters. With respect to
matters requiring the affirmative vote of a specified percentage of the total
Shares outstanding, an abstention or broker non-vote will be considered present
for purposes of determining a quorum but will have the effect of a vote against
such matters. Accordingly, abstentions and broker non-votes will have no effect
on Proposal No. 1, for which the required vote is a plurality of the votes cast,
but effectively will be a vote against the other Proposals, which require
approval of a majority of the outstanding voting securities under the 1940 Act
or applicable state law.
The individuals named as proxies on the enclosed proxy cards will vote in
accordance with your direction as indicated thereon if your card is received
properly executed by you or by your duly appointed agent or attorney-in-fact. If
your card is properly executed and you give no voting instructions, your Shares
will be voted FOR the nominees named herein for the Board of the Company to
which the proxy card relates and FOR the remaining Proposals described in this
proxy statement and referenced on the proxy card. If any nominee for the Company
Boards should withdraw or otherwise become unavailable for election, your Shares
will be voted in favor of such other nominee or nominees as management may
recommend. You may revoke any proxy card by giving another proxy or by letter or
telegram revoking the initial proxy. To be effective your revocation must be
received by the Fund prior to the related Meeting and must indicate your name
and account number. In addition, if you attend a Meeting in person you may, if
you wish, vote by ballot at that Meeting, thereby canceling any proxy previously
given.
3
<Page>
The close of business on May 16, 2003 has been fixed as the record date for
the determination of shareholders entitled to notice of, and to vote at, the
Meetings. Information as to the number of outstanding Shares for each Fund as of
the record date is set forth below:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C CLASS Y CLASS Z
- ---- --------------- --------------- -------------- ------------- --------------
CMF
California Series.............. 8,521,909.602 1,874,211.409 202,208.031 -- 401,050.447
California Income Series....... 15,284,815.882 5,717,888.165 861,140.843 -- 554,333.662
California Money Market
Series....................... 197,258,892.77 -- -- -- --
GIF................................ 108,694,158.950 22,840,761.664 3,217,616.714 -- 11,681,598.275
HYF................................ 243,049,816.433 119,490,580.950 16,974,938.280 -- 11,665,876.979
MBF................................
High Income Series............. 48,416,166.594 23,833,399.445 2,769,323.394 -- 1,553,712.745
Insured Series................. 24,151,543.273 5,252,487.452 735,445.628 -- 788,105.963
MSF
Florida Series................. 5,938,197.332 1,674,700.429 556,188.608 -- 184,064.248
New Jersey Series.............. 12,321,232.701 3,174,651.120 542,597.890 -- 304,922.008
New Jersey Money Market
Series....................... 162,865,307.67 -- -- -- --
New York Series................ 14,682,857.185 2,713,641.338 280,947.892 -- 230,137.588
New York Money Market Series... 356,789,648.432 -- -- -- --
Pennsylvania Series............ 11,878,525.030 3,644,000.129 112,487.895 -- --
NMF................................ 36,523,139.580 2,945,881.291 383,738.507 -- 310,281.119
STBF
Prudential Short-Term Corporate
Bond Fund.................... 9,623,812.679 5,764,320.188 5,602,639.061 -- 4,468,750.237
Dryden Ultra Short Bond Fund... 5,139,501.333 96,623.910 9,308.960 3,209,443.976 22,080,782.130
TRBF............................... 10,259,302.362 14,396,306.563 1,850,255.837 -- 5,258,711.943
<Caption>
FUND TOTAL
- ---- ---------------
CMF
California Series.............. 10,999,379.489
California Income Series....... 22,418,178.552
California Money Market
Series....................... 197,258,892.77
GIF................................ 146,434,135.603
HYF................................ 391,181,212.642
MBF................................
High Income Series............. 55,122,602.178
Insured Series................. 30,927,582.316
MSF
Florida Series................. 8,353,150.617
New Jersey Series.............. 16,343,403.719
New Jersey Money Market
Series....................... 162,865,307.67
New York Series................ 17,907,584.003
New York Money Market Series... 356,789,648.432
Pennsylvania Series............ 15,635,013.054
NMF................................ 40,163,040.497
STBF
Prudential Short-Term Corporate
Bond Fund.................... 25,459,522.165
Dryden Ultra Short Bond Fund... 30,535,660.309
TRBF............................... 31,764,576.705
</Table>
None of the Proposals require separate voting by class, although for all
proposals except Proposal No. 1, shares of each Fund of CMF, MBF and MSF will be
voted separately. Shareholders of Dryden Ultra Short Bond Fund only vote for
Proposals No. 1 and 5. Shareholders of Prudential Short-Term Corporate Bond Fund
and Dryden Ultra Short Bond Fund will vote separately on Proposal No. 5. Each
Share of each class is entitled to one vote. To the knowledge of management, the
executive officers and Board Members of each Fund, as a group, owned less than
1% of the outstanding Shares of each Fund as of May 16, 2003. A listing of
persons who owned beneficially 5% or more of any class of the Shares of a Fund
as of May 16, 2003 is contained in Exhibit A.
COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS OF A FUND MAY OBTAIN WITHOUT CHARGE ADDITIONAL COPIES OF THE FUND'S
ANNUAL AND SEMI-ANNUAL REPORTS BY WRITING THE FUND AT GATEWAY CENTER THREE,
100 MULBERRY STREET, 4TH FLOOR, NEWARK, NEW JERSEY 07102, OR BY CALLING
1-800-225-1852 (TOLL FREE).
Each full Share of each Fund outstanding is entitled to one vote, and each
fractional Share of each Fund outstanding is entitled to a proportionate share
of one vote, with respect to each matter to be voted upon by the Shareholders of
that Fund. Information about the vote necessary with respect to each Proposal is
discussed below in connection with each Proposal.
Shareholders voting via the Internet should understand that there may be
costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies that must be borne by the Shareholder.
We have been advised that Internet voting procedures that have been made
available to you are consistent with the requirements of law.
4
<Page>
TO ELECT DIRECTORS OR TRUSTEES
PROPOSAL NO. 1
DISCUSSION
The Board of each Company has nominated the 10 individuals identified below
for election to each Company's Board. Pertinent information about each nominee
is set forth in the listing below. Each of the nominees has consented to being
named in this proxy statement, and has indicated a willingness to serve if
elected. All but one of the nominees currently serve as Directors or Trustees on
some, but not all of the funds in the Prudential retail mutual fund complex. The
remaining nominee, David E. A. Carson, currently does not serve as a Director or
Trustee for any of the funds in the Prudential retail mutual fund complex, but
serves as a Director of the American Skandia Advisor Funds, Inc.
Because many of the other funds within the Prudential retail mutual fund
complex are also asking shareholders to elect the same individuals, if the
Shareholders of each of these Companies elect each nominee, most of the
Companies within the Prudential retail mutual fund complex will be overseen by a
common Board. As part of the creation of a common Board, certain individuals
currently serving as Directors or Trustees of each Company have not been
nominated for election. Each of the current Directors or Trustees of each
Company who has not been nominated has announced his intention to resign his
position if Shareholders elect the nominees.
Each Company's current Directors or Trustees believes that creating a common
Board is in the best interests of each Company. The principal reasons for adding
these individuals are:
- to bring additional experience and diversity of viewpoints to the Board;
- to bring the benefit of experience derived from service on the boards of
the other Prudential mutual funds;
- to promote continuity on the Board; and
- to achieve efficiencies and coordination in operation, supervision and
oversight of the Funds which may be derived from having the same
individuals serve on the Board of each of the Prudential retail mutual
funds.
If elected, all nominees will hold office until the earlier to occur of
(a) the next meeting of Shareholders at which Board Members are elected and
until their successors are elected and qualified or (b) until their terms expire
in accordance with each Company's retirement policy or (c) until they resign or
are removed as permitted by law. Each Company's retirement policy generally
calls for the retirement of Directors on December 31 of the year in which they
reach the age of 75.
Board Members who are not "interested persons" of a Company (as defined in
the 1940 Act) are referred to as Independent Board Members or Independent
Directors. Board Members who are interested persons of a Company are referred to
as Interested Board Members or Interested Directors.
Currently, each Independent Director who serves on the Board of a Company is
paid annual fees as set forth below for his or her service on the Board of each
Company. Directors' fees are allocated among all of the Funds in a "cluster"
based on their proportionate net assets. In addition, an Independent Board
Member who serves on the Executive Committee is paid by the Funds in the cluster
an annual aggregate fee of $8,000 and an Independent Board Member who chairs the
Audit or Nominating Committee is paid by those Funds an annual aggregate fee of
$2,000 per Committee. Interested Directors will continue to receive no
compensation from any Fund. Board Members will continue to be reimbursed for any
expenses incurred in attending meetings and for other incidental expenses. Board
fees are reviewed periodically by each Company's Board.
5
<Page>
None of the nominees is related to another. None of each Company's
Independent Directors nor persons nominated to become Independent Directors owns
shares of Prudential Financial, Inc. or its affiliates. The business experience
and address of each Independent Director nominee and each Interested Director
nominee, as well as information regarding their service on other mutual funds in
the Prudential mutual fund complex, is as follows:
PROPOSED INDEPENDENT DIRECTOR NOMINEES
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
TERM OF FUND COMPLEX+
POSITION(S) OFFICE AND OVERSEEN BY OTHER DIRECTORSHIPS**
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) NOMINEE FOR HELD BY NOMINEE
NAME, ADDRESS* AND AGE EACH FUND TIME SERVED DURING PAST FIVE YEARS DIRECTOR FOR DIRECTOR
- ---------------------- ------------- ------------- ------------------------ --------------- ------------------------
David E. A. Carson (68)++ None -- Director (January 2000 31 Director of United
People's Bank to May 2000), Chairman Illuminating and UIL
1 Financial Plaza (January 1999 to Holdings, a utility
Second Floor December 1999), Chairman company, since May 1993;
Hartford, CT 06103 and Chief Executive Trustee of Mass Mutual
Officer (January 1998 to Institutional Funds and
December 1998) and Mass Mutual Series
President, Chairman and Funds, since 1996.
Chief Executive Officer
of People's Bank
(1988-1997).
Robert E. La Blanc (69) None -- President (since 1981) 108 Director of Storage
of Robert E. La Blanc Technology Corporation
Associates, Inc. (since 1979)
(telecommunications); (technology); Chartered
formerly General Partner Semiconductor
at Salomon Brothers and Manufacturing, Ltd.
Vice-Chairman of (Singapore) (since
Continental Telecom; 1998); Titan Corporation
Trustee of Manhattan (electronics) (since
College. 1995); Computer
Associates
International, Inc.
(since 2002) (software
company); Director
(since 1999) of First
Financial Fund, Inc. and
Director (since April
1999) of The High Yield
Plus Fund, Inc.
Douglas H. McCorkindale (63) None -- Chairman (since February 108 Director of Gannett
2001), Chief Executive Co., Inc., Director of
Officer (since June Continental
2000) and President Airlines, Inc. (since
(since September 1997) May 1993); Director of
of Gannett Co. Inc. Lockheed Martin Corp.
(publishing and media); (since May 2001)
formerly Vice Chairman (aerospace and defense);
(March 1984-May 2000) of Director of the High
Gannett Co. Inc. Yield Plus Fund, Inc.
(since 1996).
</Table>
6
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
TERM OF FUND COMPLEX+
POSITION(S) OFFICE AND OVERSEEN BY OTHER DIRECTORSHIPS**
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) NOMINEE FOR HELD BY NOMINEE
NAME, ADDRESS* AND AGE EACH FUND TIME SERVED DURING PAST FIVE YEARS DIRECTOR FOR DIRECTOR
- ---------------------- ------------- ------------- ------------------------ --------------- ------------------------
Stephen P. Munn (60) CMF: Trustee Since 1999 Chairman of the Board 103 Chairman of the Board
GIF: Director Since 1999 (since 1994) and (since January 1994) and
HYF: Director Since 1999 formerly Chief Executive Director (since 1988) of
MBF: Trustee Since 1999 Officer (1998-2001) and Carlisle Companies
MSF: Trustee Since 1999 President of Carlisle Incorporated
NMF: Director Since 1999 Companies Incorporated. (manufacturer of
STBF: Since 1999 industrial products);
Director Since 1999 Director of Gannett
TRBF: Since 1999 Co., Inc. (publishing
Director and media).
Richard A. Redeker (59) CMF: Trustee Since 1993 Formerly Management 103
GIF: Director Since 1993 Consultant of
HYF: Director Since 1995 Invesmart, Inc. (August
MBF: Trustee Since 1995 2001-October 2001);
MSF: Trustee Since 1993 formerly employee of
NMF: Director Since 1993 Prudential Investments
STBF: Since 1995 (October 1996-December
Director Since 1993 1998).
TRBF: Since 1994
Director
Robin B. Smith (63) None -- Chairman of the Board 100 Director of BellSouth
(since January 2003) of Corporation (since
Publishers Clearing 1992).
House (direct
marketing); formerly
Chairman and Chief
Executive Officer
(August 1996-January
2003) of Publishers
Clearing House.
</Table>
7
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
TERM OF FUND COMPLEX+
POSITION(S) OFFICE AND OVERSEEN BY OTHER DIRECTORSHIPS**
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) NOMINEE FOR HELD BY NOMINEE
NAME, ADDRESS* AND AGE EACH FUND TIME SERVED DURING PAST FIVE YEARS DIRECTOR FOR DIRECTOR
- ---------------------- ------------- ------------- ------------------------ --------------- ------------------------
Stephen Stoneburn (59) None -- President and Chief 106
Executive Officer (since
June 1996) of Quadrant
Media Corp. (a
publishing company);
formerly President (June
1995-June 1996) of Argus
Integrated Media, Inc.;
Senior Vice President
and Managing Director
(January 1993-1995) of
Cowles Business Media
and Senior Vice
President of Fairchild
Publications, Inc.
(1975-1989).
Clay T. Whitehead (64) None -- President (since 1983) 125 Director (since 2000) of
of National Exchange First Financial Fund,
Inc. (new business Inc. and Director (since
development firm). 2000) of The High Yield
Plus Fund, Inc.
</Table>
8
<Page>
PROPOSED INTERESTED DIRECTOR NOMINEES
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND
TERM OF COMPLEX+
POSITION(S) OFFICE AND OVERSEEN BY OTHER DIRECTORSHIPS**
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) NOMINEE FOR HELD BY NOMINEE
NAME, ADDRESS* AND AGE EACH FUND TIME SERVED DURING PAST FIVE YEARS DIRECTOR FOR DIRECTOR
- ---------------------- ------------- ------------- ------------------------- ------------- -------------------------
Judy A. Rice (55) President and Director or President, Chief 129
Director or Trustee for Executive Officer, Chief
Trustee all Funds Operating Officer and
since 2000. Officer-In-Charge (since
President of 2003) of PI; Director,
all Funds Officer-in-Charge,
since 2003. President, Chief
Executive Officer and
Chief Operating Officer
(since May 2003) of
American Skandia Advisory
Services, Inc.; Director,
Officer-in-Charge,
President, Chief
Executive Officer and
Chief Operating Officer
(since May 2003) of
American Skandia
Investment
Services, Inc.;
Director, Officer-in-
Charge, President, Chief
Executive Officer (since
May 2003) of American
Skandia Fund
Services, Inc.; formerly
various positions to
Senior Vice President
(1992-1999) of Prudential
Securities Incorporated
(PSI); various positions
to Managing Director
(1975-1992) of Salomon
Smith Barney; Member of
Board of Governors of the
Money Management
Institute.
</Table>
9
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND
TERM OF COMPLEX+
POSITION(S) OFFICE AND OVERSEEN BY OTHER DIRECTORSHIPS**
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) NOMINEE FOR HELD BY NOMINEE
NAME, ADDRESS* AND AGE EACH FUND TIME SERVED DURING PAST FIVE YEARS DIRECTOR FOR DIRECTOR
- ---------------------- ------------- ------------- ------------------------- ------------- -------------------------
Robert F. Gunia (56) Vice CMF: Since Executive Vice President 147 Vice President and
President and 1996 and Chief Administrative Director (since May 1989)
Director or GIF: Since Officer (since June 1999) and Treasurer (since
Trustee 1996 of PI; Executive Vice 1999) of The Asia Pacific
GST: Since President and Treasurer Fund, Inc.
1996 (since January 1996) of
HYF: Since PI; President (since
1996 April 1999) of PIMS;
MBF: Since Corporate Vice President
1996 (since September 1997) of
MSF: Since The Prudential Insurance
1996 Company of America;
NMF: Since Director, Executive Vice
1996 President and Chief
STBF: Since Administrative Officer
1996 (since May 2003) of
TRBF: Since American Skandia
1996 Investment Services, Inc;
Director, Executive Vice
President and Chief
Administrative Officer
(since May 2003) of
American Skandia Advisory
Services, Inc.; Director
and Executive Vice
President (since May
2003) of American Skandia
Fund Services, Inc.;
formerly Senior Vice
President (March 1987-May
1999) of PSI; formerly
Chief Administrative
Officer (July
1989-September 1996),
Director (January
1989-September 1996) and
Executive Vice President,
Treasurer and Chief
Financial Officer (June
1987-December 1996) of
Prudential Mutual Fund
Management, Inc. (PMF).
</Table>
- ------------------------
* Unless otherwise indicated, the address of each nominee is c/o Prudential
Investments LLC (PI), Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
** This column includes only directorships of companies required to register,
or file reports with the Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934 (that is, "public companies") or
other investment companies registered under the 1940 Act.
+ The Fund Complex consists of all investment companies managed by PI.
Effective May 1, 2003, the Funds for which PI serves as manager include The
Prudential Mutual Funds, Strategic Partners Funds, American Skandia Advisor
Funds, Inc., The Prudential Variable Contract Accounts 2, 10, 11, The Target
Portfolio Trust, The Prudential Series Fund, Inc., American Skandia Trust,
and Prudential's Gibraltar Fund.
++ Mr. Carson has agreed to resign as a Trustee of Mass Mutual Institutional
Funds and Mass Mutual Series Funds, effective August 4, 2003, and subject to
his election as a Director of each Company and the other mutual funds in the
Fund Complex.
10
<Page>
The following tables set forth the dollar range of Fund securities held by
each nominee as of December 31, 2002. The tables also include the aggregate
dollar range of securities held by each nominee in all funds in the Fund Complex
overseen by that nominee as of December 31, 2002.
SHARE OWNERSHIP TABLE -- INDEPENDENT DIRECTOR NOMINEES
<Table>
<Caption>
AGGREGATE DOLLAR RANGE
OF SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN BY
DOLLAR RANGE OF NOMINEE IN FAMILY
NAME OF NOMINEE SECURITIES IN EACH FUND OF INVESTMENT COMPANIES
- --------------- ----------------------------------- -----------------------
David E. A. Carson................ None None
Robert E. La Blanc................ None Over $100,000
Douglas H. McCorkindale........... None Over $100,000
Stephen P. Munn................... HYF: $10,001-$50,000 Over $100,000
All other Funds: None
Richard A. Redeker................ MSF -- New Jersey Series: Over $100,000
$10,001-$50,000
MSF -- New Jersey Money Market
Series: $50,001-$100,000
All other Funds: None
Robin B. Smith.................... None Over $100,000
Stephen Stoneburn................. None Over $100,000
Clay T. Whitehead................. None Over $100,000
</Table>
SHARE OWNERSHIP TABLE -- INTERESTED DIRECTOR NOMINEES
<Table>
<Caption>
AGGREGATE DOLLAR RANGE
OF SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN BY
DOLLAR RANGE OF NOMINEE IN FAMILY
NAME OF NOMINEE SECURITIES IN EACH FUND OF INVESTMENT COMPANIES
- --------------- ----------------------------------- -----------------------
Judy A. Rice None Over $100,000
Robert F. Gunia................... GIF: $1-$10,000 Over $100,000
HYF: $10,001-$50,000
MSF -- New Jersey Money Market
Series: $1-$10,000
TRBF: $10,001-$50,000
All other Funds: None
</Table>
None of the Independent Director nominees, or any member of their immediate
families owned beneficially or of record any securities in an investment adviser
or principal underwriter of a Fund or a person (other than a registered
investment company) directly or indirectly controlling, controlled by, or under
common control with an investment adviser or principal underwriter of a Fund as
of December 31, 2002.
11
<Page>
The following table sets forth information describing the aggregate
compensation paid by each Fund for each Fund's most recently completed fiscal
year and by the Fund Complex for the calendar year ended December 31, 2002 to
each of the Directors of the Funds that are up for election, for his/her
services:
COMPENSATION PAID TO INDEPENDENT DIRECTORS
<Table>
<Caption>
TOTAL 2002
PENSION OR COMPENSATION
RETIREMENT BENEFITS ESTIMATED FROM FUND AND
NAME OF INDEPENDENT AGGREGATE COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX PAID
DIRECTOR, POSITION(1) FROM EACH FUND FUND EXPENSES UPON RETIREMENT TO DIRECTORS
- --------------------- ---------------------------- -------------------- --------------- -------------------
Stephen P. Munn -- Director CMF $5,120 None None $118,000 (23/72)(2)
GIF $4,000
HYF $6,488
MBF $4,783
MSF $10,905
NMF $2,683
STBF $1,175
TRBF $1,987
Richard A. Redeker -- CMF $4,925 None None $120,500 (23/72)(2)
Director GIF $3,800
HYF $5,825
MBF $4,750
MSF $10,458
NMF $2,566
STBF $1,525
TRBF $1,900
</Table>
- ------------------------
(1) Interested Directors do not receive any compensation from the Companies or
the Fund Complex.
(2) Indicates number of funds/portfolios in Fund Complex (including the Funds)
to which aggregate compensation relates. As of December 31, 2002, the Fund
Complex consists of 45 funds and 117 portfolios.
If elected, the directors will hold office generally without limit except
that (a) any director may resign; (b) any director may be removed by the holders
of not less than a majority of the Company's outstanding Shares entitled to be
cast in the election of directors (and, in the case of CMF, MBF and MSF, by a
vote of two-thirds of the directors); and (c) each Company's retirement policy
generally calls for the retirement of Directors on December 31 of the year in
which they reach the age of 75. In the event of a vacancy on the Board, the
remaining directors will fill such vacancy by appointing another director, so
long as immediately after such appointment, at least two-thirds of the directors
have been elected by shareholders.
The Board of each Company, which is currently composed of three Interested
Directors and five Independent Directors, met four times during the twelve
months ended December 31, 2002. Each incumbent director attended each of these
meetings. It is expected that the directors will meet at least four times a year
at regularly scheduled meetings.
Each Company has an Audit Committee, which is composed entirely of
independent directors, and normally meets four times a year, or as required, in
conjunction with the meetings of the Board of Directors. Among other things,
each Company's Audit Committee has the following responsibilities:
- Recommending to the Board of Directors of each Company the selection,
retention or termination, as appropriate, of the independent accountants
of a Fund.
- Reviewing the independent accountants' compensation, the proposed terms of
their engagement, and their independence.
- Reviewing audited annual financial statements including any adjustments to
those statements recommended by the independent accountants, and any
significant issues that arose in connection with the preparation of those
financial statements.
12
<Page>
- Reviewing changes in accounting policies or practices that had or are
expected to have a significant impact on the preparation of financial
statements.
- Generally acting as a liaison between the independent accountants and the
Board of Directors.
For each Company the members of the Audit Committee and Nominating Committee
are Delayne Dedrick Gold, Thomas T. Mooney, Stephen P. Munn, Richard A. Redeker
and Louis A. Weil, III. During the twelve months ended December 31, 2002, the
Audit Committee of each Company met four times.
The firm of PricewaterhouseCoopers LLP (PwC), 1177 Avenue of the Americas,
New York, NY 10036, is the independent accountant for each Fund. Each Company's
audit committee recommended, and the Board of each Company (including a majority
of the Independent Directors) approved, the selection of PwC as each Fund's
independent accountant for the Fund's current fiscal year. Representatives of
PwC are not expected to be present at the Meetings, but have been given the
opportunity to make a statement if they so desire and will not be available by
telephone during the Meeting to respond to appropriate questions.
AUDIT FEES
The following aggregate fees were billed by PwC for professional services to
the Funds in connection with the audit of each Fund's annual financial
statements for each Fund's most recently completed fiscal year.
<Table>
<Caption>
FISCAL YEAR
FUND ENDED AUDIT FEES
- ---- ----------- ----------
CMF
California Series......................................... 8/31/2002 $15,000
California Income Series.................................. 8/31/2002 15,000
California Money Market Series............................ 8/31/2002 15,000
GIF......................................................... 2/28/2003 35,000
HYF......................................................... 12/31/2002 38,000
MBF
High Income Series........................................ 4/30/2002* 25,000
Insured Series............................................ 4/30/2002* 16,000
MSF
Florida Series............................................ 8/31/2002 13,000
New Jersey Series......................................... 8/31/2002 13,000
New Jersey Money Market Series............................ 8/31/2002 13,000
New York Series........................................... 8/31/2002 13,000
New York Money Market Series.............................. 8/31/2002 13,000
Pennsylvania Series....................................... 8/31/2002 13,000
NMF......................................................... 12/31/2002 32,000
STBF
Prudential Short-Term Corporate Bond Fund................. 12/31/2002 32,000
Dryden Ultra Short Bond Fund.............................. N/A** N/A
TRBF........................................................ 12/31/2002 32,000
</Table>
- ------------------------
* Information for fiscal year ended 4/30/03 is not yet available.
** Dryden Ultra Short Bond Fund commenced operations on April 2, 2003,
therefore this information is not available for this fund.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PwC billed no fees for professional services rendered to the Funds or to PI
or any entity controlling, controlled by or under common control with PI that
provides services to the Funds in connection with financial information systems
design and implementation, for each Fund's most recently completed fiscal year,
as indicated above.
13
<Page>
ALL OTHER FEES
The aggregate fees billed by PwC for services rendered to each Fund, PI, and
any entity controlling, controlled by or under common control with PI that
provides services to the Funds, amounted to approximately $1,000,300 for the
calendar year ended December 31, 2002.
The Audit Committee of each Company has considered whether the services
described above are compatible with PwC's independence.
Nominating Committee members confer periodically and hold meetings as
required. The responsibilities of each Company's Nominating Committee include,
but are not limited to, recommending to the Board the individuals to be
nominated to become Independent Directors. During the twelve months ended
December 31, 2002, no Company's Nominating Committee met. The Companies do not
have compensation committees. A Company's Nominating Committee generally will
not consider nominees recommended by Shareholders.
Information about the number of Board and Committee meetings held during the
most recent fiscal year for each Fund is included in Exhibit B. Information
concerning Company officers is set forth in Exhibit C.
REQUIRED VOTE
For each Company, nominees receiving the affirmative vote of a plurality of
the votes cast will be elected, provided a quorum is present.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL NO. 1.
TO APPROVE A PROPOSAL TO PERMIT THE MANAGER TO ENTER INTO, OR MAKE
MATERIAL CHANGES TO, SUBADVISORY AGREEMENTS WITHOUT
OBTAINING SHAREHOLDER APPROVAL
PROPOSAL NO. 2
THIS PROPOSAL APPLIES TO ALL FUNDS EXCEPT DRYDEN ULTRA SHORT BOND FUND.
The Board of each Company has approved, and recommends that shareholders
approve, Proposal No. 2, which would permit PI to enter into subadvisory
agreements with new subadvisers to the Fund and to make material amendments to
subadvisory agreements with existing subadvisers to the Fund, without obtaining
shareholder approval. THIS IS CALLED A "MANAGER-OF-MANAGERS" STRUCTURE AND, IN
THE FUTURE, MAY BE USED TO MANAGE EACH FUND. THIS NEW STRUCTURE WOULD NOT CHANGE
THE RATE OF ADVISORY FEES CHARGED TO A FUND. Because Dryden Ultra Short Bond
Fund already has a Manager-of-Managers structure, shareholders of that Fund do
not have to vote on Proposals Nos. 2 and 3. Information concerning each other
Fund's current management arrangements, including a description of the Fund's
current subadvisory agreement, is contained in Proposal No. 3. If shareholders
approve Proposal No. 2 so that shareholder approval of new or amended
subadvisory agreements is no longer required, the Directors of a Fund, including
a majority of the Independent Directors, must continue to approve these
agreements annually in order for them to take effect. On March 4, 2003, the
Board of each Company, including the Independent Directors, discussed and
approved Proposal No. 2 at an in-person meeting.
Proposal No. 2 is being submitted to shareholders pursuant to the
requirements of an exemptive order obtained by the Prudential Mutual Funds from
the SEC in September 1996 (the Original Order). The Original Order grants relief
to The Target Portfolio Trust (for which PI acts as a Manager-of-Managers) and
other Prudential Mutual Funds from certain provisions of the 1940 Act and
certain rules thereunder. Specifically, the Original Order permits PI to enter
into or amend a subadvisory agreement with a
14
<Page>
subadviser that is not otherwise an affiliated person (as defined in the 1940
Act) of PI. Among other things, the Original Order permits PI to enter into
(1) a new subadvisory agreement that is necessitated due to an "assignment" (as
defined in the 1940 Act), (2) an amendment to a subadvisory agreement, or (3) a
new subadvisory agreement substituting a new subadviser for an old subadviser.
The Funds plan to apply to the SEC for an amended order permitting them not
to disclose the fee rates paid to specific subadvisers where a Fund employs more
than one subadviser because that may permit PI to hire new subadvisers at lower
fees. There can be no assurance that such an amended order would be granted by
the SEC.
WHY SHAREHOLDER APPROVAL IS BEING SOUGHT
Section 15 of the 1940 Act makes it unlawful for any person to act as
investment adviser to an investment company, except pursuant to a written
contract that has been approved by shareholders. For purposes of Section 15, the
term "investment adviser" includes any subadviser to an investment company.
Section 15 also requires that an investment advisory agreement provide that it
will terminate automatically upon its assignment.
In conformity with Section 15 of the 1940 Act, each Fund currently is
required to obtain shareholder approval of subadvisory agreements in the
following situations:
- (1) the employment of a new subadviser to replace an existing subadviser
or (2) the allocation of a portion of its assets to an additional
subadviser;
- a material change in the terms of a subadvisory agreement; and
- the continued employment of an existing subadviser on the same terms if
there has been or is expected to be an assignment of a subadvisory
agreement as a result of a change of control of the subadviser.
The 1940 Act does not require shareholder approval for the termination of a
subadvisory agreement if such termination is approved by a Fund's Board,
including its Independent Directors, although shareholders of the Fund may
terminate a subadvisory agreement at any time by a vote of a majority of its
outstanding voting securities, as defined in the 1940 Act.
DISCUSSION
Under the "Manager-of-Managers" structure, each Fund would continue to
employ PI, subject to the supervision of the Board, to manage or provide for the
management of each Fund. PI could select one or more subadvisers to invest the
assets of each Fund, subject to the review and approval of the Board of the
respective Fund. (Currently, the selection of one or more subadvisers is subject
to the approval of the Fund's shareholders, which is why Proposal No. 2 is being
submitted to shareholders of the Funds.) PI would review each subadviser's
performance on an ongoing basis. PI would continue to be responsible for
communicating performance expectations and evaluations to subadvisers and for
recommending to the Board whether a subadviser's contract should be renewed,
modified or terminated. PI would continue to pay an advisory fee to each
subadviser from each Fund's overall management fee. Each Board believes that
requiring a Fund's shareholders to approve changes in subadvisers and
subadvisory agreements (including continuation of subadvisory agreements that
otherwise would have terminated by virtue of an assignment) not only results in
unnecessary administrative expenses to the Fund, but also may cause delays in
executing changes that PI and the Board have determined are necessary or
desirable. Each Board believes that these expenses, and the possibility of
delays, may result in shareholders receiving less satisfactory service than
would be the case if Proposal No. 2 is implemented.
The kind of changes to subadvisory arrangements that could be effected
without further shareholder approval if Proposal No. 2 is approved include:
(1) allocating a portion of a Fund's assets to one or more additional
subadvisers; (2) continuing a subadvisory agreement where a change in control of
the subadviser
15
<Page>
automatically otherwise causes that agreement to terminate; and (3) replacing an
existing subadviser with a new subadviser when PI and the Board determine that
the new subadviser's investment philosophy and style, past performance, security
selection experience and preferences, personnel, facilities, financial strength,
quality of service and client communication are more consistent with the best
interests of the Fund and its shareholders. Each Board believes that PI can
effect the types of subadvisory changes described above more efficiently,
without sacrificing the quality of service to shareholders, if the Funds were
permitted to operate in the manner described in Proposal No. 2. Each Board
further believes that these gains in efficiency would ultimately benefit each
Fund and its shareholders. Shareholders of many of the funds in the Prudential
fund complex approved the same Manager-of-Managers structure for their funds
several years ago.
Although a Manager-of-Managers structure will be put into place for each
Fund whose shareholders approve Proposal No. 2, the Fund will not employ new
subadvisers pursuant to this structure unless and until PI and the Board
determine that a change in subadvisory arrangements is appropriate. In making
these determinations as to a Fund, PI intends to evaluate rigorously both
affiliated subadvisers and unaffiliated subadvisers according to objective and
disciplined standards. The Original Order does not apply to affiliated
subadvisers, which will remain subject to the shareholder approval requirement.
Following shareholder approval of Proposal No. 2, PI will continue to be
each Fund's investment manager. Each Board and PI, under the Board's
supervision, will continue to monitor the nature and quality of the services
provided by PIM and may, in the future, recommend additional subadvisers (apart
from PIM) or the reallocation of assets among PIM and other subadvisers. If one
or more new subadvisers are added to a Fund, PI will be responsible for
determining the allocation of assets among the subadvisers and will have the
flexibility to increase the allocation to any one subadviser to as much as 100%
and decrease the allocation to any one subadviser to as little as 0%, subject to
Board approval. The Manager-of-Managers structure that each Board is asking
shareholders to approve will give the Boards and PI the flexibility to appoint
additional subadvisers without shareholder approval, but it is possible that no
new subadvisers will be added.
If Proposal No. 2 is approved by a Fund's shareholders, those shareholders
no longer would be entitled to approve the selection of a new subadviser or a
material amendment to an existing subadvisory agreement. Instead, shareholders,
within 90 days of the change, would receive an information statement containing
substantially all of the information about the subadviser and the subadvisory
agreement that would otherwise be contained in a proxy statement. The
information statement would include disclosure as to the level of fees to be
paid to PI and each subadviser (unless the SEC permits information as to the
rate of fees to be paid to subadvisers not to be disclosed) and would disclose
subadviser changes or changes in subadvisory agreements.
Each Board and PI have concluded that, through the information statement and
adherence to the conditions outlined below, shareholders of each Fund would
receive adequate disclosure about any new subadvisers or material amendments to
subadvisory agreements. Whether or not Proposal No. 2 is approved, amendments to
the Management Agreement between PI and each Fund would remain subject to the
shareholder and Board approval requirements of Section 15 of the 1940 Act and
related proxy disclosure requirements. Moreover, although PI and each Board
already generally may change the rate of fees payable by PI to a subadviser
without shareholder approval, PI and the Board could not increase the rate of
the management fees payable by a Fund to PI or cause the Fund to pay subadvisory
fees directly to a subadviser without first obtaining shareholder approval.
For these reasons, each Board believes that approval of Proposal No. 2 to
permit PI and the Boards to enter into new subadvisory agreements or make
material changes to existing subadvisory agreements without shareholder approval
is in the best interests of the shareholders of the Funds.
16
<Page>
CONDITIONS
A Fund will not rely on the Original Order to implement the
Manager-of-Managers structure until all of the conditions set forth below have
been met.
The following are conditions for relief under the Original Order:
1. PI will provide general management and administrative services to a
Fund, including overall supervisory responsibility for the general
management and investment of the Fund's securities portfolio, and, subject
to review and approval by the Board, will (a) set the Fund's overall
investment strategies; (b) select subadvisers; (c) monitor and evaluate the
performance of subadvisers; (d) allocate and, when appropriate, reallocate
the Fund's assets among its subadvisers in those cases where the Fund has
more than one subadviser; and (e) implement procedures reasonably designed
to ensure that the subadvisers comply with the Fund's investment objectives,
policies, and restrictions.
2. Before a Fund may operate in the manner described in Proposal
No. 2, the Proposal must be approved by a majority of its outstanding voting
securities, as defined in the 1940 Act, or in the case of a new Fund of a
Company whose public shareholders purchased shares on the basis of a
prospectus containing the disclosure contemplated by condition 4 below, by
the sole shareholder before the offering of shares of such Fund to the
public. [Approval of Proposal No. 2 would satisfy this condition with
respect to a Fund.]
3. A Fund will furnish to shareholders all of the information about a
new subadviser or subadvisory agreement that would be included in a proxy
statement. This information will include any change in the disclosure caused
by the addition of a new subadviser or any material changes in a subadvisory
agreement. The Funds will meet this condition by providing shareholders with
an information statement complying with certain provisions of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder. With
respect to a newly retained subadviser, or a change in a subadvisory
agreement, the information statement will be provided to shareholders of a
Fund within a maximum of 90 days after the addition of the new subadviser or
the implementation of any material change in a subadvisory agreement.
4. A Fund will disclose in its prospectus the existence, substance and
effect of the Original Order.
5. No Director or officer of a Fund or director or officer of PI will
own directly or indirectly (other than through a pooled investment vehicle
that is not controlled by the Director or officer) any interest in any
subadviser except for (a) ownership of interests in PI or any entity that
controls, is controlled by or is under common control with PI, or
(ii) ownership of less than 1% of the outstanding securities of any class of
equity or debt of a publicly-traded company that is either a subadviser or
any entity that controls, is controlled by or is under common control with a
subadviser.
6. PI will not enter into a subadvisory agreement with any subadviser
that is an "affiliated person" (as defined in the 1940 Act) of a Fund or PI
other than by reason of serving as a subadviser to the Fund (an Affiliated
Subadviser) without such agreement, including the compensation payable
thereunder, being approved by the shareholders of the Fund.
7. At all times, a majority of the members of the Board of a Fund will
be persons each of whom is an Independent Director of the Fund and the
nomination of new or additional Independent Directors will be placed within
the discretion of the then existing Independent Directors.
8. When a subadviser change is proposed for a Fund with an Affiliated
Subadviser, the Board, including a majority of the Independent Directors,
will make a separate finding, reflected in the Board's minutes, that such
change is in the best interests of the Fund and its shareholders and does
not involve a conflict of interest from which PI or the Affiliated
Subadviser derives an inappropriate advantage.
17
<Page>
MATTERS CONSIDERED BY EACH BOARD
At Board meetings held on March 4, 2003, each Board, including the
Independent Directors, approved the submission to shareholders of Proposal No. 2
regarding the Manager-of-Managers structure. Prior to the meeting each Director
received materials discussing this type of management structure. At the meeting,
each Director attended a comprehensive presentation on the proposed structure
and had the opportunity to ask questions and request further information in
connection with such consideration. Each Board gave primary consideration to the
fact that the rate of the management fee payable to PI would not change as a
result of adopting a Manager-of-Managers structure and that the new structure
would provide the potential for PI to hire subadvisers and amend subadvisory
agreements more efficiently and with less expense. Each Board also considered
that PI had substantial experience in evaluating investment advisers and that PI
would bring that experience to the task of evaluating the current subadviser for
a Fund and any potential new subadviser. Each Board took into account the fact
that PI could not, without the prior approval of the Board, including a majority
of the Independent Directors: (1) appoint a new subadviser, (2) materially
change the allocation of portfolio assets among subadvisers, or (3) make
material amendments to existing subadvisory agreements. Each Board also took
into account the fact that other funds managed by PI, including most of the
funds marketed, distributed and operated similarly to the Funds, operate within
this structure.
REQUIRED VOTE
For each Fund, approval of this Proposal requires the affirmative vote of a
majority of that Fund's outstanding voting securities, as defined in the 1940
Act to mean the lesser of (1) 67% of the shares represented at the Meeting if
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.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 2.
TO PERMIT AN AMENDMENT TO THE MANAGEMENT CONTRACT
BETWEEN PI AND EACH COMPANY
PROPOSAL NO. 3
THIS PROPOSAL APPLIES TO ALL FUNDS EXCEPT DRYDEN ULTRA SHORT BOND FUND.
The Board of each Company, including the Independent Directors, has
approved, and recommends that shareholders of the Funds approve, a proposal to
amend the management agreement between PI and each Company (on behalf of each
Fund) (the Amended Management Agreements). Because the material features of each
Amended Management Agreement are substantially similar to each other, we have
attached as Exhibit D to this proxy statement a form of the Amended Management
Agreements applicable to each Fund. If approved at the Meeting, the Amended
Management Agreements will supersede the existing Management Agreements (the
Existing Management Agreements) between each Company and PI, respectively.
The Amended Management Agreements are substantially similar to the Existing
Management Agreements except with respect to the provisions relating to the
Manager-of-Managers structure. THE RATE OF ADVISORY FEES PAYABLE BY EACH FUND TO
PI WILL NOT CHANGE. The primary difference is that the Amended Management
Agreements would permit PI, with Board approval, to allocate and reallocate a
Fund's portfolio assets among subadvisers as PI deems appropriate. In addition,
the Amended Management Agreements contain a provision permitting a Fund to
indemnify the Manager in certain instances.
If the Amended Management Agreement is approved with respect to your Fund,
the Fund's existing subadvisory agreement between PI and PIM (the Existing PIM
Subadvisory Agreement) will be amended
18
<Page>
to reflect the changes in the Amended Management Agreement. Therefore, in
deciding whether to approve the Amended Management Agreement, you should
consider that by voting for approval of the Amended Management Agreement with
respect to your Fund, you are also voting to approve amending the existing PIM
Subadvisory Agreement in order to permit PI, with Board approval, to allocate
and reallocate your Fund's portfolio assets to and from PIM from 0% to 100% of
your Fund's portfolio assets and to clarify that PIM's subadvisory fee will be
based on the portfolio assets that it manages. EACH AMENDED PIM SUBADVISORY
AGREEMENT WILL OTHERWISE BE SIMILAR IN ALL OTHER MATERIAL RESPECTS AS THE
EXISTING PIM SUBADVISORY AGREEMENT, except as to the date of the Agreement. The
Board of each Company, including the Independent Directors, has approved
amending the existing PIM Subadvisory Agreement for each Fund. Because the
material features of each Amended PIM Subadvisory Agreement are substantially
similar to each other, we have attached as Exhibit E to this proxy statement a
form of the Amended PIM Subadvisory Agreement applicable to all of the Funds. If
the Amended Agreement is approved at the Meeting as to a Fund, the Amended PIM
Subadvisory Agreement will supersede the Existing PIM Subadvisory Agreement
between PI and PIM as to that Fund.
EXISTING PIM SUBADVISORY AGREEMENTS
The Existing PIM Subadvisory Agreements provide that PIM will furnish
investment advisory services in connection with the management of the Funds. In
connection with those services, PIM is obligated to keep certain books and
records of the Funds. Pursuant to the Existing Agreements, as well as under the
Amended Agreements, PI continues to have responsibility for all investment
advisory services.
The table below lists the compensation paid by PI to PIM under the Existing
PIM Subadvisory Agreements for the last fiscal year of each Fund, as well as the
date of that Agreement and the date on
19
<Page>
which that Agreement was last submitted to shareholders for approval. Each such
Agreement was most recently continued by the Board on May 29, 2003.
<Table>
<Caption>
EXISTING PIM DATE SUBADVISORY
SUBADVISORY AGREEMENT FEE PAID TO PIM
AGREEMENT SUBMITTED TO (% OF AVERAGE DAILY
FUND DATE SHAREHOLDERS NET ASSETS)
- ---- --------------------------- -------------------------- --------------------------------
CMF
California Series............... 12/30/88 12/8/88 .25%
California Income Series........ 12/30/88 12/8/88 .25%
California Money Market
Series........................ 12/30/88 12/8/88 .25%
GIF............................... 7/1/88 2/25/88 .25% up to $3 billion,
.166% over $3 billion
HYF............................... 5/2/88 4/28/88 .250% up to $250 million,
.2256% of the next
$500 million,
.2025% of the next
$750 million,
.1806% of the next
$500 million,
.160% of the next $500 million,
.1406% of the next
$500 million,
and .1225% over $3 billion.
MBF
High Income Series.............. 3/1/88 12/19/88 .25% up to $1 billion,
.214% over $1 billion
Insured Series.................. 3/1/88 12/19/88 .25% up to $1 billion,
.214% over $1 billion
MSF
Florida Series.................. 12/30/88 12/8/88 .25%
New Jersey Series............... 12/30/88 12/8/88 .25%
New Jersey Money Market
Series........................ 12/30/88 12/8/88 .25%
New York Series................. 12/30/88 12/8/88 .25%
New York Money Market Series.... 12/30/88 12/8/88 .25%
Pennsylvania Series............. 12/30/88 12/8/88 .25%
NMF............................... 5/2/88 4/28/88 .25% up to $250 million,
.226% of the next $250 million,
.203% of the next $500 million,
.181% of the next $250 million,
.160% of the next $250 million,
and .141% over $1.5 billion.
STBF
Prudential Short-Term Corporate
Bond Fund..................... 7/25/89 5/12/89 .20%
TRBF.............................. 1/3/95 9/12/94 .25%
</Table>
20
<Page>
The table beginning on page 25 lists the fees paid to PI by each Fund. The
table below sets forth the total fees paid by PI to PIM for each Fund during its
most recent fiscal year:
<Table>
<Caption>
FISCAL YEAR FEE RECEIVED
FUND ENDED BY PIM
- ---- ----------- ------------
CMF
California Series......................................... 8/31/02 $ 332,738
California Income Series.................................. 8/31/02 639,900
California Money Market Series............................ 8/31/02 694,364
GIF......................................................... 2/28/03 3,213,148
HYF......................................................... 12/31/02 4,242,224
MBF
High Income Series........................................ 4/30/03 1,996,495
Insured Series............................................ 4/30/03 861,938
MSF
Florida Series............................................ 8/31/02 237,123
New Jersey Series......................................... 8/31/02 444,895
New Jersey Money Market Series............................ 8/31/02 1,123,993
New York Series........................................... 8/31/02 59,042
New York Money Market Series.............................. 8/31/02 558,048
Pennsylvania Series....................................... 8/31/02 411,325
NMF......................................................... 12/31/02 1,477,270
STBF
Prudential Short-Term Corporate Bond Fund................. 12/31/02 388,102
TRBF........................................................ 12/31/02 909,000
</Table>
PIM currently advises the following mutual funds with investment objectives
and policies similar to those of the Funds:
<Table>
<Caption>
TOTAL NET
ASSETS AS OF FEE RECEIVED
FUND 12-31-02 BY PIM
- ---- ------------ -------------------------------
Cash Accumulation Trust
Liquid Assets Fund............................ $449,767,311 --*
National Money Market Fund.................... 299,092,770 .195% up to $1 billion,
.169% of the next
$500 million,
.140% of the next
$500 million,
and .114% over $2 billion
Prudential Global Total Return Fund, Inc........ $223,607,235 .375% to $500 million
.333% next $500 million
.293% over $1 billion
</Table>
- ------------------------
* PI reimburses PIM for its direct costs, excluding profit and overhead,
incurred by PIM in furnishing services to PI.
21
<Page>
The table below lists the name and principal occupation of the principal
executive officers and each director of PIM. The address of each person, unless
otherwise noted, is Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102.
<Table>
<Caption>
NAME POSITION WITH PIM PRINCIPAL OCCUPATIONS
- ---- ---------------------------------- ---------------------------------
John R. Strangfeld....... Chairman and Director Vice Chairman of Prudential
Financial, Inc. (Prudential);
Chairman, Director and CEO of
Prudential Securities Group;
Director and President of
Prudential Asset Management
Holding Company; Director of
Jennison Associates LLC;
Executive Vice President of The
Prudential Insurance Company of
America.
Bernard B. Winograd...... Director, President and CEO Senior Vice President of
Prudential Financial, Inc.;
Director of Jennison Associates,
LLC; Director and Vice President
of Prudential Asset Management
Holding Company.
Matthew J. Chanin ....... Director and Senior Vice President Director and President of
Gateway Center Four Prudential Equity
100 Mulberry St. Investors, Inc.; Chairman,
Newark, NJ 07102 Director and President of
Prudential Private Placement
Investors, Inc.
Dennis M. Kass .......... Director and Vice President Chairman, Director and CEO of
466 Lexington Ave. Jennison Associates LLC; Director
18th floor of Prudential Trust Company.
New York, NY 10017
Philip N. Russo.......... Director Director of Jennison Associates
LLC; Executive Vice President,
Chief Financial Officer and
Treasurer, PI.
James J. Sullivan ....... Director, Vice President and Chairman, Director, President and
Gateway Center Two Managing Director CEO of Prudential Trust Company;
100 Mulberry St. Director and President of The
Newark, NJ 07102 Prudential Asset Management
Company, Inc.
</Table>
As discussed above, if a Fund's shareholders approve this Proposal, the
relevant Existing Management Agreement would be amended to provide that PI may
reallocate Fund assets upon Board approval only and without further shareholder
approval. This would mean, for example, that a Fund that has allocated 100% of
its assets to one subadviser would be able to change the allocation to 50% to
one subadviser and 50% to a second subadviser with Board approval but without
seeking shareholder approval. (The Fund's Board could appoint the second
unaffiliated subadviser with shareholder approval or, if Proposal No. 2 is
approved, by Board action alone.) Alternatively, a Fund that has allocated 50%
of its assets to subadviser #1 and 50% to subadviser #2 would be able to change
the allocation to 75% of assets to subadviser #1 and 25% to subadviser #2
without seeking shareholder approval.
Reallocations may result in additional costs since sales of securities may
result in higher portfolio turnover. Also, because each subadviser selects
portfolio securities independently, it is possible that a
22
<Page>
security held by one portfolio segment of a Fund may also be held by the other
portfolio segment of that Fund or that the two subadvisers may simultaneously
favor the same industry. PI will monitor each Fund's overall portfolio to ensure
that any such overlaps do not create an unintended industry concentration or
result in a violation of a Fund's diversification requirements. In addition, if
one subadviser of a Fund buys a security at the same time that another Fund
subadviser sells it, the net position of the Fund in the security may be
approximately the same as it would have been with an undivided portfolio and no
such sale and purchase, but the Fund will have incurred additional costs. PI
will consider these costs in determining the allocation of assets. PI will
consider the timing of reallocation based upon the best interests of a Fund and
its shareholders. To maintain a Fund's federal income tax status as a regulated
investment company, PI also may have to sell securities on a periodic basis and
the Fund could realize capital gains that would not have otherwise occurred.
Below we provide additional information about the Amended Management
Agreements and the Existing Management Agreements.
EXISTING MANAGEMENT AGREEMENTS
The Funds are currently managed under Existing Management Agreements with
PI, dated as shown in the following table.
The following table shows the date that each Fund's Existing Management
Agreement was most recently renewed by its Board, including a majority of the
Independent Directors, and the date that each Existing Management Agreement was
last approved by a vote of the Fund's shareholders.
<Table>
<Caption>
DATE AGREEMENT DATE AGREEMENT
MOST RECENTLY MOST RECENTLY
DATE OF RENEWED SUBMITTED FOR
FUND AGREEMENT WITH PI BY BOARD SHAREHOLDER APPROVAL
- ---- -------------------------- -------------------------- --------------------------
CMF
California Series........................ 12/30/88 5-29-03 12/8/88
California Income Series................. 12/30/88 5-29-03 12/8/88
California Money Market Series........... 12/30/88 5-29-03 12/8/88
GIF........................................ 7/1/88 5-29-03 2/25/88
HYF........................................ 5/2/88 5-29-03 4/28/88
MBF
High Income Series....................... 3/1/88 5-29-03 12/19/88
Insured Series........................... 3/1/88 5-29-03 12/19/88
MSF
Florida Series........................... 12/30/88 5-29-03 12/8/88
New Jersey Series........................ 12/30/88 5-29-03 12/8/88
New Jersey Money Market Series........... 12/30/88 5-29-03 12/8/88
New York Series.......................... 12/30/88 5-29-03 12/8/88
New York Money Market Series............. 12/30/88 5-29-03 12/8/88
Pennsylvania Series...................... 12/30/88 5-29-03 12/8/88
NMF........................................ 5/2/88 5-29-03 4/28/88
STBF
Prudential Short-Term Corporate Bond
Fund................................... 7/25/89 5-29-03 5/12/89
TRBF....................................... 1/3/95 5-29-03 9/12/94
</Table>
23
<Page>
PI serves as manager to the Funds and to almost all of the other investment
companies that comprise the Prudential Mutual Funds. PI is organized in New York
as a limited liability company. As of March 31, 2003, PI managed and/or
administered open-end and closed-end management investment companies with assets
of approximately $83.5 billion.
PI is a wholly-owned subsidiary of PIFM Holdco, Inc., which is a
wholly-owned subsidiary of Prudential Asset Management Holding Company (PAMHCO),
which is a wholly-owned subsidiary of Prudential Financial, Inc. The address of
PI, PIFM HoldCo, Inc. and PAMHCO is Gateway Center Three, 100 Mulberry Street,
Newark, NJ 07102. The address of Prudential Financial, Inc. is 751 Broad Street,
Newark, NJ 07102.
The table below lists the name and principal occupations of the principal
executive officers of PI. The address of each person is Gateway Center Three,
100 Mulberry Street, Newark, NJ 07102-4077.
<Table>
<Caption>
NAME POSITION AND PRINCIPAL OCCUPATIONS
- ---- ------------------------------------------------------------
Judy A. Rice..................... Officer-In-Charge, President, Chief Executive Officer and
Chief Operating Officer, PI
Robert F. Gunia ................. Executive Vice President and Chief Administrative Officer,
PI; Vice President, Prudential; President, PIMS
William V. Healey................ Executive Vice President and Chief Legal Officer, PI; Vice
President and Associate General Counsel, Prudential; Senior
Vice President, Chief Legal Officer and Secretary, PIMS
Keitha L. Kinne.................. Executive Vice President, PI
Kevin B. Osborn.................. Executive Vice President, PI
Stephen Pelletier................ Executive Vice President, PI
Philip N. Russo.................. Executive Vice President, Chief Financial Officer and
Treasurer, PI; Director of Jennison Associates LLC
Lynn M. Waldvogel................ Executive Vice President, PI
</Table>
24
<Page>
For its services, PI was paid as compensation the following amounts during
each Fund's most recent fiscal year:
<Table>
<Caption>
FISCAL YEAR TOTAL MANAGEMENT FEES AS % MANAGEMENT
FUND ENDED OF AVERAGE NET ASSETS FEES PAID
- ---- ----------- ------------------------------- ----------
CMF
California Series..................... 8/31/02 .50% $ 665,475
California Money Market Series........ 8/31/02 .50% 1,279,800
California Income Series.............. 8/31/02 .50% 1,388,727
GIF..................................... 2/28/03 .50% up to $3 billion, 6,426,296
.35% over $3 billion
HYF..................................... 12/31/02 .50% of up to $250 million, 9,293,686
.475% of the next
$500 million,
.45% of the next $750 million,
.425% of the next
$500 million,
.40% of the next $500 million,
.375% of the next
$500 million,
.35% over $3 billion
MBF
High Income Series.................... 4/30/03 .50% up to $1 billion, 3,992,990
.45% over $1 billion
Insured Series........................ 4/30/03 .50% up to $1 billion, 1,723,876
.45% over $1 billion
MSF
Florida Series........................ 8/31/02 .50% 474,246
New Jersey Series..................... 8/31/02 .50% 889,789
New Jersey Money Market Series........ 8/31/02 .50% 2,247,986
New York Series....................... 8/31/02 .50% 1,118,083
New York Money Market Series.......... 8/31/02 .50% 1,116,096
Pennsylvania Series................... 8/31/02 .50% 822,649
NMF..................................... 12/31/02 .50% up to $250 million, 3,078,101
.475% of the next
$250 million,
.45% of the next $500 million,
.425% of the next
$250 million,
.40% of the next $250 million,
.375% over $1.5 billion
STBF
Prudential Short-Term Corporate Bond
Fund................................ 12/31/02 .40% 776,204
TRBF.................................... 12/31/02 .50% 1,818,120
</Table>
AMOUNTS PAID TO AFFILIATES
THE DISTRIBUTOR
PIMS, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077, acts as the distributor of the shares of the Funds. PIMS is a
subsidiary of Prudential. Pursuant to distribution and service plans adopted
under Rule 12b-1 under the 1940 Act, the Funds bear the expense of distribution
and service (12b-1) fees paid to PIMS with respect to their respective Class A,
Class B and Class C shares. For
25
<Page>
their most recently completed fiscal years, PIMS received distribution and
service fees from the Funds as follows.
<Table>
<Caption>
CLASS A Class B Class C
FISCAL 12b-1 12b-1 12b-1
FUND YEAR ENDED Fees Fees Fees
- ---- ---------- ---------- ---------- --------
CMF
California Series.......... 8/31/02 $ 256,071 $ 130,552 $ 13,332
California Income Series... 8/31/02 422,989 364,320 68,913
California Money Market
Series................... 8/31/02 347,182 N/A N/A
GIF.......................... 2/28/03 2,475,045 1,514,867 188,757
HYF.......................... 12/31/02 3,015,121 5,400,919 543,796
MBF
High Income Series......... 4/30/03 1,241,494 1,320,334 203,408
Insured Series............. 4/30/03 681,521 290,014 56,694
MSF
Florida Series............. 8/31/02 161,503 117,150 43,544
New Jersey Series.......... 8/31/02 343,789 178,717 30,755
New Jersey Money Market
Series................... 8/31/02 279,024 N/A N/A
New York Series............ 8/31/02 455,779 179,637 22,443
New York Money Market
Series................... 8/31/02 561,997 N/A N/A
Pennsylvania Series........ 8/31/02 309,927 198,368 6,641
NMF.......................... 12/31/02 1,460,591 245,483 42,817
STBF
Prudential Short-Term
Corporate Bond Fund...... 12/31/02 227,841 394,274 236,950
TRBF......................... 12/31/02 252,000 1,917,000 145,000
</Table>
PIMS also generally receives front-end sales charges resulting from the
sales of Class A and Class C shares. From these fees, PIMS pays sales charges to
affiliated broker-dealers, who in turn pay commissions to salespersons and incur
other distribution costs. PIMS has advised the Funds that it received the
26
<Page>
following front-end sales charges during the Funds' most recently completed
fiscal years, as indicated above.
<Table>
<Caption>
CLASS A CLASS C
FUND SALES CHARGES SALES CHARGES
- ---- ------------- -------------
CMF
California Series............................. $ 65,400 $ 7,700
California Income Series...................... 156,500 20,000
California Money Market Series................ N/A N/A
GIF............................................. 534,100 108,700
HYF............................................. 471,000 141,000
MBF
High Income Series*........................... 156,800 37,100
Insured Series*............................... 98,500 15,000
MSF
Florida Series................................ 25,300 5,800
New Jersey Series............................. 44,100 19,900
New Jersey Money Market Series................ -- --
New York Series............................... 47,900 7,200
New York Money Market Series.................. -- --
Pennsylvania Series........................... 48,100 5,500
NMF............................................. 128,000 19,600
STBF
Prudential Short-Term Corporate Bond Fund..... 294,100 215,300
TRBF............................................ 238,800 36,000
</Table>
* Information is as of 4/30/02. Information for fiscal year ended 4/30/03 is
not yet available.
PIMS also received approximately the following contingent deferred sales
charges (CDSCs) imposed on certain redemptions by certain Class B and Class C
shareholders of the Funds for their most recently completed fiscal years, as
indicated above.
<Table>
<Caption>
CLASS B CLASS C
FUND CDSCS CDSCS
- ---- ---------- --------
CMF
California Series................................. $ 51,300 $ 2,900
California Income Series.......................... 206,700 3,900
California Money Market Series.................... N/A N/A
GIF................................................. 416,200 46,000
HYF................................................. 1,434,000 35,000
MBF
High Income Series*............................... 530,800 65,200
Insured Series*................................... 65,200 1,300
MSF
Florida Series.................................... 58,000 2,300
New Jersey Series................................. 33,400 700
New Jersey Money Market Series.................... -- --
New York Series................................... 49,600 3,100
New York Money Market Series...................... -- --
Pennsylvania Series............................... 40,200 2,000
NMF................................................. 50,800 4,700
STBF
Prudential Short-Term Corporate Bond Fund......... 125,800 59,000
TRBF................................................ 386,800 11,000
</Table>
* Information is as of 4/30/02. Information for fiscal year ended 4/30/03 is
not yet available.
27
<Page>
THE TRANSFER AGENT
The Funds' transfer agent, Prudential Mutual Fund Services LLC (PMFS), 194
Wood Avenue South, Iselin, New Jersey 08830, is a wholly-owned subsidiary of PI.
PMFS received approximately the following fees for its services to the Funds for
each Fund's most recently completed fiscal year, as indicated above.
<Table>
<Caption>
TRANSFER AGENT
FUND FEES
- ---- --------------
CMF
California Series......................................... $ 36,600
California Income Series.................................. 43,000
California Money Market Series............................ 57,700
GIF......................................................... 1,657,000
HYF......................................................... 2,412,000
MBF
High Income Series........................................ 250,900
Insured Series............................................ 128,100
MSF
Florida Series............................................ 24,000
New Jersey Series......................................... 60,000
New Jersey Money Market Series............................ 49,000
New York Series........................................... 92,000
New York Money Market Series.............................. 78,000
Pennsylvania Series....................................... 97,000
NMF......................................................... 323,800
STBF
Prudential Short-Term Corporate Bond Fund................. 196,200
TRBF........................................................ 629,800
</Table>
COMMISSIONS PAID TO PRUDENTIAL SECURITIES INCORPORATED
Prudential Securities Incorporated (PSI), One Seaport Plaza, New York, New
York 10292, is a wholly-owned subsidiary of Prudential Financial, Inc. None of
the Funds paid any commissions to PSI during each Fund's most recently completed
fiscal year.
AMENDED MANAGEMENT AGREEMENTS
Pursuant to the Existing Management Agreements, PI, subject to the
supervision of the Funds' Boards, and in conformity with the investment policies
and restrictions of the Funds, manages both the investment operations of the
Funds and the composition of the Funds' portfolios, including the purchase,
retention, disposition and loan of securities or other assets. Under the Amended
Management Agreements, PI may delegate the subadvisory function to one or more
than one subadviser. As discussed in Proposal No. 2 above, PI would like the
ability to manage in a "Manager-of-Managers" style in which PI would, among
other things, (i) continually evaluate the performance of the subadvisers to
each Fund through qualitative and quantitative analysis and consultations with
each subadviser, (ii) periodically make recommendations to the Fund's Board as
to whether the contract with one or more subadvisers should be renewed, modified
or terminated and (iii) periodically report to the Fund's Board regarding the
results of its evaluation and monitoring functions. Under the Amended Management
Agreements, PI must keep certain books and records of each Fund. PI also would
administer each Fund's business affairs and furnish appropriate office
facilities, together with ordinary clerical and bookkeeping services that are
not furnished by the Funds' custodian and PMFS, the Funds' transfer and dividend
disbursing agent. Officers and employees of PI serve as officers and Directors
of the Funds without compensation.
28
<Page>
A model Amended Management Agreement under which PI would provide management
services to the Funds is attached as Exhibit D to this proxy statement. In
brief, the Amended Management Agreement provides that:
- PI will administer a Fund's business affairs and supervise the Fund's
investments. Subject to Board approval, PI may select and employ one or
more subadvisers for a Fund, who will have primary responsibility for
determining what investments the Fund will purchase, retain and sell;
- Subject to Board approval, PI may reallocate a Fund's assets among
subadvisers;
- PI (or a subadviser, acting under PI's supervision) will select brokers to
effect trades for a Fund, and may pay a higher commission to a broker that
provides bona fide research services;
- PI will pay the salaries and expenses of any employee or officer of a Fund
(other than the fees and expenses of the Fund's Independent Directors).
Otherwise, the Fund pays its own expenses;
- For each Fund, PI will be paid at the same advisory fee rate as is
currently charged to each such Fund under the Existing Management
Agreements; and
- Each Fund will indemnify PI for all liabilities, costs and expenses
incurred by PI in any action or proceeding arising out of the performance
of its duties under the Amended Management Agreement. But PI will not be
indemnified for any liability to the Fund or its shareholders to which it
would otherwise be subject due to gross negligence in or reckless
disregard of its duties under the Amended Management Agreement.
MATTERS CONSIDERED BY THE BOARD
The proposal to present the Amended Management Agreements to shareholders
was approved by the Board of each Company, including the Independent Directors,
on March 4, 2003. The Board Members received materials relating to the Amended
Management Agreements in advance of the meeting at which these Agreements were
considered, and had the opportunity to ask questions and request further
information in connection with such consideration. The Board gave primary
consideration to the fact that the rate of fees will not change and that the
terms of the Amended Management Agreements were substantially similar to the
Existing Management Agreements, except that, under the Amended Management
Agreements, PI would be able to allocate Fund assets among subadvisers, subject
to Board approval. Each Board also considered a number of other factors,
including the fact that authorizing PI to change subadvisers without shareholder
approval would permit the Funds to change subadvisers in the future without
incurring the expense and delay of a shareholder vote. The Board gave strong
consideration to the fact that PI had substantial experience in evaluating
investment advisers and would bring that experience to the task of evaluating
the subadvisers to the Funds in the future. The Board noted PI's commitment to
the maintenance of effective compliance programs. The Board also gave weight to
the fact that it would be beneficial to conform the advisory structure of the
Funds to the advisory structure already in place for other mutual funds in the
Prudential Mutual Fund family, and would place the Fund on equal footing with
those other funds as to the speed and efficiency of subadviser changes. After
consideration of all these factors, each Board concluded that adopting Proposal
No. 3 is reasonable, fair and in the best interests of each Fund and its
shareholders.
REQUIRED VOTE
For each Fund, approval of this Proposal requires the affirmative vote of a
majority of that Fund's outstanding voting securities, as defined in the 1940
Act.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 3.
29
<Page>
TO APPROVE CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES
PROPOSAL NO. 4
THIS PROPOSAL APPLIES TO ALL FUNDS, EXCEPT DRYDEN ULTRA SHORT BOND FUND.
BACKGROUND
The Board of each Company has approved, and recommends that shareholders of
each Fund approve, the amendment of certain fundamental investment restrictions
and policies of each Fund. Dryden Ultra Short Bond Fund already has adopted
fundamental investment restrictions and policies similar to the proposed uniform
restrictions discussed below. Therefore, shareholders of this Fund do not need
to vote on this Proposal.
Each Fund has adopted fundamental investment restrictions and policies
regarding the management of the Fund's investments. The designation of these
restrictions and policies as "fundamental" means that they cannot be changed
without shareholder approval. You are being asked to approve changes to your
Fund's fundamental investment restrictions and policies in order to:
(a) provide the Fund's Manager and subadviser(s) with additional flexibility to
pursue the Fund's investment objective; (b) allow the Fund to implement certain
investment programs that may help the Fund to achieve economies of scale by
participating in transactions with other Prudential Mutual Funds, such as joint
investment in affiliated investment companies and an inter-fund lending program
(TRBF already has some ability to engage in these programs but, if the proposed
restrictions are approved by shareholders, its policies would be made uniform
with those of other Prudential Mutual Funds); and (c) eliminate investment
restrictions that were imposed by state regulators that are no longer required
or that were imposed years ago, but do not support the Manager's and
Subadviser's strategy to pursue your Fund's investment objective.
RISKS: The proposed fundamental investment limitations are intended to
provide each Fund's Manager and subadviser(s) with flexibility in pursuing each
Fund's investment objective to respond to future investment opportunities, as
well as to clarify existing fundamental restrictions or to provide uniformity
among the Funds' policies. If adopted, each Fund will interpret the new
restrictions in light of existing and future exemptive orders, SEC releases,
no-action letters or similar relief or interpretations. The Funds' greater
investment flexibility could increase the level of risk. Generally, however, the
proposed changes are not expected to modify the way each Fund is currently
managed. Certain specific risks associated with each proposed fundamental
investment limitation are described below, however, generally the Manager does
not anticipate that the proposed changes, individually or in the aggregate, will
materially change either the level or nature of risk associated with investing
in each Fund.
The Funds have similar, although not identical, fundamental investment
restrictions. Some of the differences are due to the Funds' different investment
objectives. Other differences are due to historical evolution. PI would like to
realign the Funds' limits by establishing uniform fundamental investment
restrictions, while achieving the goals described above. Consistency among the
Funds' fundamental investment restrictions should also facilitate the management
of the Funds since it will be easier for the Funds' Manager and subadviser(s) to
monitor compliance issues relating to the Funds if they have uniform investment
restrictions.
The 1940 Act requires a mutual fund to disclose, in its registration
statement, its policy with respect to each of the following:
- diversification
- issuing senior securities
- borrowing money, including the purpose for which the proceeds will be used
30
<Page>
- underwriting securities of other issuers
- concentrating investments in a particular industry or group of industries
- purchasing or selling real estate or commodities
- making loans
In addition to the above items, a mutual fund is free to designate as
"fundamental" investment policies concerning other investment practices. As
discussed below, the Board of each Fund recommends that some of those
restrictions be amended.
SPECIFIC RECOMMENDATIONS
The Board of each Fund has approved the adoption of a uniform set of
fundamental investment restrictions. Each Fund's current fundamental investment
restrictions appear in that Fund's Statement of Additional Information. In
addition to variations among the Funds arising from their historical
development, there are also, and will continue to be, differences resulting from
a Fund's investment objective or, with respect to other Funds, its operation as
a non-diversified Fund or its intention to concentrate its investments in a
specific industry or group of industries. The table appearing at the end of this
Proposal provides a list of your Fund's current fundamental investment
restrictions and the proposed revisions to those restrictions.
The proposed uniform fundamental investment restrictions and policies are as
follows (the information in brackets is explanatory and is not part of the
restrictions):
The following restrictions are fundamental policies. Fundamental
policies are those that cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities. The term
"majority of the Fund's outstanding voting securities" for this purpose
means the vote of the lesser of (i) 67% or more of the voting shares of the
Fund represented at a meeting at which more than 50% of the outstanding
voting shares of the Fund are present in person or represented by proxy, or
(ii) more than 50% of outstanding voting shares of the Fund.
The Fund may not:
(1) Purchase the securities of any issuer if, as a result, the Fund would
fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as each may be amended
from time to time except to the extent that the Fund may be permitted to
do so by exemptive order, SEC release, no-action letter or similar relief
or interpretations (collectively, the "1940 Act Laws, Interpretations and
Exemptions").
(2) Issue senior securities or borrow money or pledge its assets, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions. For
purposes of this restriction, the purchase or sale of securities on a
when-issued or delayed delivery basis, reverse repurchase agreements,
dollar rolls, short sales, derivative and hedging transactions such as
interest rate swap transactions, and collateral arrangements with respect
thereto, and transactions similar to any of the foregoing and collateral
arrangements with respect thereto, and obligations of the Fund to
Directors/Trustees pursuant to deferred compensation arrangements are not
deemed to be a pledge of assets or the issuance of a senior security.
(3) Buy or sell real estate, except that investment in securities of issuers
that invest in real estate and investments in mortgage-backed securities,
mortgage participations or other instruments supported or secured by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights relating to such securities, including
the right to enforce security interests and to hold real estate acquired
by reason of such enforcement until that real estate can be liquidated in
an orderly manner.
31
<Page>
(4) Buy or sell physical commodities or contracts involving physical
commodities. The Fund may purchase and sell (i) derivative, hedging and
similar instruments such as financial futures contracts and options
thereon, and (ii) securities or instruments backed by, or the return from
which is linked to, physical commodities or currencies, such as forward
currency exchange contracts, and the Fund may exercise rights relating to
such instruments, including the right to enforce security interests and
to hold physical commodities and contracts involving physical commodities
acquired as a result of the Fund's ownership of instruments supported or
secured thereby until they can be liquidated in an orderly manner.
(5) Purchase any security if as a result 25% or more of the Fund's total
assets would be invested in the securities of issuers having their
principal business activities in the same industry or group of
industries, except for temporary defensive purposes, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
(6) 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.
(7) The Fund may make loans, including loans of assets of the Fund,
repurchase agreements, trade claims, loan participations or similar
investments, or as permitted by the 1940 Act Laws, Interpretations and
Exemptions. The acquisition of bonds, debentures, other debt securities
or instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates of
deposit, bankers' acceptances or instruments similar to any of the
foregoing will not be considered the making of a loan, and is permitted
if consistent with the Fund's investment objective.
[For purposes of Investment Restriction 1, the Fund will currently not
purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets, (i) more than 5% of the Fund's total assets (determined
at the time of investment) would be invested in securities of a single
issuer and (ii) the Fund would own more than 10% of the outstanding voting
securities of any single issuer.
For purposes of Investment Restriction 2, under the Investment Company
Act of 1940, as amended (the "1940 Act"), the Fund can borrow money from a
bank provided that immediately after such borrowing there is asset coverage
of at least 300% for all borrowings. If the asset coverage falls below 300%,
the Fund must, within three business days, reduce the amount of its
borrowings to satisfy the 300% requirement.
For purposes of Investment Restriction 5, the Fund relies on The North
American Industry Classification System published by the Bureau of Economic
Analysis, U.S. Department of Commerce, in determining industry
classification. The Fund's reliance on this classification system is not a
fundamental policy of the Fund and, therefore, can be changed without
shareholder approval.
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 asset values will not be
considered a violation of such policy. However, if the Fund's asset coverage
for borrowings permitted by Investment Restriction 2 falls below 300%, the
Fund will take prompt action to reduce its borrowings, as required by the
1940 Act Laws, Interpretations and Exemptions.]
PROPOSAL 4(a): FUND DIVERSIFICATION
The Funds (other than Florida Series and New Jersey Money Market Series of
MSF) are operated as diversified investment companies under the 1940 Act. In
general, this means that, with respect to 75% of the value of a Fund's total
assets, the Fund invests in cash, cash items, obligations of the U.S.
government, its agencies or instrumentalities, securities of other investment
companies and other securities. The "other securities" are subject to the
additional requirement that not more than 5% of total assets will be invested
32
<Page>
in the securities of a single issuer and that the Fund will not hold more than
10% of an issuer's outstanding voting securities.
The proposed amendment would restrict such a Fund from purchasing the
securities of any issuer if, as a result, the Fund would fail to be a
diversified management company within the meaning of the 1940 Act and the rules
and regulations promulgated thereunder, except to the extent that the Fund may
be permitted to do so by the 1940 Act Laws, Interpretations and Exemptions. The
restriction is accompanied by a note that indicates what the 1940 Act currently
requires for the Fund to be "diversified." The Fund would, however, be free to
amend that note if applicable laws are amended or the Fund receives an exemption
from the requirements imposed by applicable law.
RECOMMENDATION: To provide flexibility as laws change or relief is obtained
from the SEC or its Staff, while also requiring these Funds to comply with the
currently applicable definition of a "diversified" investment company, the Board
of each such Fund recommends that shareholders adopt the following as a
fundamental investment restriction:
The Fund may not:
Purchase the securities of any issuer if, as a result, the Fund would
fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as each may be amended
from time to time, except to the extent that the Fund may be permitted to
do so by exemptive order, SEC release, no-action letter or similar relief
or interpretations (collectively, the "1940 Act Laws, Interpretations and
Exemptions").
The following note accompanies this investment restriction:
For purposes of Investment Restriction 1, the Fund will currently not
purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets, (i) more than 5% of the Fund's total assets
(determined at the time of investment) would be invested in securities of
a single issuer and (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer.
PROPOSAL 4(b): ISSUING SENIOR SECURITIES, BORROWING MONEY OR PLEDGING ASSETS
The Funds are permitted to borrow money and pledge assets to secure such
borrowings. However, the amount that may be borrowed, the purposes for which
borrowings may be made, and the amount of securities that may be pledged vary.
The proposed amendment would allow each Fund to borrow money and pledge its
assets to secure such borrowings to the extent permitted by the 1940 Act Laws,
Interpretations and Exemptions. The restriction is accompanied by a note stating
that if asset coverage for a borrowing falls below 300%, the Fund will, within
three business days, reduce its borrowings. This note is to reflect the current
requirement that the Fund limit borrowing to one-third of its total assets.
However, a Fund would be free to amend its borrowing limitations if applicable
law changes or the Fund receives an exemption from the requirements imposed by
applicable law. None of the Funds currently has pending or currently proposes to
file a request for exemptive relief to permit it to borrow with an asset
coverage ratio of less than 300%. Moreover, there can be no assurance that the
SEC Staff would grant exemptive or similar relief if requested.
Under the proposed investment restriction, the Fund could borrow money for
temporary, extraordinary or emergency purposes or for the clearance of
transactions and to take advantage of investment opportunities. Notwithstanding
the increased flexibility under the proposed restriction, the Funds do not
intend to change their investment practices at this time. In addition, under the
proposed investment restriction, the Fund would not be precluded from lending to
and borrowing from other Prudential Mutual Funds if the SEC staff grants
exemptive relief which would permit borrowing and lending between the Funds and
the Funds adopt such an inter-fund lending program. If the Fund obtains such
relief, the borrowing Fund may be able to reduce the cost of borrowing money and
the lending Fund may be able to generate interest income. With respect to TRBF,
which has the capability to engage in some
33
<Page>
of these transactions, this will increase the Fund's flexibility and conform its
policies to that of the other Funds, in connection with borrowing money or
pledging its assets.
RISKS: If a Fund borrows money to invest in securities and the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the money borrowed), the net asset value of the
Fund's shares will decrease faster than would otherwise be the case. This is the
speculative factor known as "leverage." In order to reduce the risk presented by
leverage, each of the Funds intends to not purchase portfolio securities when
borrowings exceed 5% of the value of its total assets. This policy may be
changed by the Directors.
If the Fund's 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 purchase and sale of securities on a when-issued or delayed delivery
basis, reverse repurchase agreements, dollar rolls, short sales, derivative and
hedging transactions such as interest rate swap transactions and similar
transactions and arrangements involve costs and risks. For example, the Fund
must pay the lender interest on the security it borrows, and the Fund will lose
money if the price of the security increases between the time of the short sale
and the date when the Fund replaces the borrowed security.
RECOMMENDATION: To provide flexibility as laws change or relief may be
obtained from the SEC or its Staff, while also requiring the Fund to comply with
currently applicable restrictions on issuing senior securities, borrowing money
and pledging assets, the Board of each Fund recommends that shareholders adopt
the following as a fundamental investment restriction:
The Fund may not:
Issue senior securities or borrow money or pledge its assets, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions. For
purposes of this restriction, the purchase or sale of securities on a
when-issued or delayed delivery basis, reverse repurchase agreements,
dollar rolls, short sales, derivative and hedging transactions such as
interest rate swap transactions, and collateral arrangements with respect
thereto, and transactions similar to any of the foregoing, and collateral
arrangements with respect thereto, and obligations of the Fund to
Directors/Trustees pursuant to deferred compensation arrangements are not
deemed to be a pledge of assets or the issuance of a senior security.
The following note accompanies this investment restriction:
For purposes of Investment Restriction 2, under the Investment Company
Act of 1940, as amended (the "1940 Act"), the Fund can borrow money from
a bank provided that immediately after such borrowing there is asset
coverage of at least 300% for all borrowings. If the asset coverage falls
below 300%, the Fund must, within three business days, reduce the amount
of its borrowings to satisfy the 300% requirement.
PROPOSAL 4(c): BUYING AND SELLING REAL ESTATE
None of the Funds is permitted to buy or sell real estate and NMF and HYF
may not invest in real estate mortgage loans. However, each of the Funds is
permitted to invest in real estate-related securities to a certain extent. For
example, all of the Funds are premitted to invest in securities (with respect to
NMF, municipal bonds or notes) which are secured by real esate. CMF, GIF, MBF,
MSF, Prudential Short-Term Corporate Bond Fund of STBF and TRBF may invest in
securities of companies which invest or deal in real estate. HYF may purchase
marketable securities of issuers which engage in real estate operations. STCBF
and TRBF may each invest in publicly traded securities of real estate investment
trusts, but not in real estate limited partnerships which are not readily
marketable. Prudential Short-Term Corporate Bond Fund may also invest in
mortgage-backed securities and securities collateralized by mortgages.
The proposed investment restriction confirms that each Fund may not buy or
sell real estate. The restriction also clarifies that each Fund may make
investments in securities that are real estate-related, as
34
<Page>
described in the restriction. In addition, the amended investment restriction
allows a Fund that holds real estate due to the enforcement of rights under an
agreement or a security interest (not through a purchase of the real estate) to
hold the real estate until it can be sold in an orderly manner. Notwithstanding
the increased flexibility under the proposed restriction, the Funds do not
intend to change their investment practices at this time.
RISKS: The performance of real estate-related securities depends upon the
strength of the real estate market and property management. Thus, investment
performance can be affected by national and regional economic conditions, as
well as other factors. These factors can have a more pronounced impact on
performance than investments in other securities.
RECOMMENDATION: To clarify the Fund's investment restriction with respect
to investments in real estate and real estate-related securities, the Board of
each Fund recommends that shareholders adopt the following as a fundamental
investment restriction:
The Fund may not:
Buy or sell real estate, except that investment in securities of issuers
that invest in real estate and investments in mortgage-backed securities,
mortgage participations or other instruments supported or secured by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights relating to such securities, including
the right to enforce security interests and to hold real estate acquired
by reason of such enforcement until that real estate can be liquidated in
an orderly manner.
PROPOSAL 4(d): BUYING AND SELLING COMMODITIES AND COMMODITY CONTRACTS
None of the funds is permitted to buy or sell commodities or commodity
contracts. NMF, MBF, HYF, GIF, Prudential Short-Term Corporate Bond Fund of
STBF, all Funds of CMF and all Funds of MSF are permitted to invest in financial
futures contracts and options thereon (except the California Money Market Series
of CMF and the New York Money Market Series and New Jersey Money Market Series
of MSF). TRBF has a similar prohibition, but notes that for purposes of the
restriction, futures contracts on securities, currencies and on securities or
financial indices and forward foreign currency exchange contracts are not deemed
to be commodities or commodity contracts. California Money Market Series, New
Jersey Money Market Series, and New York Money Market Series are not permitted
to invest in financial futures contracts and related investment types because of
current regulations.
The proposed investment restriction confirms that each Fund may not buy or
sell commodities or commodity contracts. The restriction also clarifies that a
Fund's investment in financial futures contracts, options on financial futures
contracts and forward currency exchange contracts is not subject to the
restriction applicable to commodity contracts and similar types of instruments.
The types and amounts of these securities will vary among the Funds, but may
include futures or options on market indexes, currencies, interest rates or some
other benchmark, swap agreements and foreign currency forward contracts. If your
Fund intends to utilize financial futures contracts, options on financial
futures contracts or forward currency exchange contracts, a description of these
instruments will appear in the Fund's Prospectus or Statement of Additional
Information.
Because the uniform restriction relating to commodities and commodities
contracts would not prohibit investment in financial futures contracts and
related investment types, those funds for which such investments are not
appropriate because of current regulations (California Money Market Series, New
Jersey Money Market Series and New York Money Market Series) will limit their
investment activities to remain in compliance with applicable regulations.
However, these funds will have the flexibility to change their respective policy
in the future in the event of future changes in regulations.
If the proposed investment restriction is approved as to a Fund, that Fund's
restriction, if any, prohibiting the Fund from investing in interests in oil,
gas or other mineral exploration or development programs, will be eliminated.
35
<Page>
RISKS: Financial futures contracts, options on financial futures contracts
and similar types of instruments and forward currency exchange contracts may be
used by a Fund as a hedging device or, in some circumstances, for speculation.
Due to imperfect correlation between the price of futures contracts and
movements in a currency or a group of currencies, the price of a futures
contract may move more or less than the price of the currency or currencies
being hedged. The use of these instruments will hedge only the currency risks
associated with investments in foreign securities, not market risk. In the case
of futures contracts on a securities indices or a security, the correlation
between the price of the futures contract and the movement of the index or
security may not be perfect. Therefore, even correct forecast of currency rates,
market trends or international political trends by your Fund's investment
adviser does not assume a successful hedging transaction.
In addition, a 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. There is no assurance that a
liquid market on an exchange will exist for any futures contract or option on a
particular futures contract. If no liquid market exists for a particular futures
contract or option on a futures contract in which a Fund invests, 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 certain circumstances, a Fund may
segregate and maintain an amount of cash or other liquid assets correlated to
the value of the contracts or other instruments.
Successful use of futures contracts, options on futures contracts and
forward currency exchange contracts and similar types of instruments by a Fund
is subject to the ability of an investment adviser to predict correctly
movements in the direction of interest and foreign currency rates and markets
generally. If the investment adviser's expectations are not met, the Fund may be
in a worse position than if the strategy had not been pursued.
RECOMMENDATION: In order to clarify and provide uniformity among the Funds'
restrictions applicable to investments in commodities and commodity contracts,
the Board of each Fund recommends that shareholders adopt the following as a
fundamental investment restriction:
The Fund may not:
Buy or sell physical commodities or contracts involving physical
commodities. The Fund may purchase and sell (i) derivative, hedging and
similar instruments such as financial futures contracts and options
thereon, and (ii) securities or instruments backed by, or the return from
which is linked to, physical commodities or currencies, such as forward
currency exchange contracts, and the Fund may exercise rights relating to
such instruments, including the right to enforce security interests and
to hold physical commodities and contracts involving physical commodities
acquired as a result of the Fund's ownership of instruments supported or
secured thereby until they can be liquidated in an orderly manner.
PROPOSAL 4(e): FUND CONCENTRATION
All of the Funds invest their portfolios to avoid "concentration" in a
particular industry or group of industries. The 1940 Act requires that a mutual
fund recite in its registration statement its policy regarding concentration. If
a Fund has a policy not to "concentrate", this means that, except for temporary
defensive purposes, less than 25% of the Fund's net assets will be invested in
the securities of issuers in the same industry. This limitation does not apply
to securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
The proposed amendment is not intended to change a Fund's policy regarding
concentration, but to provide uniformity in disclosure of the policy among the
Funds and the other Prudential Mutual Funds having a policy not to concentrate
their investments.
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RISKS: Although the Funds do not concentrate their investment in a
particular industry or group of industries, they may, for temporary defensive
purposes, do so. If this occurs, a Fund would, on a temporary basis, be subject
to risks that may be unique or pronounced relating to a particular industry or
group of industries. These risks could include greater sensitivity to
inflationary pressures or supply and demand for a particular product or service.
RECOMMENDATION: The Board of each Fund recommends that shareholders adopt
the following as a fundamental investment restriction:
The Fund may not:
Purchase any security if as a result 25% or more of the Fund's total
assets would be invested in the securities of issuers having their
principal business activities in the same industry, except for temporary
defensive purposes, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
PROPOSAL 4(f): MAKING LOANS
The current lending policy of the Funds varies. For example, GIF, MBF,
Prudential Short-Term Corporate Bond Fund of STBF, TRBF, and HYF are permitted
to lend securities. TRBF also allows for loans otherwise permitted by exemptive
order of the SEC. HYF is also permitted to make loans through the purchase of
debt obligations, as is NMF. HYF is also permitted to make loans through
purchase of bank debt (i.e., loan participations). CMF and MSF are not permitted
to make loans except through repurchase agreements, as discussed below.
Each Fund also may engage in repurchase agreement transactions, where the
Fund purchases securities from a broker or bank with an agreement by the seller
to repurchase the securities at an agreed upon price at an agreed upon time.
These transactions allow the Fund to invest its cash to generate income, usually
on a short-term basis, while maintaining liquidity to honor its redemption
obligations. Generating portfolio income through investment in repurchase
agreements is not an integral part of your Fund's investment program. A Fund
would engage in these transactions primarily to keep its cash fully invested,
but available to meet redemption requests.
The Funds have established a securities lending program where they use a
securities lending agent to locate institutions that, on a temporary basis, seek
to hold certain securities that are owned by a Fund. In these transactions, a
Fund transfers its ownership interest in a security with the right to receive
income from the borrower and the right to have the security returned to the Fund
on short notice, for example, to enable the Fund to vote the securities.
Securities lending allows a Fund to generate income on portfolio securities to
enhance the Fund's returns.
In recognition of the fact that the Funds do make loans of assets, the
revised investment policy is intended to eliminate the differing investment
restrictions applicable to the various Funds, and replace it with a uniform
policy applicable to all Funds that permits making loans to the extent permitted
by applicable laws and regulations. The new disclosure more clearly describes
the Funds' lending activities and plans to make loans of assets in the future.
The new policy would not prevent a Fund's purchase of debt securities, including
investments in government securities, corporate debt securities and certain bank
obligations. The new policy would not preclude Funds from lending money to the
other Prudential Mutual Funds, as explained in Proposal 4(b). The new investment
policy would also allow a Fund to engage in repurchase agreement transactions
and securities lending without these activities being deemed prohibited loans.
With respect to TRBF, the Fund has the capability to engage in some of these
transactions and will conform its lending policy to that of the other Funds.
RISKS: Where a Fund engages in securities lending, it assumes a risk that a
borrower fails to maintain the required amount of collateral. The Fund or its
lending agent would be required to pursue the borrower for any excess
replacement cost over the value of the collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral if the borrower of the securities
37
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fails financially. To mitigate these risks, each Fund's investment adviser makes
loans of portfolio securities only to firms determined to be creditworthy.
In repurchase agreement transactions, a seller of a security agrees to
repurchase that security from a Fund at a mutually agreed-upon time and price.
The repurchase 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 transaction. If a seller fails to repurchase securities as
required by its agreement with the Fund and the value of the collateral securing
the repurchase agreement declines, the Fund may lose money. To address this
risk, each Fund's investment adviser enters into repurchase agreements only with
firms determined to be creditworthy.
RECOMMENDATION: In order to provide uniformity among the Funds' policies
applicable to making loans, including allowing the Funds to implement their
securities lending program as described above, the Board of each Fund recommends
that shareholders adopt the following as a fundamental investment policy:
The Fund may make loans, including loans of assets of the Fund,
repurchase agreements, trade claims, loan participations or similar
investments, or as permitted by the 1940 Act Laws, Interpretations and
Exemptions. The acquisition of bonds, debentures, other debt securities
or instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates of
deposit, bankers' acceptances or instruments similar to any of the
foregoing is not considered the making of a loan, and is permitted if
consistent with the Fund's investment objective.
PROPOSAL 4(g): OTHER INVESTMENT RESTRICTIONS
Certain Funds have adopted additional fundamental investment restrictions
which were required to be designated as fundamental by state securities laws.
These state securities laws have since been repealed or are otherwise no longer
applicable to these Funds.
To provide maximum flexibility in managing the Funds and uniformity in the
restrictions applicable to these Funds, the Board of each such Fund proposes
that all investment restrictions and policies of each such Fund, apart from
(1) its investment objective, (2) those restrictions listed in Proposals
No. 4(a) through 4(f), and (3) each Fund's current fundamental restriction on
underwriting, be designated as non-fundamental or be eliminated. The specific
investment restrictions and policies affected by Proposal No. 4 are identified
in the table below. If shareholders of a Fund approve Proposal No. 4(g), all of
the Fund's investment restrictions and policies, except as noted above, will be
non-fundamental or eliminated as indicated in the table below. If shareholders
of a Fund reject Proposal No. 4(g), the Fund's additional current fundamental
investment restrictions will remain fundamental.
If designated non-fundamental, such investment restriction or policy could
be changed by the Board of Directors without shareholder approval, although
shareholders would be informed of any material change to any non-fundamental
restriction or policy prior to the implementation of the change. Apart from the
restrictions described in the paragraphs below, there is no current intention to
make any material changes in any of the investment restrictions of each such
Fund that will be designated non-fundamental. Some of these restrictions will be
restated without substantively changing the restriction. All of these changes
are indicated in the table below.
Currently, under the 1940 Act, a Fund may invest in securites of other
investment companies subject to certain limitations. The Funds have obtained an
exemptive order from the SEC that allows each Fund greater flexibility to invest
in securities of other investment companies -- up to 25% of each Fund's assets
in shares of affiliated mutual funds (cash management strategy). Such investment
would be made to facilitate your Fund's investment of its cash and short-term
investments. The ability to invest in an affiliated mutual fund should allow
each Fund to reduce the administrative burdens and costs associated with
investing in money market instruments and short-term debt securities. Each Fund
would be permitted to invest in an affiliated mutual fund only if the investment
is consistent with the Fund's investment objective and strategy. If shareholders
approve the designation of a Fund's investment in mutual funds as a
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non-fundamental investment restriction, we anticipate that such Fund's Board
will amend the investment restriction to implement the cash management strategy
permitted by the SEC relief. To the extent a Fund invests in securities of other
investment companies, other than affiliated mutual funds pursuant to the cash
management strategy described above, shareholders of the Fund may be subject to
duplicate management and advisory fees. This investment restriction with respect
to TRBF has already been amended to implement the cash management strategy and
may be further amended in the future for consistency with the other Funds.
Currently, GIF has a fundamental investment restriction that states that it
may only write and purchase put and call options related to U.S. Government
securities. If this proposal is adopted, this limitation will be eliminated and
the Fund will have the ability to invest in options unrelated to U.S. Government
securities, to the same extent as the other Funds. In addition, the Fund will be
able to invest in other types of instruments that are the economic equivalent of
options, also unrelated to U.S. Government securities, such as options on swaps
and credit default swaps, which are discussed below. If the Fund adopts such a
policy, the Fund may be subject to increased risks that are not present with
options on U.S. Government securities, which are considered among the most
creditworthy of fixed-income investments. For example, the Fund may be subject
to heightened risk of share price volatility and counterparty default.
High Income Series and Insured Series of MBF currently have a fundamental
investment restriction limiting their investments in puts, calls or combinations
of these types of investments to certain puts and options on futures contracts.
If this proposal is adopted, this limitation will become non-fundamental and the
Funds will also have the ability to invest in options on swaps and, with respect
to the High Income Series, credit default swaps and credit-linked securities.
These investment types are discussed in the paragraphs below.
An option on a swap is a contract that gives a counterparty the right (but
not the obligation) to enter into a new or modify an existing swap agreement, at
some designated future time on specified terms. Whether a fund is successful as
a buyer or seller of options on swaps (or credit default swaps), depends on the
subadviser's ability to predict correctly whether certain types of investments
are likely to produce greater returns than other investments and involves, among
other things, illiquidity risks and risk of counterparty default. A fund will
generally incur a greater degree of risk when it sells a swap option than when
it purchases a swap option. When a fund purchases a swap option, it risks losing
the amount of the premium it has paid should it decide to let the option expire
unexercised. When a fund sells a swap option, upon exercise of the option, the
fund will become obligated according to the terms of the underlying agreement.
In a credit default swap transaction, the buyer is obligated to pay the
seller a periodic stream of payments over the term of the contract provided that
no event of default on an underlying reference obligation has occurred. If an
event of default occurs, the seller must pay the buyer the full notional value
of the reference obligation (even if the reference obligation has little or no
value) in exchange for the reference obligation. If a fund is a buyer and no
event of default occurs, the fund will lose its investment and recover nothing.
Credit default swaps involve greater risks than if a fund had invested in the
reference obligation directly. If a fund purchases credit default swaps in order
to hedge against the risk of default of debt securities they hold, it would
involve, among other things, the risk that the swap may expire worthless and
would only generate income in the event of an actual default by the issuer of
the underlying obligation.
Credit-linked securities are securities that are collateralized by one or
more credit default swaps on corporate credits. A fund would have the right to
receive periodic interest payments from the issuer of the credit-linked security
at an agreed-upon interest rate, and a return of principal at the maturity date.
Credit-linked securities involve the risk that the issuer of the credit-linked
security may default or go bankrupt, the credit risk of the corporate credits
underlying the credit default swaps, limited liquidity or no liquidity, market
risk and prepayment risk.
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<Page>
PROPOSED AMENDMENTS TO FUNDAMENTAL
INVESTMENT RESTRICTIONS AND POLICIES
The following chart compares each Fund's fundamental investment restrictions
and policies as they currently exist to the proposed amended provisions.
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
A series may not: Purchase securities on
margin (but the series may obtain such
short-term credits as may be necessary for
the clearance of transactions. For the
purpose of this restriction, the deposit or
payment by the California Series or the
California Income Series of initial or
maintenance margin in connection with
futures contracts or related options
transactions is not considered the purchase
of a security on margin).
SHORT SALES OF SECURITIES This restriction will be eliminated.
A series may not: Make short sales of
securities or maintain a short position.
ISSUING SENIOR SECURITIES, BORROWING MONEY A series may not: Issue senior securities or
OR PLEDGING ASSETS borrow money or pledge its assets, except as
A series may not may not: Issue senior permitted by the Investment Company Act of
securities, borrow money or pledge its 1940, and the rules and regulations
assets, except that the series may borrow up promulgated thereunder, as each may be
to 33 1/3% of the value of its total assets amended from time to time, exemptive order,
(calculated when the loan is made) for SEC release, no-action letter or similar
temporary, extraordinary or emergency relief or interpretations (collectively, the
purposes or for the clearance of "1940 Act Laws, Interpretations and
transactions. The series may pledge up to Exemptions"). For purposes of this
33 1/3% of the value of its total assets to restriction, the purchase or sale of
secure such borrowings. A series will not securities on a when-issued or delayed
purchase portfolio securities if its delivery basis, reverse repurchase
borrowings exceed 5% of its assets. For agreements, dollar rolls, short sales,
purposes of this restriction, the preference derivative and hedging transactions such as
as to shares of a series in liquidation and interest rate swap transactions, and
as to dividends over all other series of the collateral arrangements with respect
Fund with respect to assets specifically thereto, and transactions similar to any of
allocated to that series, the purchase and the foregoing, and collateral arrangements
sale of futures contracts and related with respect thereto, and obligations of the
options, collateral arrangements with Trust to Trustees pursuant to deferred
respect to margin for futures contracts and compensation arrangements are not deemed to
the writing of related options by the be a pledge of assets or the issuance of a
California Series or the California Income senior security.
Series and obligations of the Fund to
Trustees pursuant to deferred compensation
arrangements, are not deemed to be a pledge
of assets or the issuance of a senior
security.
DIVERSIFICATION A series may not: Purchase the securities of
A series may not: Purchase any security if any issuer if, as a result, the series would
as a fail to be a
</Table>
40
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
result, with respect to 75% of its total diversified company within the meaning of
assets, more than 5% of its total assets the 1940 Act Laws, Interpretations and
would be invested in the securities of any Exemptions.
one issuer (provided that this restriction
shall not apply to obligations issued or
guaranteed as to principal and interest by
the U.S. government or its agencies or
instrumentalities).
BUYING OR SELLING REAL ESTATE OR INTERESTS A series may not: Buy or sell physical
IN REAL ESTATE; BUYING OR SELLING commodities or contracts involving physical
COMMODITIES OR COMMODITY CONTRACTS commodities. A series may purchase and sell
A series may not: Buy or sell commodities or (i) derivative, hedging and similar
commodity contracts, or real estate or instruments such as financial futures and
interests in real estate, although it may options thereon, and (ii) securities or
purchase and sell financial futures instruments backed by, or the return from
contracts and related options, securities which is linked to, physical commodities or
which are secured by real estate and currencies, such as forward currency
securities of companies which invest or deal exchange contracts, and a series may
in real estate. The California Money Market exercise rights relating to such
Series may not purchase and sell financial instruments, including the right to enforce
futures contracts and related options. security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
series' ownership of instruments supported
or secured thereby until they can be
liquidated in an orderly manner.
A series may not: Buy or sell real estate,
except that investment in securities of
issuers that invest in real estate and
investments in mortgage-backed securities,
mortgage participations or other instruments
supported or secured by interests in real
estate are not subject to this limitation,
and except that the series may exercise
rights relating to such securities,
including the right to enforce security
interests and to hold real estate acquired
by reason of such enforcement until that
real estate can be liquidated in an orderly
manner.
ACTING AS AN UNDERWRITER No change.
A series may not: 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.
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
A series may not: Invest in interests in
oil, gas or other mineral exploration or
development programs.
MAKING LOANS A series may make loans, including loans of
A series may not: Make loans, except through assets of the series, repurchase agreements,
repurchase agreements. trade claims, loan participations or similar
investments,
</Table>
41
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<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
or as permitted by the 1940 Act Laws,
Interpretations and Exemptions. The
acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the series investment
objective.
(CALIFORNIA INCOME SERIES) The California Income Series may not
The California Income Series may not purchase securities (other than municipal
purchase securities (other than municipal obligations and obligations guaranteed as to
obligations and obligations guaranteed as to principal and interest by the
principal and interest by the U.S. U.S. government or its agencies or
government or its agencies or instrumentalities) if, as a result of such
instrumentalities) if, as a result of such purchase, 25% or more of the total assets of
purchase, 25% or more of the total assets of the Series (taken at current market value)
the Series (taken at current market value) would be invested in any one industry or
would be invested in any one industry. group of industries, except for temporary
defensive purposes.
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
The Fund may not: Purchase securities on
margin (but the Fund may obtain such short-
term credits as may be necessary for the
clearance of transactions); the deposit or
payment by the Fund of initial or variation
margin in connection with interest rate
futures contracts or related options
transactions is not considered the purchase
of a security on margin.
SHORT SALES OF SECURITIES This restriction will be eliminated.
The Fund may not: Make short sales of
securities or maintain a short position,
except short sales "against the box."
ISSUING SENIOR SECURITIES, BORROWING MONEY The Fund may not: Issue senior securities or
OR PLEDGING ASSETS borrow money or pledge its assets, except as
The Fund may not: Issue senior securities, permitted by the Investment Company Act of
borrow money or pledge its assets, except 1940, and the rules and regulations
that the Fund may borrow up to 20% of the promulgated thereunder, as each may be
value of its total assets (calculated when amended from time to time, exemptive order,
the loan is made) for temporary, SEC release, no-action letter or similar
extraordinary or emergency purposes or for relief or interpretations (collectively, the
the clearance of transactions. The Fund may "1940 Act Laws, Interpretations and
pledge up to 20% of the value of its total Exemptions"). For purposes of this
assets to secure such borrowings. For restriction, the purchase or sale of
purposes of this restriction, the purchase securities on a when-issued or delayed
or sale of securities on a when-issued delivery basis, reverse repurchase
agreements, dollar rolls, short sales,
</Table>
42
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
or delayed delivery basis, collateral derivative and hedging transactions such as
arrangements with respect to interest rate interest rate swap transactions, and
swap transactions, reverse repurchase collateral arrangements with respect
agreements or dollar roll transactions or thereto, and transactions similar to any of
the writing of options on debt securities or the foregoing, and collateral arrangements
on interest rate futures contracts or other with respect thereto, and obligations of the
financial futures contracts are not deemed Fund to Directors pursuant to deferred
to be a pledge of assets and neither such compensation arrangements are not deemed to
arrangements, nor the purchase or sale of be a pledge of assets or the issuance of a
interest rate futures contracts or other senior security.
financial futures contracts or the purchase
or sale of related options, nor obligations
of the Fund to Directors pursuant to
deferred compensation arrangements are
deemed to be the issuance of a senior
security.
DIVERSIFICATION; CONCENTRATION The Fund may not: Purchase the securities of
The Fund may not: Purchase any security any issuer if, as a result, the Fund would
(other than obligations of the U.S. fail to be a diversified company within the
Government, its agencies or meaning of the 1940 Act Laws,
instrumentalities) if as a result: (i) with Interpretations and Exemptions.
respect to 75% of the Fund's total assets,
more than 5% of the Fund's total assets
(determined at the time of investment) would
then be invested in securities of a single
issuer or (ii) 25% or more of the Fund's
total assets (determined at the time of
investment) would be invested in a single
industry.
The Fund may not: Purchase any security if The Fund may not: Purchase any security if
as a result the Fund would then hold more as a result more than 25% of the Fund's
than 10% of the outstanding voting total assets would be invested in the
securities of an issuer. securities of issuers having their principal
business activities in the same industry or
group of industries, except for temporary
defensive purposes, and except that this
limitation does not apply to securities
issued or guaranteed by the U.S. government,
its agencies or instrumentalities.
BUYING OR SELLING COMMODITIES OR COMMODITY The Fund may not: Buy or sell physical
CONTRACTS; REAL ESTATE commodities or contracts involving physical
The Fund may not: Buy or sell commodities or commodities. The Fund may purchase and sell
commodity contracts or real estate or (i) derivative, hedging and similar
interests in real estate, except it may instruments such as financial futures and
purchase and sell securities which are options thereon, and (ii) securities or
secured by real estate, securities of instruments backed by, or the return from
companies which invest or deal in real which is linked to, physical commodities or
estate, interest rate futures contracts and currencies, such as forward currency
other financial futures contracts and exchange contracts, and the Fund may
options thereon. exercise rights relating to such
instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Fund's ownership of instruments
</Table>
43
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
supported or secured thereby until they can
be liquidated in an orderly manner.
The Fund may not: Buy or sell real estate,
except that investment in securities of
issuers that invest in real estate and
investments in mortgage-backed securities,
mortgage participations or other instruments
supported or secured by interests in real
estate are not subject to this limitation,
and except that the Fund may exercise rights
relating to such securities, including the
right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
ACTING AS AN UNDERWRITER No change.
The Fund may not: 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.
INVESTING TO EXERCISE CONTROL OR MANAGEMENT This restriction will not change, but will
The Fund may not: Make investments for the become non-fundamental.
purpose of exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT This restriction will become
COMPANIES non-fundamental, and is expected to be
The Fund may not: Invest in securities of changed by the Board.
other registered investment companies,
except by purchases in the open market
involving only customary brokerage
commissions and as a result of which not
more than 10% of its total assets
(determined at the time of investment) would
be invested in such securities, or except as
part of a merger, consolidation or other
acquisition.
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
The Fund may not: Invest in interests in
oil, gas or other mineral exploration or
development programs.
MAKING LOANS The Fund may make loans, including loans of
The Fund may not: Make loans, except through assets of the Fund, repurchase agreements,
(i) repurchase agreements and (ii) loans of trade claims, loan participations or similar
portfolio securities (limited to 30% of the investments, or as permitted by the 1940 Act
Fund's total assets). Laws, Interpretations and Exemptions. The
acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of
</Table>
44
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
deposit, bankers' acceptances or instruments
similar to any of the foregoing will not be
considered the making of a loan, and is
permitted if consistent with the Fund's
investment objective.
WARRANTS This restriction will not change, but will
The Fund may not: Purchase warrants if as a become non-fundamental.
result the Fund would then have more than 5%
of its total assets (determined at the time
of investment) invested in warrants.
PUT AND CALL OPTIONS This restriction will be eliminated.
The Fund may not: Write, purchase or sell
puts, calls or combinations thereof, or
purchase or sell futures contracts or
related options, except that the Fund may
write put and call options on U.S.
Government securities, purchase put and call
options on U.S. Government securities and
purchase or sell interest rate futures
contracts and other financial futures
contracts and related options.
PRUDENTIAL HIGH YIELD FUND, INC.
DIVERSIFICATION The Fund may not: Purchase the securities of
The Fund may not: Invest more than 5% of the any issuer if, as a result, the Fund would
market or other fair value of its total fail to be a diversified company within the
assets in the securities of any one issuer meaning of the Investment Company Act of
(other than obligations of, or guaranteed 1940, and the rules and regulations
by, the United States Government, its promulgated thereunder, as each may be
agencies or instrumentalities). amended from time to time, by exemptive
order, SEC release, no-action letter or
The Fund may not: Purchase more than 10% of similar relief or interpretations
the voting securities of any issuer. (collectively, the "1940 Act Laws,
Interpretations and Exemptions").
CONCENTRATION The Fund may not: Purchase any security if
The Fund may not: Invest more than 25% of as a result more than 25% of the Fund's
the market or other fair value of its total total assets would be invested in the
assets in the securities of issuers, all of securities of issuers having their principal
which conduct their principal business business activities in the same industry or
activities in the same industry. For group of industries, except for temporary
purposes of this restriction, gas, electric defensive purposes, and except that this
water and telephone utilities will each be limitation does not apply to securities
treated as being a separate industry. This issued or guaranteed by the U.S. government,
restriction does not apply to obligations its agencies or instrumentalities.
issued or guaranteed by the United States
Government or its agencies or
instrumentalities.
SHORT SALES OF SECURITIES The restriction will be eliminated.
The Fund may not: Make short sales of
securities.
</Table>
45
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
PURCHASING SECURITIES ON MARGIN The restriction will be eliminated.
The Fund may not: Purchase securities on
margin, except for such short-term credits
as are necessary for the clearance of
purchases and sales of portfolio securities
and the making of MARGIN payments in
connection with transactions in financial
futures contracts.
ISSUING SENIOR SECURITIES, BORROWING MONEY The Fund may not: Issue senior securities or
OR PLEDGING ASSETS borrow money or pledge its assets, except as
The Fund may not: Issue senior securities, permitted by the 1940 Act Laws,
borrow money or pledge its assets, except Interpretations and Exemptions. For purposes
that the Fund may borrow up to 20% of the of this restriction, the purchase or sale of
value of its total assets (calculated when securities on a when- issued or delayed
the loan is made) for temporary, delivery basis, reverse repurchase
extraordinary or emergency purposes or for agreements, dollar rolls, short sales,
the clearance of transactions. The Fund may derivative and hedging transactions such as
pledge up to 20% of the value of its total interest rate swap transactions, and
assets to secure such borrowings. Secured collateral arrangements with respect
borrowings may take the form of reverse thereto, and transactions similar to any of
repurchase agreements, pursuant to which the the foregoing, and collateral arrangements
Fund would sell portfolio securities for with respect thereto, and obligations of the
cash and simultaneously agree to repurchase Fund to Directors pursuant to deferred
them at a specified date for the same amount compensation arrangements are not deemed to
of cash plus an interest component. For be a pledge of assets or the issuance of a
purposes of this restriction, obligations of senior security.
the Fund to Directors pursuant to deferred
compensation arrangements and the purchase
and sale of securities on a when-issued or
delayed delivery basis and engaging in
financial futures contracts and related
options are not deemed to be the issuance of
a senior security or a pledge of assets.
ACTING AS AN UNDERWRITER No change.
The Fund may not: Engage in the underwriting
of securities except insofar as the Fund may
be deemed an underwriter under the
Securities Act in disposing of a portfolio
security.
BUYING OR SELLING REAL ESTATE LOANS The Fund may not: Buy or sell real estate,
The Fund may not: Purchase or sell real except that investment in securities of
estate or real estate mortgage loans, issuers that invest in real estate and
although it may purchase marketable investments in mortgage-backed securities,
securities of issuers which engage in real mortgage participations or other instruments
estate operations or securities which are supported or secured by interests in real
secured by interests in real estate. estate are not subject to this limitation,
and except that the Fund may exercise rights
relating to such securities, including the
right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
</Table>
46
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
BUYING OR SELLING COMMODITIES OR COMMODITY The Fund may not: Buy or sell physical
CONTRACTS commodities or contracts involving physical
The Fund may not: Purchase or sell commodities. The Fund may purchase and sell
commodities or commodity futures contracts, (i) derivative, hedging and similar
except financial futures contracts and instruments such as financial futures and
options thereon. options thereon, and (ii) securities or
instruments backed by, or the return from
which is linked to, physical commodities or
currencies, such as forward currency
exchange contracts, and the Fund may
exercise rights relating to such
instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Fund's ownership of instruments supported or
secured thereby until they can be liquidated
in an orderly manner.
MAKING LOANS The Fund may make loans, including loans of
The Fund may not: Make loans of money or assets of the Fund, repurchase agreements,
securities, except through the purchase of trade claims, loan participations or similar
debt obligations, bank debt (I.E., loan investments, or as permitted by the 1940 Act
participations), repurchase agreements and Laws, Interpretations and Exemptions. The
loans of securities. acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Fund's investment
objective.
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
The Fund may not: Purchase oil, gas or other
mineral leases, rights or royalty contracts
or exploration or development programs,
except that the Fund may invest in the
securities of companies which invest in or
sponsor such programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT This restriction will become
COMPANIES non-fundamental, and is expected to be
The Fund may not: Purchase securities of changed by the Board.
other investment companies, except in the
open market involving only customary
brokerage commissions and as a result of
which no more than 10% of its total assets
(determined at the time of investment) would
be invested in such securities, or except in
connection with a merger, consolidation,
reorganization or acquisition of assets.
</Table>
47
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
INVESTING TO EXERCISE CONTROL OR MANAGEMENT This restriction will not change, but will
The Fund may not: Invest for the purpose of become non-fundamental.
exercising control or management of another
company.
U.S. DENOMINATED ISSUES This restriction will not change, but will
The Fund may not: Invest more than 20% of become non-fundamental.
the market or other fair value of its total
assets in United States currency-denominated
issues of foreign governments and other
foreign issuers; or invest more than 10% of
the market or other fair value of its total
assets in securities which are payable in
currencies other than United States dollars.
The Fund will not engage in investment
activity in non-U.S. dollar-denominated
issues without first obtaining authorization
to do so from its Board of Directors. See
"Description of the Fund, Its Investments
and Risks -- Investment Strategies, Policies
and Risks -- Securities of Foreign Issuers."
PRUDENTIAL MUNICIPAL BOND FUND
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
Each Series may not: Purchase securities on
margin (but the Series may obtain such
short-term credits as may be necessary for
the clearance of transactions and for margin
payments in connection with transactions in
financial futures contracts and options
thereon).
SHORT SALES OF SECURITIES This restriction will be eliminated.
Each Series may not: Make short sales of
securities or maintain a short position.
ISSUING SENIOR SECURITIES, BORROWING MONEY Each Series may not: Issue senior securities
OR PLEDGING ASSETS or borrow money or pledge its assets, except
Each Series may not: Issue senior as permitted by the Investment Company Act
securities, borrow money or pledge its of 1940, and the rules and regulations
assets, except that each Series may borrow promulgated thereunder, as each may be
up to 33 1/3% of the value of its total amended from time to time, by exemptive
assets (calculated when the loan is made) order, SEC release, no- action letter or
for temporary, extraordinary or emergency similar relief or interpretations
purposes and to take advantage of investment (collectively, the "1940 Act Laws,
opportunities or for the clearance of Interpretations and Exemptions"). For
transactions. The Series may pledge up to purposes of this restriction, the purchase
33 1/3% of the value of its total assets to or sale of securities on a when-issued or
secure such borrowings. For purposes of this delayed delivery basis, reverse repurchase
restriction, the preference as to shares of agreements, dollar rolls, short sales,
a Series in liquidation and as to dividends derivative and hedging transactions such as
over all other Series of the Fund with interest rate swap transactions, and
respect to assets specifically allocated to collateral arrangements with respect
that Series, the purchase or sale of thereto, and transactions similar to any of
securities the foregoing, and
</Table>
48
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
on a when-issued or delayed delivery basis, collateral arrangements with respect
the purchase and sale of financial futures thereto, and obligations of the Fund to
contracts and collateral arrangements with Trustees pursuant to deferred compensation
respect thereto and obligations of the arrangements are not deemed to be a pledge
Series to Trustees, pursuant to deferred of assets or the issuance of a senior
compensation arrangements, are not deemed to security.
be the issuance of a senior security or a
pledge of assets.
DIVERSIFICATION Each Series may not: Purchase the securities
Each Series may not: Purchase any security of any issuer if, as a result, the Series
if as a result, with respect to 75% of the would fail to be a diversified company
total assets of the Series, more than 5% of within the meaning of the 1940 Act Laws,
the total assets of the Series would be Interpretations and Exemptions.
invested in the securities of any one issuer
(provided that this restriction shall not
apply to obligations issued or guaranteed as
to principal and interest by the U.S.
Government or its agencies or
instrumentalities).
CONCENTRATION Each Series may not: Purchase securities
Each Series may not: Purchase securities (other than municipal obligations and
(other than municipal obligations and obligations guaranteed as to principal and
obligations guaranteed as to principal and interest by the U.S. Government or its
interest by the U.S. Government or its agencies or instrumentalities) if, as a
agencies or instrumentalities) if, as a result of such purchase, 25% or more of the
result of such purchase, 25% or more of the total assets of the Series (taken at current
total assets of the Series (taken at current market value) would be invested in any one
market value) would be invested in any one industry or group of industries, except for
industry. (For purposes of this restriction, temporary defensive purposes. (For purposes
industrial development bonds, where the of this restriction, industrial development
payment of the principal and interest is the bonds, where the payment of the principal
ultimate responsibility of companies within and interest is the ultimate responsibility
the same industry, are grouped together as of companies within the same industry, are
an "industry.") grouped together as an "industry.")
BUYING OR SELLING COMMODITIES OR COMMODITY Each Series may not: Buy or sell physical
CONTRACTS commodities or contracts involving physical
Each Series may not: Buy or sell commodities commodities. Each Series may purchase and
or commodity contracts, except financial sell (i) derivative, hedging and similar
futures contracts and options thereon. instruments such as financial futures and
options thereon, and (ii) securities or
instruments backed by, or the return from
which is linked to, physical commodities or
currencies, such as forward currency
exchange contracts, and the Fund may
exercise rights relating to such
instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Series' ownership of instruments supported
or secured thereby until they can be
liquidated in an orderly manner.
</Table>
49
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
BUYING OR SELLING REAL ESTATE OR INTERESTS Each Series may not: Buy or sell real
IN REAL ESTATE estate, except that investment in securities
Each Series may not: Buy or sell real estate of issuers that invest in real estate and
or interests in real estate, although it may investments in mortgage-backed securities,
purchase and sell securities which are mortgage participations or other instruments
secured by real estate and securities of supported or secured by interests in real
companies which invest or deal in real estate are not subject to this limitation,
estate. and except that a Series may exercise rights
relating to such securities, including the
right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
ACTING AS AN UNDERWRITER No change.
Each Series may not: 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.
INVESTING IN SECURITIES OF OTHER INVESTMENT This restriction will become
COMPANIES non-fundamental, and is expected to be
Each Series may not: Purchase securities of changed by the Board.
other investment companies, except in the
open market involving only customary
brokerage commissions and as a result of
which no more than 10% of its total assets
(determined at the time of investment) would
be invested in such securities, or except in
connection with a merger, consolidation,
reorganization or acquisition of assets.
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
Each Series may not: Invest in interests in
oil, gas or other mineral exploration or
development programs.
MAKING LOANS Each Series may make loans, including loans
Each Series may not: Make loans, except of assets of the Fund, repurchase
through repurchase agreements and loans of agreements, trade claims, loan
portfolio securities (limited to 33% of the participations or similar investments, or as
Series' total assets). permitted by the 1940 Act Laws,
Interpretations and Exemptions. The
acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Series' investment
objective.
</Table>
50
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
PUT AND CALL OPTIONS This restriction will become non-fundamental
Each Series may not: Purchase or write puts, and changed as follows:
calls or combinations thereof, except as
described in the Prospectus and this Each Series may not: Purchase or write puts,
Statement of Additional Information with calls or combinations thereof, except as
respect to puts and options on futures described in the Prospectus and this
contracts. Statement of Additional Information with
respect to puts and options on future
contracts. Notwithstanding the foregoing,
each Series is authorized to invest in
options on swaps, and the High Income Series
is authorized to invest in credit default
swaps and credit-linked securities.
INVESTING TO EXERCISE CONTROL OR MANAGEMENT This restriction will not change, but will
Each Series may not: Invest for the purpose become non-fundamental.
of exercising control or management of
another company.
PRUDENTIAL MUNICIPAL SERIES FUND
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
The Fund may not: Purchase securities on
margin, but the Fund may obtain such short-
term credits as may be necessary for the
clearance of transactions. For the purpose
of this restriction, the deposit or payment
by the Fund (except with respect to the New
York Money Market Series and the New Jersey
Money Market Series) of initial or
maintenance margin in connection with
futures contracts or related options
transactions is not considered the purchase
of a security on margin.
SHORT SALES OF SECURITIES This restriction will be eliminated.
The Fund may not: Make short sales of
securities or maintain a short position.
</Table>
51
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
ISSUING SENIOR SECURITIES, BORROWING MONEY Each series may not: Issue senior securities
OR PLEDGING ASSETS or borrow money or pledge its assets, except
The Fund may not: Issue senior securities, as permitted by the Investment Company Act
borrow money or pledge its assets, except of 1940, and the rules and regulations
that the Fund may on behalf of a series promulgated thereunder, as each may be
borrow up to 33 1/3% of the value of its amended from time to time, by exemptive
total assets (calculated when the loan is order, SEC release, no- action letter or
made) for temporary, extraordinary or similar relief or interpretations
emergency purposes or for the clearance of (collectively, the "1940 Act Laws,
transactions. The Fund on behalf of a series Interpretations and Exemptions"). For
may pledge up to 33 1/3% of the value of its purposes of this restriction, the purchase
total assets to secure such borrowings. A or sale of securities on a when-issued or
series will not purchase portfolio delayed delivery basis, reverse repurchase
securities if its borrowings exceed 5% of agreements, dollar rolls, short sales,
the assets. For purposes of this derivative and hedging transactions such as
restriction, the preference as to shares of interest rate swap transactions, and
a series in liquidation and as to dividends collateral arrangements with respect
over all other series of the Fund with thereto, and transactions similar to any of
respect to assets specifically allocated to the foregoing, and collateral arrangements
that series, the purchase and sale of with respect thereto, and obligations of the
futures contracts and related options, series to Trustees pursuant to deferred
collateral arrangements with respect to compensation arrangements are not deemed to
margin for futures contracts, the writing of be a pledge of assets or the issuance of a
related options (except with respect to the senior security.
New York Money Market Series and the New
Jersey Money Market Series) and obligations
of the Fund to Trustees pursuant to deferred
compensation arrangements, are not deemed to
be a pledge of assets or the issuance of a
senior security.
PURCHASING SECURITIES OF A SINGLE ISSUER Each series may not: Purchase the securities
The Fund may not: Purchase any security if of any issuer if, as a result, a series
as a result, with respect to 75% of a would fail to be a diversified company
series' total assets (except with respect to within the meaning of the 1940 Act Laws,
the Florida Series and the New Jersey Money Interpretations and Exemptions. This
Market Series), more than 5% of the total restriction does not apply to the Florida
assets of any series would be invested in Series and the New Jersey Money Market
the securities of any one issuer (provided Series.
that this restriction shall not apply to
obligations issued or guaranteed as to
principal and interest either by the U.S.
government or its agencies or
instrumentalities).
BUYING OR SELLING COMMODITIES OR COMMODITIES Each series may not: Buy or sell physical
CONTRACTS; BUYING OR SELLING REAL ESTATE OR commodities or contracts involving physical
INTERESTS IN REAL ESTATE commodities. A series may purchase and sell
The Fund may not: Buy or sell commodities or (i) derivative, hedging and similar
commodity contracts, or real estate or instruments such as financial futures and
interests in real estate, although it may options thereon, and (ii) securities or
purchase and sell financial futures instruments backed by, or the return from
contracts and related options (except with which is linked to, physical commodities or
respect to the New York Money Market Series currencies, such as forward currency
and the New Jersey Money Market Series), exchange contracts, and a series may
securities which are secured by real estate exercise rights relating to such
and securities of companies which instruments, including the right to enforce
security interests
</Table>
52
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
invest or deal in real estate. and to hold physical commodities and
contracts involving physical commodities
acquired as a result of the series'
ownership of instruments supported or
secured thereby until they can be liquidated
in an orderly manner.
Each series may not: Buy or sell real
estate, except that investment in securities
of issuers that invest in real estate and
investments in mortgage-backed securities,
mortgage participations or other instruments
supported or secured by interests in real
estate are not subject to this limitation,
and except that a series may exercise rights
relating to such securities, including the
right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
ACTING AS AN UNDERWRITER No change.
The Fund may not: 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.
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
The Fund may not: Invest in interests in
oil, gas or other mineral exploration or
development programs.
MAKING LOANS Each series may make loans, including loans
The Fund may not: Make loans, except through of assets of the Fund, repurchase
repurchase agreements. agreements, trade claims, loan
participations or similar investments, or as
permitted by the 1940 Act Laws,
Interpretations and Exemptions. The
acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Fund's investment
objective.
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
PURCHASING SECURITIES OF A SINGLE ISSUER The Fund may not: Purchase the securities of
The Fund may not: With respect to 75% of its any issuer if, as a result, a series would
total assets, invest more than 5% of the fail to be a diversified company within the
market or other fair value of its total meaning of the Investment Company Act of
assets in the 1940, and the rules
</Table>
53
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
securities of any one issuer (other than and regulations promulgated thereunder, as
obligations of, or guaranteed by, the U.S. each may be amended from time to time, by
Government, its agencies or exemptive order, SEC release, no-action
instrumentalities). It is the current policy letter or similar relief or interpretations
(but not a fundamental policy) of the Fund (collectively, the "1940 Act Laws,
not to invest more than 5% of the market or Interpretations and Exemptions").
other fair value of its total assets in the
securities of any one issuer.
SHORT SALES OF SECURITIES This restriction will be eliminated.
The Fund may not: Make short sales of
securities.
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
The Fund may not: Purchase securities on
margin, except for such short-term credits
as are necessary for the clearance of
purchases and sales of portfolio securities
and margin payments in connection with
transactions in financial futures contracts.
ISSUING SENIOR SECURITIES, BORROWING MONEY The Fund may not: Issue senior securities or
OR PLEDGING ASSETS borrow money or pledge its assets, except as
The Fund may not: Issue senior securities, permitted by the 1940 Act Laws,
borrow money or pledge its assets, except Interpretations and Exemptions. For purposes
that the Fund may borrow up to 33 1/3% of of this restriction, the purchase or sale of
the value of its total assets (calculated securities on a when- issued or delayed
when the loan is made) for temporary, delivery basis, reverse repurchase
extraordinary or emergency purposes or for agreements, dollar rolls, short sales,
the clearance of transactions. The Fund may derivative and hedging transactions such as
pledge up to 33 1/3% of the value of its interest rate swap transactions, and
total assets to secure such borrowings. collateral arrangements with respect
Secured borrowings may take the form of thereto, and transactions similar to any of
reverse repurchase agreements, pursuant to the foregoing, and collateral arrangements
which the Fund would sell portfolio with respect thereto, and obligations of the
securities for cash and simultaneously agree Fund to Directors pursuant to deferred
to repurchase them at a specified date for compensation arrangements are not deemed to
the same amount of cash plus an interest be a pledge of assets or the issuance of a
component. The Fund would maintain, in a senior security.
segregated account with its Custodian,
liquid assets equal in value to the amount
owed. For purposes of this restriction,
obligations of the Fund to Directors
pursuant to deferred compensation
arrangements, the purchase and sale of
securities on a when-issued or delayed
delivery basis, the purchase and sale of
financial futures contracts and options and
collateral arrangements with respect to
margins for financial futures contracts and
with respect to options are not deemed to be
the issuance of a senior security or a
pledge of assets.
ACTING AS AN UNDERWRITER No change.
The Fund may not: Engage in the underwriting
of securities or purchase any securities as
to
</Table>
54
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
which registration under the Securities Act
of 1933 would be required for resale of such
securities to the public.
BUYING OR SELLING REAL ESTATE LOANS The Fund may not: Buy or sell real estate,
The Fund may not: Purchase or sell real except that investment in securities of
estate or real estate mortgage loans, issuers that invest in real estate and
although it may purchase Municipal Bonds or investments in mortgage-backed securities,
Notes secured by interests in real estate. mortgage participations or other instruments
supported or secured by interests in real
estate are not subject to this limitation,
and except that the Fund may exercise rights
relating to such securities, including the
right to enforce security interests and to
hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
MAKING LOANS The Fund may make loans, including loans of
The Fund may not: Make loans of money or assets of the Fund, repurchase agreements,
securities, except through the purchase of trade claims, loan participations or similar
debt obligations or repurchase agreements. investments, or as permitted by the 1940 Act
Laws, Interpretations and Exemptions. The
acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Fund's investment
objective.
INVESTING IN SECURITIES OF OTHER INVESTMENT This restriction will become
COMPANIES non-fundamental, and is expected to be
The Fund may not: Purchase securities of changed by the Board.
other investment companies, except in the
open market involving any customary
brokerage commissions and as a result of
which not more than 10% of its total assets
(determined at the time of investment) would
be invested in such securities or except in
connection with a merger, consolidation,
reorganization or acquisition of assets.
INVESTING TO EXERCISE CONTROL OR MANAGEMENT This restriction will not change, but will
The Fund may not: Invest for the purpose of become non-fundamental.
exercising control or management of another
company.
UNSEASONED ISSUERS: INDUSTRIAL REVENUE BONDS This restriction will not change, but will
The Fund may not: Purchase industrial become non-fundamental.
revenue bonds if, as a result of such
purchase, more than
</Table>
55
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
5% of total Fund assets would be invested in
industrial revenue bonds where payment of
principal and interest are the
responsibility of companies with less than
three years of operating history.
BUYING OR SELLING COMMODITIES OR COMMODITIES The Fund may not: Buy or sell physical
CONTRACTS commodities or contracts involving physical
The Fund may not: Purchase or sell commodities. The Fund may purchase and sell
commodities or commodities futures contracts (i) derivative, hedging and similar
except financial futures contracts and instruments such as financial futures and
options thereon. options thereon, and (ii) securities or
instruments backed by, or the return from
which is linked to, physical commodities or
currencies, such as forward currency
exchange contracts, and the Fund may
exercise rights relating to such
instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Fund's ownership of instruments supported or
secured thereby until they can be liquidated
in an orderly manner.
CONCENTRATION The Fund may not: Invest more than 25% of
The Fund may not: Invest more than 25% of the value of its total assets in securities
the value of its total assets in securities whose issuers are located in any one state,
whose issuers are located in any one state. except for temporary defensive purposes.
PRUDENTIAL SHORT-TERM BOND FUND, INC. --
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
The Fund may not: 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 variation margin in connection
with options or futures contracts is not
considered the purchase of a security on
margin.
SHORT SALES OF SECURITIES This restriction will be eliminated.
The Fund may not: Make short sales of
securities or maintain a short position,
except short sales "against the box."
ISSUING SENIOR SECURITIES, BORROWING MONEY The Fund may not: Issue senior securities or
OR PLEDGING ASSETS borrow money or pledge its assets, except as
The Fund may not: Issue senior securities, permitted by the Investment Company Act of
borrow money or pledge its assets, except 1940, and the rules and regulations
that the Fund may borrow up to 20% of the promulgated thereunder, as each may be
value of its total assets (calculated when amended from time to time, by exemptive
the loan is made) from banks for temporary, order, SEC release, no- action letter or
extraordinary similar relief or interpretations
</Table>
56
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
or emergency purposes or for the clearance (collectively, the "1940 Act Laws,
of transactions and may pledge up to 20% of Interpretations and Exemptions"). For
the value of its total assets to secure such purposes of this restriction, the purchase
borrowings. The purchase or sale of or sale of securities on a when-issued or
securities on a "when-issued" or delayed delayed delivery basis, reverse repurchase
delivery basis, and the purchase and sale of agreements, dollar rolls, short sales,
financial futures contracts and collateral derivative and hedging transactions such as
arrangements with respect thereto and with interest rate swap transactions, and
respect to interest rate swap transactions, collateral arrangements with respect
covered dollar rolls and reverse repurchase thereto, and transactions similar to any of
agreements, are not deemed to be a pledge of the foregoing, and collateral arrangements
assets and such arrangements are not deemed with respect thereto, and obligations of the
to be the issuance of a senior security. The Fund to Directors pursuant to deferred
Fund will not purchase portfolio securities compensation arrangements are not deemed to
if its borrowings exceed 5% of its net be a pledge of assets or the issuance of a
assets. senior security.
PURCHASING SECURITIES OF A SINGLE ISSUER; The Fund may not: Purchase any security if
CONCENTRATION as a result more than 25% of the Fund's
The Fund may not: Purchase any security total assets would be invested in the
(other than obligations of the U.S. securities of issuers having their principal
Government, its agencies and business activities in the same industry or
instrumentalities, including municipal group of industries, except for temporary
obligations and obligations guaranteed as to defensive purposes, and except that this
principal and interest) if as a result: limitation does not apply to securities
(i) with respect to 75% of its net assets, issued or guaranteed by the U.S. government,
more than 5% of the Fund's total assets its agencies or instrumentalities.
(determined at the time of investment) would
then be invested in securities of a single The Fund may not: Purchase the securities of
issuer or (ii) 25% or more of the Fund's any issuer if, as a result, the Fund would
total assets (determined at the time of fail to be a diversified company within the
investment) would be invested in one or more meaning of the 1940 Act Laws,
issuers having their principal business Interpretations and Exemptions.
activities in the same industry.
UNSEASONED ISSUERS This restriction will not change, but it
The Fund may not: Purchase securities, other will become non-fundamental.
than obligations of the U.S. Government, its
agencies or instrumentalities, of any issuer
having a record, together with predecessors,
of less than three years of continuous
operations if, immediately after such
purchase, more than 5% of such Fund's total
assets would be invested in such securities.
BUYING OR SELLING REAL ESTATE OR INTERESTS The Fund may not: Buy or sell real estate,
IN REAL ESTATE except that investment in securities of
The Fund may not: Buy or sell real estate or issuers that invest in real estate and
interests in real estate, except that the investments in mortgage-backed securities,
Fund may purchase and sell mortgage-backed mortgage participations or other instruments
securities, securities collateralized by supported or secured by interests in real
mortgages, securities which are secured by estate are not subject to this limitation,
real estate, securities of companies which and except that the Fund may exercise rights
invest or deal in real estate and publicly relating to such securities, including the
traded securities of real estate right to enforce security interests
</Table>
57
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
investment trusts. The Fund may not purchase and to hold real estate acquired by reason
interests in real estate limited of such enforcement until that real estate
partnerships which are not readily can be liquidated in an orderly manner.
marketable.
ACTING AS AN UNDERWRITER No change.
The Fund may not: 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.
INVESTING TO EXERCISE CONTROL OR MANAGEMENT This restriction will not change, but it
The Fund may not: Make investments for the will become non-fundamental.
purpose of exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT This restriction will become
COMPANIES non-fundamental, and is expected to be
The Fund may not: Invest in securities of changed by the Board.
other registered investment companies,
except by purchases in the open market
involving only customary brokerage
commissions and as a result of which not
more than 10% of its total assets
(determined at the time of investment) would
be invested in such securities, or except as
part of a merger, consolidation or other
acquisition.
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
The Fund may not: Invest in interests in
oil, gas or other mineral exploration or
development programs, except that the Fund
may invest in the securities of companies
which invest in or sponsor such programs.
MAKING LOANS The Fund may make loans, including loans of
The Fund may not: Make loans, except through assets of the Fund, repurchase agreements,
(i) repurchase agreements and (ii) loans of trade claims, loan participations or similar
portfolio securities (limited to 30% of the investments, or as permitted by the 1940 Act
value of the Fund's total assets). Laws, Interpretations and Exemptions. The
acquisition of bonds, debentures, other debt
securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Fund's investment
objective.
PURCHASE OF EQUITY SECURITIES This restriction will not change, but will
The Fund may not: Purchase common stock or become non-fundamental.
other voting securities, preferred stock,
warrants or other equity securities, except
as may be permitted by restriction number 9
[relating to
</Table>
58
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
investing in securities of other investment
companies].
BUYING OR SELLING COMMODITIES OR COMMODITY The Fund may not: Buy or sell physical
CONTRACTS commodities or contracts involving physical
The Fund may not: Buy or sell commodities or commodities. The Fund may purchase and sell
commodity contracts, except that the Fund (i) derivative, hedging and similar
may purchase and sell financial futures instruments such as financial futures and
contracts and options thereon. options thereon, and (ii) securities or
instruments backed by, or the return from
which is linked to, physical commodities or
currencies, such as forward currency
exchange contracts, and the Fund may
exercise rights relating to such
instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Fund's ownership of instruments supported or
secured thereby until they can be liquidated
in an orderly manner.
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
PURCHASING SECURITIES ON MARGIN This restriction will be eliminated.
The Fund may not: 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.
SHORT SALES OF SECURITIES This restriction will be eliminated.
The Fund may not: 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.
ISSUING SENIOR SECURITIES, BORROWING MONEY The Fund may not: Issue senior securities or
OR PLEDGING ASSETS borrow money or pledge its assets, except as
The Fund may not: Issue senior securities, permitted by the Investment Company Act of
borrow money or pledge its assets, except 1940, and the rules and regulations
that the Fund may borrow up to 33 1/3% of promulgated thereunder, as each may be
the value of its total assets (calculated amended from time to time, by exemptive
when the loan is made) for temporary, order, SEC release, no- action letter or
extraordinary or emergency purposes, for the similar relief or interpretations
clearance of transactions or for investment (collectively, the "1940 Act Laws,
purposes. The Interpretations and Exemptions"). For
purposes of this
</Table>
59
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
Fund may pledge up to 33 1/3% of the value restriction, the purchase or sale of
of its total assets to secure such securities on a when-issued or delayed
borrowings. For purposes of this delivery basis, reverse repurchase
restriction, the purchase or sale of agreements, dollar rolls, short sales,
securities on a when-issued or delayed derivative and hedging transactions such as
delivery basis, forward foreign currency interest rate swap transactions, and
exchange contracts and collateral collateral arrangements with respect
arrangements relating thereto, and thereto, and transactions similar to any of
collateral arrangements with respect to the foregoing, and collateral arrangements
interest rate swap transactions, reverse with respect thereto, and obligations of the
repurchase agreements, dollar roll Fund to Directors pursuant to deferred
transactions, options, futures contracts and compensation arrangements are not deemed to
options thereon and obligations of the Fund be a pledge of assets or the issuance of a
to Directors pursuant to deferred senior security.
compensation arrangements are not deemed to
be a pledge of assets or the issuance of a
senior security.
DIVERSIFICATION; CONCENTRATION The Fund may not: Purchase any security if
The Fund may not: Purchase any security as a result more than 25% of the Fund's
(other than obligations of the U.S. total assets would be invested in the
Government, its agencies or securities of issuers having their principal
instrumentalities) if as a result: (i) with business activities in the same industry or
respect to 75% of the Fund's total assets, group of industries, except for temporary
more than 5% of the Fund's total assets defensive purposes, and except that this
(determined at the time of investment) would limitation does not apply to securities
then be invested in securities of a single issued or guaranteed by the U.S. government,
issuer or (ii) 25% or more of the Fund's its agencies or instrumentalities.
total assets (determined at the time of the
investment) would be invested in a single
industry.
DIVERSIFICATION The Fund may not: Purchase the securities of
The Fund may not: Purchase more than 10% of any issuer if, as a result, the Fund would
all outstanding voting securities of any one fail to be a diversified company within the
issuer. meaning of the 1940 Act Laws,
Interpretations and Exemptions.
REAL ESTATE The Fund may not: Buy or sell real estate,
The Fund may not: Buy or sell real estate or except that investment in securities of
interests in real estate, except that the issuers that invest in real estate and
Fund may purchase and sell securities which investments in mortgage-backed securities,
are secured by real estate, securities of mortgage participations or other instruments
companies which invest or deal in real supported or secured by interests in real
estate and publicly traded securities of estate are not subject to this limitation,
real estate investment trusts. The Fund may and except that the Fund may exercise rights
not purchase interests in real estate relating to such securities, including the
limited partnerships which are not readily right to enforce security interests and to
marketable. hold real estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
BUYING OR SELLING COMMODITIES OR COMMODITIES The Fund may not: Buy or sell physical
CONTRACTS commodities or contracts involving physical
The Fund may not: Buy or sell commodities or commodities. The Fund may purchase and sell
commodity contracts, except that the Fund (i) derivative, hedging and similar
may purchase and sell financial futures instruments such as financial futures and
contracts and options thereon. (For purposes options thereon, and (ii) securities or
of this instruments backed by, or
</Table>
60
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
restriction, futures contracts on the return from which is linked to, physical
securities, currencies and on securities or commodities or currencies, such as forward
financial indices and forward foreign currency exchange contracts, and the Fund
currency exchange contracts are not deemed may exercise rights relating to such
to be commodities or commodity contracts.) instruments, including the right to enforce
security interests and to hold physical
commodities and contracts involving physical
commodities acquired as a result of the
Fund's ownership of instruments supported or
secured thereby until they can be liquidated
in an orderly manner.
ACTING AS AN UNDERWRITER No change.
The Fund may not: Act as underwriter, except
to the extent that, in connection with the
disposition of portfolio securities, it may
be deemed to be an underwriter under certain
federal securities laws. The Fund has not
adopted a fundamental investment policy with
respect to investments in restricted
securities.
INVESTING TO EXERCISE CONTROL OR MANAGEMENT This restriction will not change, but it
The Fund may not: Make investments for the will become non-fundamental.
purpose of exercising control or management.
INVESTING IN THE SECURITIES OF OTHER This restriction will become
INVESTMENT COMPANIES non-fundamental, and is expected to be
The Fund may not: Invest in securities of changed by the Board.
other investment companies, except as
permitted under the Investment Company Act
of 1940 and the rules thereunder, as amended
from time to time, or by any exemptive
relief granted by the Securities and
Exchange Commission. (Currently, under the
Investment Company Act of 1940, the Fund may
invest in securities of other investment
companies subject to the following
limitations: the Fund may hold not more than
3% of the outstanding voting securities of
any one investment company, may not have
invested more than 5% of its total assets in
any one investment company and may not have
invested more than 10% of its total assets
in securities of one or more investment
companies.)
INTERESTS IN OIL, GAS AND SIMILAR PROGRAMS This restriction will be eliminated.
The Fund may not: Invest in interests in
oil, gas or other mineral exploration or
development programs, except that the Fund
may invest in the securities of companies
which invest in or sponsor such programs.
MAKING LOANS The Fund may make loans, including loans of
The Fund may not: Make loans, except through assets of the Fund, repurchase agreements,
trade
</Table>
61
<Page>
<Table>
<Caption>
CURRENT RESTRICTIONS PROPOSED RESTRICTIONS
- -------------------- --------------------------------------------
(i) repurchase agreements, (ii) loans of claims, loan participations or similar
portfolio securities limited to 30% of the investments, or as permitted by the 1940 Act
Fund's total assets and (iii) as otherwise Laws, Interpretations and Exemptions. The
permitted by exemptive order of the acquisition of bonds, debentures, other debt
Securities and Exchange Commission. securities or instruments, or participations
or other interests therein and investments
in government obligations, commercial paper,
certificates of deposit, bankers'
acceptances or instruments similar to any of
the foregoing will not be considered the
making of a loan, and is permitted if
consistent with the Fund's investment
objective.
</Table>
REQUIRED VOTE
For each Fund, approval of these Proposals requires the affirmative vote of
a majority of that Fund's outstanding voting securities, as defined in the 1940
Act.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSALS NO. 4(a), 4(b), 4(c), 4(d), 4(e), 4(f) AND 4(g), AS
APPLICABLE.
TO APPROVE AMENDMENTS TO THE ARTICLES OF INCORPORATION
OR DECLARATION OF TRUST FOR EACH COMPANY
PROPOSAL NO. 5
THIS PROPOSAL APPLIES TO EACH COMPANY AS DESCRIBED BELOW.
BACKGROUND
The Board of each Company has approved, submitted for shareholder approval,
and recommends that shareholders approve, amendments (collectively, the "Charter
Amendments") to each Company's governing documents, which are either a
declaration of trust or articles of incorporation, as applicable (either, a
"Charter"). Each of the Companies is organized and operates under a state
Charter (either Maryland or Massachusetts). The chart below identifies the
applicable state Charter for each Company.
<Table>
<Caption>
NAME OF COMPANY JURISDICTION
- --------------- ------------
CMF Massachusetts
GIF Maryland
HYF Maryland
MBF Massachusetts
MSF Massachusetts
NMF Maryland
STBF Maryland
TRBF Maryland
</Table>
The Charter Amendments are intended to reflect changes to state laws that
have occurred over the years, to eliminate unnecessary or unduly burdensome
provisions that do not optimally protect the interests of shareholders, to
eliminate potential uncertainty regarding the application of certain state laws
and to achieve consistent Charter provisions for the Companies in each
jurisdiction and, where possible, across jurisdictions. The Board of each
Company believes that approval of the Charter Amendments is in
62
<Page>
the best interests of the Company and its shareholders, and recommends that
shareholders approve the Charter Amendments for their respective Companies.
There are certain material differences between the proposed Charter
Amendments for each Company and each Company's current Charter. In some cases,
the proposed Charter Amendments would allow the Board, acting alone, to take
certain actions that are now subject to shareholder vote. These differences are
summarized in the tables appearing at the end of this Proposal. The text of the
proposed Charter Amendments is also included at the end of this Proposal.
Set forth below is a detailed analysis of the proposed Charter Amendments:
1. Charter Amendments. Each Charter would be amended to give the Board of
Directors or Trustees the right to amend the Charter without shareholder action
to the fullest extent permitted by law.
THIS AMENDMENT IS INTENDED TO GIVE EACH COMPANY MAXIMUM FLEXIBILITY TO
PERMIT AMENDMENT OF ITS CHARTER BY THE BOARD TO ADDRESS ANY FUTURE
CIRCUMSTANCES WITHOUT THE NECESSITY OF THE TIME AND EXPENSE OF OBTAINING
A SHAREHOLDER VOTE UNLESS SUCH VOTE IS REQUIRED BY THE 1940 ACT OR OTHER
LAW.
In addition, each Maryland Company Charter would be amended to specifically
reserve the Company's right to alter the "contract rights" of outstanding
shares, in order to clarify that the Company is exempt from certain Maryland
appraisal rights statutes.
UNDER MARYLAND LAW, A SHAREHOLDER MAY BE ENTITLED TO REQUIRE A
CORPORATION TO PAY "FAIR VALUE" FOR HIS/HER SHARES IF A CHARTER AMENDMENT
SUBSTANTIALLY ADVERSELY AFFECTS HIS/HER RIGHTS AS A SHAREHOLDER. WE DO
NOT BELIEVE ANY OF THE MARYLAND COMPANIES ARE CURRENTLY SUBJECT TO SUCH
STATUTES, BECAUSE MARYLAND LAW GENERALLY DENIES APPRAISAL RIGHTS TO
SHAREHOLDERS OF PUBLIC COMPANIES AND OF OPEN-END INVESTMENT COMPANIES.
HOWEVER, THE BOARD OF DIRECTORS OF EACH MARYLAND COMPANY HAS DETERMINED
THAT IT IS IN THE BEST INTEREST OF THE COMPANY TO REDUCE, TO THE EXTENT
POSSIBLE, ANY UNCERTAINTY REGARDING THE POTENTIAL APPLICATION OF THE
APPRAISAL STATUTES TO THE MARYLAND COMPANIES.
Finally, each Maryland Company Charter would be amended to clarify that the
Board of Directors, without shareholder action, can increase or decrease the
aggregate number of shares that the Company has authority to issue.
ALTHOUGH WE BELIEVE THAT THE MARYLAND COMPANIES HAVE THIS POWER UNDER
MARYLAND LAW, THE BOARD OF DIRECTORS OF EACH MARYLAND COMPANY BELIEVES IT
IS IN THE BEST INTEREST OF THE COMPANY TO ELIMINATE ANY POTENTIAL
UNCERTAINTY REGARDING THIS AUTHORITY.
2. Redemption Provisions. Each Massachusetts Company Charter would be
amended, if necessary, to give the Board of Trustees the authority to redeem
shares for any reason under terms set by the Board of Trustees, including the
failure by a shareholder to provide required information or maintain a minimum
required investment. Any such required redemption would be effected at the
redemption price, and in accordance with the redemption procedures, for
voluntary redemptions. The Maryland Company Charters already provide for
redemption rights; these Charters would be amended to allow the redemption
consideration to be set at net asset value less any redemption fee or other
charge as may be fixed by resolution of the Board.
THIS AMENDMENT IS INTENDED TO ALLOW EACH COMPANY TO BE OPERATED MORE
EFFICIENTLY BY PERMITTING REDEMPTION AT THE DISCRETION OF THE BOARD, AND
ALLOCATING REDEMPTION COSTS ONLY TO THE AFFECTED SHARES.
In addition, each Maryland Company Charter would be amended to clarify that a
redemption by such Company, even if it is of all of the outstanding shares of a
fund or class, will not constitute a "liquidation" under Maryland law that would
require a shareholder vote.
ALTHOUGH WE BELIEVE THAT THE MARYLAND COMPANIES HAVE AUTHORITY UNDER
MARYLAND LAW TO REDEEM ALL SHARES IN A CLASS OR FUND WITHOUT A
SHAREHOLDER VOTE, THE BOARD OF DIRECTORS OF EACH MARYLAND
63
<Page>
COMPANY BELIEVES IT IS IN THE BEST INTEREST OF THE COMPANY TO ELIMINATE
ANY POTENTIAL UNCERTAINTY REGARDING THIS AUTHORITY.
3. Quorum; Action by Shareholders. Each Charter (other than STBF, which
already includes this provision) would be amended to provide that a quorum would
be one-third of the outstanding shares of a Company entitled to be cast at a
meeting. In addition, the amendment would clearly provide that one-third of all
votes entitled to be cast on a specific matter would be sufficient to constitute
a quorum for that matter, even if only some of the outstanding classes or funds
are entitled to vote on that matter. In addition, each Massachusetts Company
Charter would be amended to require a plurality vote in the election of Trustees
and would be amended to require that other matters can be approved by a majority
of votes cast at a meeting at which a quorum is present, subject in all cases to
any higher vote requirements under the 1940 Act or applicable state law.
THIS AMENDMENT IS INTENDED TO INCREASE THE LIKELIHOOD THAT A QUORUM WILL
BE PRESENT AT ALL SHAREHOLDER MEETINGS TO AVOID THE TIME AND EXPENSE OF
CONTINUED SOLICITATION.
4. Number of Trustees. Each Massachusetts Company Charter would be amended
to provide that the number of Trustees would be as determined pursuant to a
written instrument or the By-laws, which generally allow the Trustees to
establish the number, without setting any maximum.
THIS AMENDMENT IS INTENDED TO GIVE EACH MASSACHUSETTS COMPANY MAXIMUM
FLEXIBILITY WITH RESPECT TO THE NUMBER OF TRUSTEES.
5. Board Authority to Classify and Reclassify Stock. Each Massachusetts
Company Charter would specifically authorize the Board of Trustees to classify
and reclassify its stock.
THIS AMENDMENT IS INTENDED TO GIVE EACH MASSACHUSETTS COMPANY MAXIMUM
FLEXIBILITY WITH RESPECT TO THE CLASSIFICATION AND ISSUANCE OF SHARES.
6. Adjournments. The Charter of each Massachusetts Company would be
amended to clarify that a meeting of shareholders may be adjourned by
shareholders holding a majority of the outstanding shares present and entitled
to vote on a proposal to adjourn whether or not a quorum is present.
THIS AMENDMENT IS INTENDED TO CLARIFY THE PROCEDURE AND REQUISITE VOTE
FOR ADJOURNING SHAREHOLDER MEETINGS AND TO AVOID HAVING TO RE-NOTICE THE
MEETING WITH ITS ATTENDANT TIME AND EXPENSE TO THE COMPANY.
7. Derivative Actions. Each Massachusetts Company Charter would be amended
to set forth the requirements for the bringing of a derivative action on behalf
of the Company by a shareholder. Such requirements would include the making of
pre-suit demand upon the Trustees by shareholders who collectively hold at least
10% of the outstanding shares and the consideration of any shareholders'
pre-suit demand by Independent Trustees.
THIS AMENDMENT IS INTENDED TO ALLOW EACH MASSACHUSETTS COMPANY TO LIMIT
LITIGATION ON BEHALF OF THE COMPANY TO THOSE SITUATIONS WHERE IT IS
SUPPORTED BY SHAREHOLDERS WITH A MATERIAL STAKE IN THE COMPANY AND TO
ADDRESS THE NEED FOR THE EVALUATION OF THE MERITS OF A POTENTIAL LAWSUIT
BY INDEPENDENT TRUSTEES.
8. Master/Feeder Transactions; Reorganization. Each Charter would be
amended to permit the Directors or Trustees to invest the property of the
Company or any fund thereof in cash or securities of other investment companies.
Each Massachusetts Company Charter would be amended to permit the Trustees to
merge, consolidate or sell substantially all of the assets of the Company (or a
fund) without a shareholder vote.
THIS AMENDMENT IS INTENDED TO GIVE EACH COMPANY MAXIMUM FLEXIBILITY
REGARDING IMPLEMENTING A MASTER/FEEDER STRUCTURE, AND TO ALLOW THE BOARD
OF TRUSTEES TO REORGANIZE EACH MASSACHUSETTS COMPANY.
64
<Page>
9. Shareholder Voting. The Charters for each Massachusetts Company would
be amended to permit dollar based voting by the shareholders. The provision
would provide that with respect to each matter submitted to a shareholder vote,
the Trustees could determine whether the shareholder vote would be done on a per
share basis or net asset value basis. For STBF, a Maryland Company, its Charter
would be amended to require dollar based voting by the shareholders. The general
effect of the dollar-based voting is that it allocates shareholder voting power
in proportion to the value of each shareholder's investment, rather than the
number of shares held. For example, if a shareholder owns 10 shares of a fund
for a total investment of $100, under dollar-based voting, the shareholder would
have 100 votes on a proposal and under share-based voting, the shareholder would
have 10 votes on the same proposal. The Directors or Trustees believe that this
will generally result in a more fair allocation of voting power by increasing
the voting power of investors holding shares with higher net asset values so as
to match the level of their investment. In addition, each Massachusetts Company
Charter would be amended to limit the requirement of a shareholder vote to the
election and removal of Trustees and to additional matters as to which
shareholder approval is required under the 1940 Act.
THIS AMENDMENT IS INTENDED TO GIVE EACH MASSACHUSETTS COMPANY MAXIMUM
FLEXIBILITY REGARDING THE APPLICABILITY OF SHAREHOLDER VOTING, TO MORE
FAIRLY ALLOCATE VOTING POWER FOR STBF, AND TO REDUCE THE NEED TO CALL
SHAREHOLDERS' MEETINGS AND THE ATTENDANT EXPENSE TO THE COMPANIES.
10. Termination of Company, Fund or Class. Each Massachusetts Company
Charter would be amended to provide that the Directors or Trustees would have
the authority to dissolve the Company or any fund or class and distribute any
net assets without shareholder approval. Each Massachusetts Company Charter
would also be amended to reduce the required shareholder vote for a termination
of the Company or any Fund when that termination is recommended by the Trustees
from a vote of two-thirds of the shares to a majority of the shares.
THIS AMENDMENT IS INTENDED TO ALLOW THE TRUSTEES TO LIQUIDATE THE COMPANY
OR ANY FUND AND TO DISTRIBUTE ANY NET ASSETS TO SHAREHOLDERS WITHOUT
FIRST OBTAINING A SHAREHOLDER VOTE.
11. Election of Trustees. Each Massachusetts Company Charter would be
amended to provide that the calling of a shareholders' meeting for the election
of Trustees when less than a majority of Trustees holding office had been
elected by the shareholders would only be required to the extent that the
calling of such a meeting was required under the 1940 Act.
THIS AMENDMENT IS INTENDED TO REDUCE THE NEED TO CALL SHAREHOLDERS'
MEETINGS FOR THE ELECTION OF TRUSTEES AND THE ATTENDANT EXPENSE TO THE
COMPANIES.
12. Indemnification and Limited Liability. The Maryland Company Charters
would be amended to provide for uniform indemnification, including by advance of
expenses, of each Company's current and former directors and officers to the
full extent required or permitted by law, and for other employees and agents to
the extent authorized by the Board of Directors or the Company's By-Laws and as
permitted by law. The Charter for each of NMF, STBF, and TRBF would also be
amended to provide that, to the extent permitted by law, directors and officers
will not be liable to the Company or its shareholders for monetary damages for
breach of fiduciary duty, in order to conform those Charters to provisions of
Maryland law and of the other Maryland Company Charters. Pursuant to Maryland
law, this provision specifically does not protect a director or officer from
liability for (a) receipt of an improper benefit or profit or (b) active and
deliberate dishonesty.
THIS AMENDMENT IS INTENDED TO ENSURE THAT THE MARYLAND COMPANY CHARTERS
ARE CONSISTENT WITH EACH OTHER AND RELEVANT MARYLAND LAW. IN ADDITION, WE
BELIEVE THESE PROVISIONS WILL ENABLE THE MARYLAND COMPANIES TO ATTRACT
AND RETAIN THE MOST HIGHLY QUALIFIED PERSONNEL.
65
<Page>
MARYLAND SUMMARY AND TEXT OF CHARTER AMENDMENTS
<Table>
<Caption>
COMPANY CHARTER QUORUM LIMITATION ON
AMENDMENTS LIABILITY
GIF Existing Requirement: Existing Requirement: Existing Provision:
Most Charter amendments The presence, in person or The Charter provides that,
require the approval of a by proxy, of a majority of to the extent permitted by
majority of the shares of all votes entitled to be law, a director or officer
common stock outstanding cast at the meeting. of the Company shall not
and entitled to vote. It be liable to the Company
appears that minor PROPOSED AMENDMENT: or its shareholders for
amendments may be approved THE PRESENCE, IN PERSON OR monetary damages for
without shareholder BY PROXY, OF ONE-THIRD OF breach of fiduciary duty.
action. ALL VOTES ENTITLED TO BE
CAST AT THE MEETING OR ON PROPOSED AMENDMENT:
PROPOSED AMENDMENT: A MATTER, WOULD CONSTITUTE NO CHANGE PROPOSED.
THE CHARTER AMENDMENT A QUORUM FOR SUCH MEETING
WOULD CLARIFY THAT THE OR MATTER. (SEE
COMPANY CAN EFFECT CERTAIN (2) BELOW).
CHARTER AMENDMENTS, SUCH
AS NAME CHANGES, WITHOUT
SHAREHOLDER APPROVAL. THE
CHARTER WOULD ALSO INCLUDE
SPECIFIC LANGUAGE
RESERVING THE RIGHT OF THE
COMPANY TO CHANGE THE
"CONTRACT RIGHTS" OF
OUTSTANDING SHARES. IN
ADDITION, THE CHARTER
WOULD CLARIFY THAT THE
BOARD OF DIRECTORS,
WITHOUT SHAREHOLDER
ACTION, CAN INCREASE OR
DECREASE THE AGGREGATE
NUMBER OF SHARES THAT THE
COMPANY HAS AUTHORITY TO
ISSUE. (SEE (1) BELOW).
<Caption>
COMPANY INDEMNIFICATION MASTER/FEEDER SHAREHOLDER VOTING REDEMPTION
TRANSACTIONS FEES AND VOTE
GIF Existing Provision: Existing Provision: Existing Requirement: Existing Provision:
The Company's By-Laws None. One vote for each share None.
provide that the Company held.
shall indemnify present PROPOSED AMENDMENT: PROPOSED AMENDMENT:
and former directors, THE COMPANY WOULD HAVE PROPOSED AMENDMENT: THE COMPANY WOULD HAVE
officers, employees and EXPLICIT AUTHORITY TO NO CHANGE PROPOSED. EXPLICIT AUTHORITY TO
agents against judgments, INVEST ASSETS IN CASH OR SUBTRACT REDEMPTION FEES
fines, settlements and IN INTERESTS ISSUED BY AND OTHER CHARGES, AS
expenses to the extent OTHER INVESTMENT DETERMINED BY THE BOARD OF
permitted by law, COMPANIES. (SEE DIRECTORS, FROM THE AMOUNT
including by advance of (6) BELOW). PAYABLE TO SHAREHOLDERS IN
expenses. The Charter does CONNECTION WITH A
not include any REDEMPTION BY SHAREHOLDERS
corresponding provisions. OR BY THE COMPANY. THE
CHARTER WOULD ALSO CLARIFY
PROPOSED AMENDMENT: THAT THE COMPANY CAN
THE CHARTER WOULD INCLUDE REDEEM ALL OUTSTANDING
A PROVISION (SEE SHARES IN A FUND OR CLASS
(5) BELOW) PROVIDING THAT WITHOUT A SHAREHOLDER
THE COMPANY SHALL VOTE. (SEE (7) BELOW).
INDEMNIFY (A) CURRENT AND
FORMER DIRECTORS AND
OFFICERS, TO THE EXTENT
PERMITTED BY LAW,
INCLUDING BY ADVANCE OF
EXPENSES; AND (B) OTHER
EMPLOYEES AND AGENTS TO
THE EXTENT APPROVED BY THE
BOARD OF DIRECTORS AND
PERMITTED BY LAW. AFTER
ADOPTION OF THIS
PROVISION, NO SUBSEQUENT
AMENDMENT OR REPEAL COULD
LIMIT THE INDEMNIFICATION
PROTECTION WITH RESPECT TO
ACTS OR OMISSIONS
OCCURRING PRIOR TO SUCH
AMENDMENT OR REPEAL.
</Table>
66
<Page>
<Table>
<Caption>
COMPANY CHARTER QUORUM LIMITATION ON
AMENDMENTS LIABILITY
HYF Existing Requirement: Existing Requirement: Existing Provision:
Most Charter amendments The presence, in person or The Charter provides that,
require the approval of a by proxy, of a majority of to the extent permitted by
majority of the shares of all votes entitled to be law, a director or officer
common stock outstanding cast at the meeting. of the Company shall not
and entitled to vote. It be liable to the Company
appears that minor PROPOSED AMENDMENT: or its shareholders for
amendments may be approved THE PRESENCE, IN PERSON OR monetary damages for
without shareholder BY PROXY, OF ONE-THIRD OF breach of fiduciary duty.
action. ALL VOTES ENTITLED TO BE
CAST AT THE MEETING OR ON PROPOSED AMENDMENT:
PROPOSED AMENDMENT: A MATTER, WOULD CONSTITUTE NO CHANGE PROPOSED.
THE CHARTER AMENDMENT A QUORUM FOR SUCH MEETING
WOULD CLARIFY THAT THE OR MATTER. (SEE
COMPANY CAN EFFECT CERTAIN (2) BELOW).
CHARTER AMENDMENTS, SUCH
AS NAME CHANGES, WITHOUT
SHAREHOLDER APPROVAL. THE
CHARTER WOULD ALSO INCLUDE
SPECIFIC LANGUAGE
RESERVING THE RIGHT OF THE
COMPANY TO CHANGE THE
"CONTRACT RIGHTS" OF
OUTSTANDING SHARES. IN
ADDITION, THE CHARTER
WOULD CLARIFY THAT THE
BOARD OF DIRECTORS,
WITHOUT SHAREHOLDER
ACTION, CAN INCREASE OR
DECREASE THE AGGREGATE
NUMBER OF SHARES THAT THE
COMPANY HAS AUTHORITY TO
ISSUE. (SEE (1) BELOW).
<Caption>
COMPANY INDEMNIFICATION MASTER/FEEDER SHAREHOLDER VOTING REDEMPTION
TRANSACTIONS FEES AND VOTE
HYF Existing Provision: Existing Provision: Existing Requirement: Existing Provision:
The Company's By-Laws None. One vote for each share None.
provide that the Company held.
shall indemnify present PROPOSED AMENDMENT: PROPOSED AMENDMENT:
and former directors, THE COMPANY WOULD HAVE PROPOSED AMENDMENT: THE COMPANY WOULD HAVE
officers, employees and EXPLICIT AUTHORITY TO NO CHANGE PROPOSED. EXPLICIT AUTHORITY TO
agents against judgments, INVEST ASSETS IN CASH OR SUBTRACT REDEMPTION FEES
fines, settlements and IN INTERESTS ISSUED BY AND OTHER CHARGES, AS
expenses to the extent OTHER INVESTMENT DETERMINED BY THE BOARD OF
permitted by law, COMPANIES. (SEE DIRECTORS, FROM THE AMOUNT
including by advance of (6) BELOW). PAYABLE TO SHAREHOLDERS IN
expenses. The Charter does CONNECTION WITH A
not include any REDEMPTION BY SHAREHOLDERS
corresponding provisions. OR BY THE COMPANY. THE
CHARTER WOULD ALSO CLARIFY
PROPOSED AMENDMENT: THAT THE COMPANY CAN
THE CHARTER WOULD INCLUDE REDEEM ALL OUTSTANDING
A PROVISION (SEE SHARES IN A FUND OR CLASS
(5) BELOW) PROVIDING THAT WITHOUT A SHAREHOLDER
THE COMPANY SHALL VOTE. (SEE (7) BELOW).
INDEMNIFY (A) CURRENT AND
FORMER DIRECTORS AND
OFFICERS, TO THE EXTENT
PERMITTED BY LAW,
INCLUDING BY ADVANCE OF
EXPENSES; AND (B) OTHER
EMPLOYEES AND AGENTS TO
THE EXTENT APPROVED BY THE
BOARD OF DIRECTORS AND
PERMITTED BY LAW. AFTER
ADOPTION OF THIS
PROVISION, NO SUBSEQUENT
AMENDMENT OR REPEAL COULD
LIMIT THE INDEMNIFICATION
PROTECTION WITH RESPECT TO
ACTS OR OMISSIONS
OCCURRING PRIOR TO SUCH
AMENDMENT OR REPEAL.
</Table>
67
<Page>
<Table>
<Caption>
COMPANY CHARTER QUORUM LIMITATION ON
AMENDMENTS LIABILITY
NMF Existing Requirement: Existing Requirement: Existing Provision:
Most Charter amendments The presence, in person or None.
require the approval of a by proxy, of a majority of
majority of the shares of all votes entitled to be PROPOSED AMENDMENT:
common stock outstanding cast at the meeting. THE CHARTER WOULD PROVIDE
and entitled to vote. It THAT, TO THE EXTENT
appears that minor PROPOSED AMENDMENT: PERMITTED BY LAW, A
amendments may be approved THE PRESENCE, IN PERSON OR DIRECTOR OR OFFICER OF THE
without shareholder BY PROXY, OF ONE-THIRD OF COMPANY WOULD NOT BE
action. ALL VOTES ENTITLED TO BE LIABLE TO THE COMPANY OR
CAST AT THE MEETING OR ON ITS SHAREHOLDERS FOR
PROPOSED AMENDMENT: A MATTER, WOULD CONSTITUTE MONETARY DAMAGES FOR
THE CHARTER AMENDMENT A QUORUM FOR SUCH MEETING BREACH OF FIDUCIARY DUTY.
WOULD CLARIFY THAT THE OR MATTER. (SEE NO SUBSEQUENT MODIFICATION
COMPANY CAN EFFECT CERTAIN (2) BELOW). OR REPEAL OF THIS
CHARTER AMENDMENTS, SUCH PROVISION COULD REVOKE
AS NAME CHANGES, WITHOUT THIS PROTECTION FOR EVENTS
SHAREHOLDER APPROVAL. THE BETWEEN ADOPTION OF THE
CHARTER WOULD ALSO INCLUDE PROVISION AND SUCH
SPECIFIC LANGUAGE MODIFICATION OR REPEAL.
RESERVING THE RIGHT OF THE (SEE (4) BELOW).
COMPANY TO CHANGE THE
"CONTRACT RIGHTS" OF
OUTSTANDING SHARES. IN
ADDITION, THE CHARTER
WOULD CLARIFY THAT THE
BOARD OF DIRECTORS,
WITHOUT SHAREHOLDER
ACTION, CAN INCREASE OR
DECREASE THE AGGREGATE
NUMBER OF SHARES THAT THE
COMPANY HAS AUTHORITY TO
ISSUE. (SEE (1) BELOW).
<Caption>
COMPANY INDEMNIFICATION MASTER/FEEDER SHAREHOLDER VOTING REDEMPTION
TRANSACTIONS FEES AND VOTE
NMF Existing Provision: Existing Provision: Existing Requirement: Existing Provision:
The Company's By-Laws None. One vote for each share None.
provide that the Company held.
shall indemnify present PROPOSED AMENDMENT: PROPOSED AMENDMENT:
and former directors, THE COMPANY WOULD HAVE PROPOSED AMENDMENT: THE COMPANY WOULD HAVE
officers, employees and EXPLICIT AUTHORITY TO NO CHANGE PROPOSED. EXPLICIT AUTHORITY TO
agents against judgments, INVEST ASSETS IN CASH OR SUBTRACT REDEMPTION FEES
fines, settlements and IN INTERESTS ISSUED BY AND OTHER CHARGES, AS
expenses to the extent OTHER INVESTMENT DETERMINED BY THE BOARD OF
permitted by law, COMPANIES. (SEE DIRECTORS, FROM THE AMOUNT
including by advance of (6) BELOW). PAYABLE TO SHAREHOLDERS IN
expenses. The Charter does CONNECTION WITH A
not include any REDEMPTION BY SHAREHOLDERS
corresponding provisions. OR BY THE COMPANY. THE
CHARTER WOULD ALSO CLARIFY
PROPOSED AMENDMENT: THAT THE COMPANY CAN
THE CHARTER WOULD INCLUDE REDEEM ALL OUTSTANDING
A PROVISION (SEE SHARES IN A FUND OR CLASS
(5) BELOW) PROVIDING THAT WITHOUT A SHAREHOLDER
THE COMPANY SHALL VOTE. (SEE (7) BELOW).
INDEMNIFY (A) CURRENT AND
FORMER DIRECTORS AND
OFFICERS, TO THE EXTENT
PERMITTED BY LAW,
INCLUDING BY ADVANCE OF
EXPENSES; AND (B) OTHER
EMPLOYEES AND AGENTS TO
THE EXTENT APPROVED BY THE
BOARD OF DIRECTORS AND
PERMITTED BY LAW. AFTER
ADOPTION OF THIS
PROVISION, NO SUBSEQUENT
AMENDMENT OR REPEAL COULD
LIMIT THE INDEMNIFICATION
PROTECTION WITH RESPECT TO
ACTS OR OMISSIONS
OCCURRING PRIOR TO SUCH
AMENDMENT OR REPEAL.
</Table>
68
<Page>
<Table>
<Caption>
COMPANY CHARTER QUORUM LIMITATION ON
AMENDMENTS LIABILITY
STBF Existing Requirement: Existing Requirement: Existing Provision:
The Charter reserves the The presence, in person or None.
Company's right to adopt by proxy, of one- third of
Charter amendments to the all votes entitled to be PROPOSED AMENDMENT:
extent permitted by law. cast at a meeting, or on a THE CHARTER WOULD PROVIDE
For minor matters such as matter on which fewer than THAT, TO THE EXTENT
name changes and changes all shares are entitled to PERMITTED BY LAW, A
in the par value of vote together, constitutes DIRECTOR OR OFFICER OF THE
shares, the Company can a quorum for such meeting COMPANY WOULD NOT BE
amend the Charter without or matter. LIABLE TO THE COMPANY OR
shareholder approval. ITS SHAREHOLDERS FOR
PROPOSED AMENDMENT: MONETARY DAMAGES FOR
PROPOSED AMENDMENT: NO CHANGE PROPOSED. BREACH OF FIDUCIARY DUTY.
THE EXISTING CHARTER NO SUBSEQUENT MODIFICATION
PROVISION WOULD BE REVISED OR REPEAL OF THIS
TO MATCH THE LANGUAGE IN PROVISION COULD REVOKE
THE OTHER MARYLAND COMPANY THIS PROTECTION FOR EVENTS
CHARTERS (SEE (1) BELOW) BETWEEN ADOPTION OF THE
AND TO SPECIFICALLY PROVISION AND SUCH
INDICATE THAT THE COMPANY MODIFICATION OR REPEAL.
RESERVES THE RIGHT TO (SEE (4) BELOW).
CHANGE THE "CONTRACT
RIGHTS" OF OUTSTANDING
SHARES. IN ADDITION, THE
CHARTER WOULD CLARIFY THAT
THE BOARD OF DIRECTORS,
WITHOUT SHAREHOLDER
ACTION, CAN INCREASE OR
DECREASE THE AGGREGATE
NUMBER OF SHARES THAT THE
COMPANY HAS AUTHORITY TO
ISSUE.
<Caption>
COMPANY INDEMNIFICATION MASTER/FEEDER SHAREHOLDER VOTING REDEMPTION
TRANSACTIONS FEES AND VOTE
STBF Existing Provision: Existing Provision: Existing Requirement: Existing Provision:
The Charter provides that None. One vote for each share None.
the Company shall held.
indemnify present and PROPOSED AMENDMENT: PROPOSED AMENDMENT:
former directors and THE COMPANY WOULD HAVE PROPOSED AMENDMENT: THE COMPANY WOULD HAVE
officers to the extent EXPLICIT AUTHORITY TO ONE VOTE FOR EACH DOLLAR EXPLICIT AUTHORITY TO
permitted by law, INVEST ASSETS IN CASH OR OF NET ASSET VALUE SUBTRACT REDEMPTION FEES
including by advance of IN INTERESTS ISSUED BY REPRESENTED BY SHARES AND OTHER CHARGES, AS
expenses. The Company's OTHER INVESTMENT HELD. (SEE (3) BELOW). DETERMINED BY THE BOARD OF
By-Laws provide that the COMPANIES. (SEE DIRECTORS, FROM THE AMOUNT
Company shall indemnify (6) BELOW). PAYABLE TO SHAREHOLDERS IN
present and former CONNECTION WITH A
directors, officers, REDEMPTION BY SHAREHOLDERS
employees and agents OR BY THE COMPANY. THE
against judgments, fines, CHARTER WOULD ALSO CLARIFY
settlements and expenses THAT THE COMPANY CAN
to the extent permitted by REDEEM ALL OUTSTANDING
law, including by advance SHARES IN A FUND OR CLASS
of expenses. WITHOUT A SHAREHOLDER
VOTE. (SEE (7) BELOW).
PROPOSED AMENDMENT:
THE EXISTING CHARTER
PROVISION WOULD BE REVISED
TO MATCH THE LANGUAGE IN
THE OTHER MARYLAND COMPANY
CHARTERS (SEE (5) BELOW)
AND TO INCLUDE AUTHORITY
FOR THE COMPANY TO
INDEMNIFY EMPLOYEES AND
AGENTS OTHER THAN
DIRECTORS AND OFFICERS TO
THE EXTENT APPROVED BY THE
BOARD OF DIRECTORS AND
PERMITTED BY LAW.
INDEMNIFICATION OF PERSONS
OTHER THAN OFFICERS AND
DIRECTORS CURRENTLY
APPEARS ONLY IN THE
COMPANY'S BY-LAWS.
</Table>
69
<Page>
<Table>
<Caption>
COMPANY CHARTER QUORUM LIMITATION ON
AMENDMENTS LIABILITY
TRBF Existing Requirement: Existing Requirement: Existing Provision:
The Charter reserves the The presence, in person or The Company's By-Laws
Company's right to adopt by proxy, of a majority of provide that, to the
Charter amendments to the all votes entitled to be extent permitted by law,
extent permitted by law. cast at the meeting. directors, officers,
For minor matters such as employees and agents of
name changes and changes PROPOSED AMENDMENT: the Company shall not be
in the par value of THE PRESENCE, IN PERSON OR liable to the Company, any
shares, the Company can BY PROXY, OF ONE-THIRD OF shareholder, officer,
amend the Charter without ALL VOTES ENTITLED TO BE director or employee of
shareholder approval. CAST AT THE MEETING OR ON the Company, or any other
A MATTER, WOULD CONSTITUTE person, for any action or
PROPOSED AMENDMENT: A QUORUM FOR SUCH MEETING failure to act. The
THE EXISTING CHARTER OR MATTER. (SEE Charter does not include
PROVISION WOULD BE REVISED (2) BELOW). any similar limitation on
TO MATCH THE LANGUAGE IN liability.
THE OTHER MARYLAND COMPANY
CHARTERS (SEE (1) BELOW) PROPOSED AMENDMENT:
AND TO SPECIFICALLY THE CHARTER WOULD PROVIDE
INDICATE THAT THE COMPANY THAT, TO THE EXTENT
RESERVES THE RIGHT TO PERMITTED BY LAW, A
CHANGE THE "CONTRACT DIRECTOR OR OFFICER OF THE
RIGHTS" OF OUTSTANDING COMPANY WOULD NOT BE
SHARES. IN ADDITION, THE LIABLE TO THE COMPANY OR
CHARTER WOULD CLARIFY THAT ITS SHAREHOLDERS FOR
THE BOARD OF DIRECTORS, MONETARY DAMAGES FOR
WITHOUT SHAREHOLDER BREACH OF FIDUCIARY DUTY.
ACTION, CAN INCREASE OR TO BE EFFECTIVE IN
DECREASE THE AGGREGATE MARYLAND, THIS PROVISION
NUMBER OF SHARES THAT THE MUST APPEAR IN THE
COMPANY HAS AUTHORITY TO CHARTER. NO SUBSEQUENT
ISSUE. MODIFICATION OR REPEAL OF
THIS PROVISION COULD
REVOKE THIS PROTECTION FOR
EVENTS BETWEEN ADOPTION OF
THE PROVISION AND SUCH
MODIFICATION OR REPEAL.
(SEE (4) BELOW).
<Caption>
COMPANY INDEMNIFICATION MASTER/FEEDER SHAREHOLDER VOTING REDEMPTION
TRANSACTIONS FEES AND VOTE
TRBF Existing Provision: Existing Provision: Existing Requirement: Existing Provision:
The Charter provides that None. One vote for each share None.
the Company shall held.
indemnify present and PROPOSED AMENDMENT: PROPOSED AMENDMENT:
former directors and THE COMPANY WOULD HAVE PROPOSED AMENDMENT: THE COMPANY WOULD HAVE
officers to the extent EXPLICIT AUTHORITY TO NO CHANGE PROPOSED. EXPLICIT AUTHORITY TO
permitted by law, INVEST ASSETS IN CASH OR SUBTRACT REDEMPTION FEES
including by advance of IN INTERESTS ISSUED BY AND OTHER CHARGES, AS
expenses. The Company's OTHER INVESTMENT DETERMINED BY THE BOARD OF
By-Laws provide that the COMPANIES. (SEE DIRECTORS, FROM THE AMOUNT
Company shall indemnify (6) BELOW). PAYABLE TO SHAREHOLDERS IN
present and former CONNECTION WITH A
directors, officers, REDEMPTION BY SHAREHOLDERS
employees and agents OR BY THE COMPANY. THE
against judgments, fines, CHARTER WOULD ALSO CLARIFY
settlements and expenses THAT THE COMPANY CAN
to the extent permitted by REDEEM ALL OUTSTANDING
law, including by advance SHARES IN A FUND OR CLASS
of expenses. WITHOUT A SHAREHOLDER
VOTE. (SEE (7) BELOW).
PROPOSED AMENDMENT:
THE EXISTING CHARTER
PROVISION WOULD BE REVISED
TO MATCH THE LANGUAGE IN
THE OTHER MARYLAND COMPANY
CHARTERS (SEE (5) BELOW)
AND TO INCLUDE AUTHORITY
FOR THE COMPANY TO
INDEMNIFY EMPLOYEES AND
AGENTS OTHER THAN
DIRECTORS AND OFFICERS TO
THE EXTENT APPROVED BY THE
BOARD OF DIRECTORS AND
PERMITTED BY LAW.
INDEMNIFICATION OF PERSONS
OTHER THAN OFFICERS AND
DIRECTORS CURRENTLY
APPEARS ONLY IN THE
COMPANY'S BY-LAWS.
</Table>
The text of the proposed Charter Amendments summarized in the preceding
table is set forth below:
(1) The Corporation reserves the right from time to time to make any
amendments to the charter of the Corporation which may now or hereafter be
authorized by law, including any amendment altering the terms or contract
rights, as expressly set forth in the charter of the Corporation, of any
shares of its outstanding stock by classification, reclassification, or
otherwise. In clarification and not limitation of the foregoing, a majority
of the entire Board of Directors, without action by the stockholders, may
amend the charter of the Corporation to increase or decrease the aggregate
number of shares of stock or the number of shares of stock of any class or
series that the Corporation has authority to issue. (All Maryland Companies)
70
<Page>
(2) At a meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast one-third of all the votes entitled to be cast
at the meeting constitutes a quorum. At a meeting of stockholders the
presence in person or by proxy of stockholders entitled to cast one-third of
all the votes entitled to be cast on any matter shall constitute a quorum
for action on that matter (including matters on which fewer than all classes
or series are entitled to vote). (All Maryland Companies except STBF)
(3) Unless otherwise expressly provided in the charter of the
Corporation, on each matter submitted to a vote of the stockholders, each
holder of shares shall be entitled to one vote for each dollar of net asset
value represented by each share standing in his name on the books of the
Corporation, irrespective of the series or class thereof, and the exclusive
voting power for all purposes shall be vested in the holders of Common
Stock. (STBF)
(4) A director or officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent such exemption from
liability or limitation thereof is not permitted by law (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended. No amendment, modification or repeal of this
Article shall adversely affect any right or protection of a director or
officer that exists at the time of such amendment, modification or repeal.
(NMF, STBF and TRBF)
(5) The Corporation shall indemnify (A) its current and former directors
and officers, whether serving or having served the Corporation or at its
request any other entity, to the full extent required or permitted by the
General Laws of the State of Maryland now or hereafter in force (as limited
by the Investment Company Act of 1940), including the advance of expenses
under the procedures and to the full extent permitted by law and (B) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the Corporation's By-Laws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of the charter of the Corporation or repeal
of any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. (All Maryland Companies)
(6) The Board of Directors is explicitly authorized to, without action
by stockholders (unless such approval is required by the Investment Company
Act of 1940), invest all or a portion of the assets of any series or class,
or dispose of all or a portion of the assets of any series or class and
invest the proceeds of such disposition, in cash or in interests issued by
one or more other investment companies registered under the Investment
Company Act of 1940. The Board of Directors is explicitly authorized to,
without action by stockholders, cause a series or class that is organized in
the master/feeder fund structure to withdraw or redeem its assets from the
master fund and cause such series or class to invest its assets directly in
cash or in securities and other financial instruments or in another master
fund. (All Maryland Companies).
71
<Page>
(7) The appropriate sections of all Maryland Company Charters shall be
modified as necessary to reflect the following provisions:
All redemptions, whether by a stockholder or by the Corporation,
shall be at a redemption price equal to the current net asset value per
share as determined by the Board of Directors from time to time in
accordance with the provisions of the charter and applicable law, less
such redemption fee or other charge, if any, as may be fixed by
resolution of the Board of Directors. A redemption by the Corporation in
accordance with the charter of the Corporation, even if it is for all the
shares of a series or class, shall not be considered a liquidation
requiring a vote of stockholders. (All Maryland Companies)
MASSACHUSETTS SUMMARY AND TEXT OF CHARTER AMENDMENTS
<Table>
<Caption>
SHAREHOLDERS MEETINGS IF LESS THAN A MAJORITY
NUMBER OF TRUSTEES OF TRUSTEES ELECTED BY SHAREHOLDERS
-------------------------------------------- ----------------------------------------------
COMPANY EXISTING REQUIREMENT PROPOSED AMENDMENT EXISTING REQUIREMENT PROPOSED AMENDMENT
- ------- --------------------- --------------------- ---------------------- ----------------------
CMF Number fixed by Number would be fixed No applicable In the event less than
Trustees, not less by Trustees, no upper provision. a majority of Trustees
than 3 or more than or lower limit on have been elected by
15. number. the shareholders, to
the extent required by
the 1940 Act, but only
to such extent, the
Trustees then in
office would be
required to call a
shareholders' meeting
for the election of
Trustees.
MSF Number fixed by Number would be fixed No applicable In the event less than
Trustees, not less by Trustees, no upper provision. a majority of Trustees
than 3 or more than or lower limit on have been elected by
15. number. the shareholders, to
the extent required by
the 1940 Act, but only
to such extent, the
Trustees then in
office would be
required to call a
shareholders' meeting
for the election of
Trustees.
MBF Number fixed by Number would be fixed No applicable In the event less than
Trustees, not less by Trustees, no upper provision. a majority of Trustees
than 3 or more than or lower limit on have been elected by
15. number. the shareholders, to
the extent required by
the 1940 Act, but only
to such extent, the
Trustees then in
office would be
required to call a
shareholders' meeting
for the election of
Trustees.
</Table>
72
<Page>
<Table>
<Caption>
SHARE CLASSIFICATION
DOLLAR VOTING OR RECLASSIFICATION QUORUM, ADJOURNMENT, PLURALITY
------------------------------- ---------------------------------- ----------------------------------
EFFECT OF
EXISTING PROPOSED EXISTING PROPOSED EXISTING PROPOSED
COMPANY REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT
- ------- ------------ ---------------- ---------------- ---------------- ---------------- ----------------
CMF No Trustees, Trustees may, in Trustees would By-Laws provide Holders of one-
applicable without the vote their have power, in that holders of third of the
provision. of the discretion, their a majority of shares entitled
shareholders, divide the discretion, to outstanding to vote on a
would determine shares of any classify or shares of the matter would be
on any vote put fund into reclassify any Company or fund a quorum. Shares
to the classes. unissued shares of the Company that abstain or
shareholders of a fund or present in for which the
whether voting class, or any person or by broker or
will be per shares of any proxy and nominee cannot
share voting or fund or class entitled to vote vote on all
dollar voting previously constitutes a matters would
(net asset value issued and quorum. count for the
times number of thereafter purpose of
shares owned). reacquired by determining a
the Company, quorum.
into one or more
funds or classes
that may be
established and
designated from
time to time.
MSF No Trustees, Trustees may, in Trustees would By-Laws provide Holders of one-
applicable without the vote their have power, in that holders of third of the
provision. of the discretion, their a majority of shares entitled
shareholders, divide the discretion, to outstanding to vote on a
would determine shares of any classify or shares of the matter would be
on any vote put fund into reclassify any Company or fund a quorum. Shares
to the classes. unissued shares of the Company that abstain or
shareholders of a fund or present in for which the
whether voting class, or any person or by broker or
will be per shares of any proxy and nominee cannot
share voting or fund or class entitled to vote vote on all
dollar voting previously constitutes a matters would
(net asset value issued and quorum. count for the
times number of thereafter purpose of
shares owned). reacquired by determining a
the Company, quorum.
into one or more
fund or classes
that may be
established and
designated from
time to time.
</Table>
73
<Page>
<Table>
<Caption>
SHARE CLASSIFICATION
DOLLAR VOTING OR RECLASSIFICATION QUORUM, ADJOURNMENT, PLURALITY
------------------------------- ---------------------------------- ----------------------------------
EFFECT OF
EXISTING PROPOSED EXISTING PROPOSED EXISTING PROPOSED
COMPANY REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT
- ------- ------------ ---------------- ---------------- ---------------- ---------------- ----------------
MBF No Trustees, Trustees may, in Trustees would By-Laws provide Holders of one-
applicable without the vote their have power, in that holders of third of the
provision. of the discretion, their a majority of shares entitled
shareholders, divide the discretion, to outstanding to vote on a
would determine shares of any classify or shares of the matter would be
on any vote put fund into reclassify any Company or fund a quorum. Shares
to the classes. unissued shares of the Company that abstain or
shareholders of a fund or present in for which the
whether voting class, or any person or by broker or
will be per Shares of any proxy and nominee cannot
share voting or fund or class entitled to vote vote on all
dollar voting previously constitutes a matters would
(net asset value issued and quorum. count for the
times number of thereafter purpose of
shares owned). reacquired by determining a
the Company, quorum.
into one or more
fund or classes
that may be
established and
designated from
time to time.
</Table>
74
<Page>
<Table>
<Caption>
SHAREHOLDER DERIVATIVE ACTIONS MANDATORY REDEMPTION
---------------------------------------------- ----------------------------------------------
COMPANY EXISTING REQUIREMENT PROPOSED AMENDMENT EXISTING REQUIREMENT PROPOSED AMENDMENT
- ------- ---------------------- ---------------------- ---------------------- ----------------------
CMF No applicable In order to bring Only for excessively Any time (a) if the
provision derivative action, large or small Trustees determine in
unless all the accounts. their sole discretion
Trustees have a that redemption is in
financial interest in the best interests of
the suit, shareholders the shareholders or
must (a) make a the holders of the
pre-suit demand on the shares of a fund, or
Trustees who do not (b) for account
have a financial maintenance purposes.
interest in the suit,
(b) obtain holders of
at least 10% of
outstanding shares to
join such request and
(c) afford the
Trustees a reasonable
amount of time to
respond.
MSF No applicable In order to bring Only for excessively Any time (a) if the
provision derivative action, large or small Trustees determine in
unless all the accounts. their sole discretion
Trustees have a that redemption is in
financial interest in the best interests of
the suit, shareholders the shareholders or
must (a) make a the holders of the
pre-suit demand on the shares of a fund, or
Trustees who do not (b) for account
have a financial maintenance purposes.
interest in the suit,
(b) obtain holders of
at least 10% of
outstanding shares to
join such request and
(c) afford the
Trustees a reasonable
amount of time to
respond.
MBF No applicable In order to bring Only for excessively Any time (a) if the
provision derivative action, large or small Trustees determine in
unless all the accounts. their sole discretion
Trustees have a that redemption is in
financial interest in the best interests of
the suit, shareholders the shareholders or
must (a) make a the holders of the
pre-suit demand on the shares of a fund, or
Trustees who do not (b) for account
have a financial maintenance purposes.
interest in the suit,
(b) obtain holders of
at least 10% of
outstanding shares to
join such request and
(c) afford the
Trustees a reasonable
amount of time to
respond.
</Table>
75
<Page>
<Table>
<Caption>
PROCEDURE FOR PROCEDURE FOR
TERMINATION OF TRUST CHARTER AMENDMENTS REORGANIZATION
-------------------------------- -------------------------------- --------------------------------
EXISTING PROPOSED EXISTING PROPOSED EXISTING PROPOSED
COMPANY REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT
- ------- --------------- --------------- --------------- --------------- --------------- ---------------
CMF Company can be Company or any All charter Trustees, Vote of 2/3 of Reorganization
terminated by fund can be amendments, without outstanding would require
(a) vote of terminated by other than shareholder shares of either
holders of 2/3 (a) vote of clean-up action, would Company (a) vote of
of shares of holders of 2/3 matters such as be authorized required, or 2/3 of shares
each fund at a of shares of name changes, to amend majority of of Company (or
meeting, each fund or require the charter so long outstanding fund being
(b) majority of 2/3 vote of approval of a as such shares of the reorganized)
Trustees, plus fund being majority of the amendment does Trust if (b) majority of
vote of holders terminated, shares not adversely recommended by outstanding
of 2/3 of (b) if outstanding and affect the Trustees. shares of the
shares of each recommended by entitled to rights of any Company (or
fund without a the Trustees, vote. shareholder. fund being
meeting, or the vote of reorganized) if
(c) Trustees by holders of a recommended by
written notice majority of Trustees or
to the shares of each (c) vote of a
shareholders. fund or majority of the
Fund can be majority vote Trustees.
terminated by of fund being Shareholders
vote of 2/3 of terminated, or would not have
shares in such (c) Trustees by appraisal
fund. written notice rights in a
to the reorganization.
shareholders. Trustees would
have the power,
without a vote
of the
shareholders,
to invest the
property of the
Company or any
fund in one or
more other
investment
companies.
</Table>
76
<Page>
<Table>
<Caption>
PROCEDURE FOR PROCEDURE FOR
TERMINATION OF TRUST CHARTER AMENDMENTS REORGANIZATION
-------------------------------- -------------------------------- --------------------------------
EXISTING PROPOSED EXISTING PROPOSED EXISTING PROPOSED
COMPANY REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT
- ------- --------------- --------------- --------------- --------------- --------------- ---------------
MSF Company can be Company or any All charter Trustees, Vote of 2/3 of Reorganization
terminated by fund can be amendments, without outstanding would require
(a) vote of terminated by other than shareholder shares of either
holders of 2/3 (a) vote of clean-up action, would Company (a) vote of
of shares of holders of 2/3 matters such as be authorized required, or 2/3 of shares
each fund at a of shares of name changes, to amend majority of of Company (or
meeting, each fund or require the charter so long outstanding fund being
(b) majority of 2/3 vote of approval of a as such shares of the reorganized)
Trustees, plus fund being majority of the amendment does Company if (b) majority of
vote of holders terminated, shares not adversely recommended by outstanding
of 2/3 of (b) if outstanding and affect the Trustees. shares of the
shares of each recommended by entitled to rights of any Company (or
fund without a the Trustees, vote. shareholder. fund being
meeting, or the vote of reorganized) if
(c) Trustees by holders of a recommended by
written notice majority of Trustees or
to the shares of each (c) vote of a
shareholders. fund or majority of the
Fund can be majority vote Trustees.
terminated by of fund being Shareholders
vote of 2/3 of terminated, or would not have
shares in such (c) Trustees by appraisal
fund. written notice rights in a
to the reorganization.
shareholders. Trustees would
have the power,
without a vote
of the
shareholders,
to invest the
property of the
Company or any
fund in one or
more other
investment
companies.
</Table>
77
<Page>
<Table>
<Caption>
PROCEDURE FOR PROCEDURE FOR
TERMINATION OF TRUST CHARTER AMENDMENTS REORGANIZATION
-------------------------------- -------------------------------- --------------------------------
EXISTING PROPOSED EXISTING PROPOSED EXISTING PROPOSED
COMPANY REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT REQUIREMENT AMENDMENT
- ------- --------------- --------------- --------------- --------------- --------------- ---------------
MBF Company can be Company or any All charter Trustees, Vote of 2/3 of Reorganization
terminated by fund can be amendments, without outstanding would require
(a) vote of terminated by other than shareholder shares of either
holders of 2/3 (a) vote of clean-up action, would Company (a) vote of
of shares of holders of 2/3 matters such as be authorized required, or 2/3 of shares
each fund at a of shares of name changes, to amend majority of of Company (or
meeting, each fund or require the charter so long outstanding fund being
(b) majority of 2/3 vote of approval of a as such shares of the reorganized)
Trustees, plus fund being majority of the amendment does Company if (b) majority of
vote of holders terminated, shares not adversely recommended by outstanding
of 2/3 of (b) if outstanding and affect the Trustees. shares of the
shares of each recommended by entitled to rights of any Company (or
fund without a the Trustees, vote. shareholder. fund being
meeting, or the vote of reorganized) if
(c) Trustees by holders of a recommended by
written notice majority of Trustees or
to the shares of each (c) vote of a
shareholders. fund or majority of the
Fund can be majority vote Trustees.
terminated by of fund being Shareholders
vote of 2/3 of terminated, or would not have
shares in such (c) Trustees by appraisal
fund. written notice rights in a
to the reorganization.
shareholders. Trustees would
have the power,
without a vote
of the
shareholders,
to invest the
property of the
Company or any
fund in one or
more other
investment
companies.
</Table>
The text of the proposed Charter Amendments summarized in the preceding
table is set out below:
- Article II, Section 2.1 of the Declaration shall be amended to read as
follows:
The number of Trustees shall be such number as shall be fixed from time
to time by a written instrument signed by a majority of the Trustees.
- Article II, Section 2.4 of the Declaration shall be amended to add the
following sentence at the end of the Section:
In the event that less than the majority of Trustees holding office have
been elected by the Shareholders, to the extent required by the 1940 Act,
but only to such extent, the Trustees then in office shall call a
Shareholders' meeting for the election of Trustees.
- Article VI, Section 6.8 of the Declaration shall be amended to add the
following sentences at the end of the Section:
As determined by the Trustees without the vote or consent of Shareholders
(except as required by the 1940 Act), on any matter submitted to a vote
of Shareholders, either (i) each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote or (ii) each
dollar of net asset value
78
<Page>
(number of Shares owned times net asset value per share of such series or
class, as applicable) shall be entitled to one vote on any matter on
which such Shares are entitled to vote and each fractional dollar amount
shall be entitled to a proportionate fractional vote. Unless the Trustees
designate otherwise in accordance with the preceding sentence, each whole
Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote.
- The first sentence of the second paragraph of Article VI, Section 6.9 of
the Declaration shall be amended to read as follows:
The Trustees, in their discretion, without a vote of Shareholders, may
classify or reclassify any unissued Shares of a series or class, or any
Shares of any series or class previously issued and thereafter reacquired
by the Trust, into Shares of one or more other series or classes that may
be established and designated from time to time.
- A new Article VI, Section 6.10 of the Declaration shall be added, reading
as follows:
Quorum and Required Vote.
One-third of the Shares entitled to vote on a matter shall be a quorum
for the transaction of business with respect to such matter at a
Shareholders' meeting. Shares that abstain or do not vote with respect to
one or more proposals presented for Shareholder approval at any
Shareholders' meeting and Shares held in "street name" as to which the
broker or nominee with respect thereto indicates on the proxy that it
does not have discretionary authority to vote with respect to a
particular proposal, will be counted for purposes of determining whether
a quorum is present at a meeting, but will not be counted as Shares voted
with respect to any such proposal. A majority of the shares present at a
meeting (regardless of whether they are authorized to vote on all the
matters to be presented to the meeting) shall be sufficient to approve
adjournments. Any adjourned session or sessions may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice. A Majority Shareholder Vote at a meeting of
which a quorum is present shall decide any question, except (1) a
plurality vote in the case of the election of Trustees, or (2) when a
different vote is required or permitted by any provision of the 1940 Act
or other applicable law or by this Declaration or the By-Laws, or when
the Trustees shall in their discretion require a larger vote or the vote
of a majority or larger fraction of the Shares of one or more particular
series or classes.
- A new Article VI, Section 6.11 of the Declaration shall be added, reading
as follows:
A Shareholder may bring a derivative action on behalf of the Trust only
if the following conditions are met:
(a) The Shareholder or Shareholders must make a pre-suit demand upon the
Trustees to bring the subject action unless an effort to cause the
Trustees to bring such an action is not likely to succeed. For purposes
of this Section 6.11(a), a demand on the Trustees shall only be deemed
not likely to succeed and therefore excused if a majority of the Board of
Trustees, or a majority of any committee established to consider the
merits of such action, is composed of Trustees who have a personal
financial interest in the transaction at issue;
(b) Unless a demand is not required under paragraph (a) of this Section
6.11, Shareholders eligible to bring such derivative action who
collectively hold at least 10% of the outstanding Shares of the Trust, or
who collectively hold at least 10% of the outstanding Shares of the
Series or Class to which such action relates, shall join in the request
for the Trustees to commence such action; and
(c) Unless a demand is not required under paragraph (a) of this Section
6.11, the Trustees must be afforded a reasonable amount of time to
consider such Shareholder request and to investigate
79
<Page>
the basis of such claim. The Trustees shall be entitled to retain counsel
or other advisors in considering the merits of the request and shall
require an undertaking by the Shareholders making such request to
reimburse the Trust for the expense of any such advisors in the event
that the Trustees determine not to bring such action.
(d) For purposes of this Section 6.11, the Board of Trustees may
designate a committee of one Trustee to consider a Shareholder demand if
necessary to create a committee with a majority of Trustees who do not
have a personal financial interest in the transaction at issue.
- Article VII, Section 7.3 of the Declaration shall be amended in its
entirety to read as follows:
REDEMPTION AT THE OPTION OF THE TRUST. Each Share of any series shall be
subject to redemption at the option of the Trust: (i) at any time, if the
Trustees determine in their sole discretion that such redemption is in
the best interests of the holders of the Shares of the Trust or of any
series, or (ii) upon such other conditions with respect to maintenance of
Shareholder accounts of a minimum amount as may from time to time be
determined by the Trustees. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto other
than to receive payment of the redemption price for such shares.
- The first sentence of Article IX, Section 9.2(a) of the Declaration shall
be amended in its entirety to read as follows:
The Trust or any series may be terminated by (1) the affirmative vote of
the holders of not less than two-thirds of the Shares of each series of
the Trust in case of a termination of the Trust or the affirmative vote
of the holders of not less than two-thirds of the series being terminated
in the case of a termination of a series, (2) if the termination is
recommended by a majority of the Trustees, a Majority Shareholder Vote or
a Majority Shareholder Vote of the series being terminated in the case of
a termination of a series, or (3) by the Trustees by written notice to
the Shareholders of the Trust or the series being terminated.
- Article IX, Sections 9.3(a) and (b) of the Declaration shall be amended in
their entirety to read as follows:
(a) The provisions of this Declaration (whether or not related to the
rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with
respect to which such amendment is or purports to be applicable and so
long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a majority
of the Trustees (or by an officer of the Trust pursuant to the vote of a
majority of the Trustees). Any amendment to this Declaration that
adversely affects the rights of all Shareholders may be adopted at any
time by an instrument in writing signed by a majority of the Trustees (or
by an officer of the Trust pursuant to a vote of a majority of the
Trustees) when authorized to do so by the vote in accordance with
Section 6.8 hereof of Shareholders holding a majority of all the Shares
outstanding and entitled to vote, without regard to series, or if said
amendment adversely affects the rights of the Shareholders of less than
all of the series, or of less than all of the classes of any series
having classes, by the vote of the holders of a majority of all the
Shares entitled to vote of each series or class, as the case may be, so
affected.
(b) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or a
series or to permit assessments upon Shareholders.
- Article IX, Section 9.4 of the Declaration shall be amended in its
entirety to read as follows:
Unless otherwise required by the 1940 Act, the Trustees may sell, convey
and transfer all or substantially all of the assets of the Trust, or the
assets of any one or more series of the Trust, to
80
<Page>
another trust, partnership, association or corporation organized under
the laws of any state of the United States, or may transfer the assets of
one series of the Trust to another series of the Trust, in exchange for
cash, shares of the transferee or other securities, or to the extent
permitted by law then in effect may merge or consolidate the Trust or any
series with any other trust or any corporation, partnership, or
association organized under the laws of any state of the United States,
all upon such terms and conditions and for such consideration when and as
authorized by (a) the affirmative vote of not less than two-thirds of the
outstanding Shares of each series of the Trust in the case of the
reorganization of the Trust, or by the affirmative vote of not less than
two-thirds of the outstanding Shares of a particular series in the case
of the reorganization of a particular series, provided, however, that if
such merger, consolidation or sale is recommended by the Trustees, a
Majority Shareholder Vote, or a vote of the majority of the outstanding
Shares in such series, shall be sufficient, or (b) a vote or written
consent of a majority of the Trustees. Shareholders shall not have
appraisal rights in connection with any such transaction. Following such
transfer, the Trustees shall distribute the cash, shares or other
securities or other consideration received in such transaction (giving
due effect to the assets belonging to and indebtedness of, and any other
differences among, the various series whose assets have so been
transferred) among the Shareholders of such series; and if all of the
assets of the Trust have been so transferred, the Trust shall be
terminated. Notwithstanding anything else herein, the Trustees may,
without Shareholder approval unless such approval is required by the 1940
Act, invest all or a portion of the Trust Property of any series, or
dispose of all or a portion of the Trust Property of any series, and
invest the proceeds of such disposition in interests issued by one or
more other investment companies registered under the 1940 Act. Any such
other investment company may (but need not) be a trust (formed under the
laws of the Commonwealth of Massachusetts or any other state or
jurisdiction) (or subtrust thereof) which is classified as a partnership
for federal income tax purposes. Notwithstanding anything else herein,
the Trustees may, without Shareholder approval unless such approval is
required by the 1940 Act, cause a series that is organized in the
master/feeder fund structure to withdraw or redeem its Trust Property
from the master fund and cause such series to invest its Trust Property
directly in securities and other financial instruments or in another
master fund.
REQUIRED VOTE
Approval of this Proposal for all Maryland Companies requires an affirmative
vote of a majority of each Company's outstanding voting securities and in the
case of STBF, of the outstanding voting securities of each Fund thereof.
Approval of this proposal for all Massachusetts Companies requires the
affirmative vote of two-thirds of each Massachusetts Fund's outstanding shares.
EACH BOARD, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT YOU
VOTE "FOR" PROPOSAL NO. 5.
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the Funds,
will be made primarily by mail but also may include telephone or oral
communications by regular employees of Prudential Securities or PI, who will not
receive any compensation therefore from the Funds or by Georgeson Shareholder
Communications Inc., a proxy solicitation firm retained by the Funds, who will
be paid the approximate fees and expenses for soliciting services set forth
below. Proxies may be recorded pursuant to (i) electronically transmitted
instructions or (ii) telephone instructions obtained through procedures
reasonably designed to verify that the instructions have been authorized.
Soliciting fees and expenses
81
<Page>
payable to Georgeson Shareholder Communications Inc. by a particular Fund are a
function of the number of shareholders in that Fund. All of the cost of the
meetings will be borne by the Funds.
<Table>
<Caption>
ESTIMATED SOLICITATION
FUND FEES AND EXPENSES
- ---- ----------------------
CMF
California Series.................................... $ 13,000
California Income Series............................. 14,050
California Money Market Series....................... 14,300
GIF.................................................... 273,750
HYF.................................................... 403,600
MBF
High Income Series................................... 59,900
Insured Series....................................... 33,100
MSF
Florida Series....................................... 9,250
New Jersey Series.................................... 16,750
New Jersey Money Market Series....................... 12,600
New York Series...................................... 20,750
New York Money Market Series......................... 17,800
Pennsylvania Series.................................. 19,900
NMF.................................................... 58,800
STBF
Prudential Short-Term Corporate Bond Fund............ 43,150
Dryden Ultra Short Bond Fund......................... 5,000
TRBF................................................... 127,200
</Table>
SHAREHOLDER PROPOSALS
The Companies will not be required to hold annual meetings of shareholders
if the election of Board Members is not required under the 1940 Act. It is the
present intention of the Board of each Company not to hold annual meetings of
shareholders unless such shareholder action is required.
Any shareholder who wishes to submit a proposal to be considered at a
Company's next meeting of shareholders should send the proposal to that Company
at Gateway Center Three, 100 Mulberry Street, 4th Floor, Newark, New Jersey
07102, so as to be received within a reasonable time before the Board makes the
solicitation relating to such meeting, in order to be included in the proxy
statement and form of proxy relating to such meeting or be brought before such
meeting without being included in the proxy statement.
Shareholder proposals that are submitted in a timely manner will not
necessarily be included in the Company's proxy materials. Inclusion of such
proposals is subject to limitations under the federal securities laws.
OTHER BUSINESS
Management knows of no business to be presented at the Meetings other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of shareholders arise, the proxies will vote according to their
best judgment in the interest of each Fund, respectively.
/s/ Deborah A. Docs
Deborah A. Docs
SECRETARY
June 6, 2003
It is important that you execute and return ALL of your proxies promptly.
82
<Page>
INDEX TO EXHIBITS TO PROXY STATEMENT
<Table>
Exhibit A Five Percent Shareholder Report
Exhibit B Board and Committee Information
Exhibit C Officer Information
Exhibit D Form of Amended Management Agreement
Exhibit E Form of PIM Subadvisory Agreement
</Table>
83
<Page>
EXHIBIT A
FIVE PERCENT SHAREHOLDER REPORT
As of May 16, 2003, the beneficial owners, directly or indirectly, of more
than 5% of any class of the outstanding shares of the Funds are listed below.
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
CMF
California Series....................... Pershing LLC 20,251/C 10.0%
P.O. Box 2052
Jersey City, NJ
Mr. Jergen Sorensen & 10,478/C 5.2%
Mrs. Karen Sorensen JT TEN
17711 Kennison Ln
Lodi, CA 95240-0806
Paine Webber 13,221/C 6.5%
For the Benefit of
Terrance J. Chan
Karen Chan JTWROS
1518 Ruby Ct
Diamond Bar, CA 91765
Mrs. Margaret Abdun - Nur Succ 24,124/C 11.9%
Ttee
Of the Amean & Wydea Haddad
Living Trust UA DTD 01-18-78
Tarzana, CA 91356
SEI Private Trust Company C/F 21,046/Z 5.2%
C/O TIAA-CREF
Attn: Mutual Funds Administration
One Freedom Valley Dr
Oaks, PA 19456
Principia Inv. Partners Plus 33,337/Z 9.6%
C/O North Shore Capital Mgt.
11621 Kew Gardens Ave, Ste 210
Palm Bch Gdns, FL 33410
California Income Series................ Mrs. Hazel L. Mortensen TTEE 52,960/C 6.1%
L J & H Mortensen Trust B
UA DTD 05/05/81
PO Box 443
Salinas, CA 93902-0443
SEI Trust Company 175,893/Z 31.7%
C/O Prudential Bache
Attn: Mutual Fund Admistrato
One Freedom Valley Dr
Oaks, PA 19456
</Table>
A-1
<Page>
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
Mr. Gurjot Singh 30,270/Z 5.5%
Mrs. Jasjit Singh CO-TTEES
Of the Singh Family Living Revocable
Trust
UA DTD 05/20/95
19040 Loree Ave
Cupertino, CA 95014-3526
Ms. Nairn Kirkpatrick TTEE 51,486/Z 9.3%
Nairn Kirkpatrick Trust
UA DTD 08/26/82
7677 Greenridge Way
Fair Oaks, CA 95628-4808
California Money Market Series.......... -- -- --
GIF....................................... Prudential Retirement Services 712,249/Z 6.1%
As Nominee For Plan 326812
Farm Fresh Retirement Plan
PO Box 5310
Scranton, PA 18505
HYF....................................... Prudential Retirement Services 4,443,962/Z 38.1%
Nominee For Trustee PI W68700
Prudential Securities Inc.
PO Box 5310
Scranton, PA 18505
MBF
High Income Series...................... Mr. Joseph A. Fiore 300,499/Z 19.3%
1 Green Meadow Ln
Cincinnati, OH 45242
New Beginning 174,197/Z 11.2%
Family Limited Partnership #1
101 Convention Center Dr, Suite 700
Las Vegas, NV 89101
Insured Series.......................... Herman Zeidman TTEE 60,502/C 8.2%
Herman M. Zeidman
TR UA DTD 08/09/85
FBO Herman Zeidman
3100 Estates Dr
Pompano Beach, FL 33069-3809
Mr. Larry A. Harris TTEE 91,099/Z 11.6%
Harris Trust
UA DTD 03-04-97
FBO Larry A. Harris
3637 W. Camino Del Norte
Tuscan, AZ 85742
Mr. Thomas D. Meyer TTEE 85,574/Z 10.5%
Thomas D. Meyer Rev Lvg Trust
UA DTD 9-20-80
PO Box 350
Three Rivers, MI 49093
</Table>
A-2
<Page>
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
MSF
Florida Series.......................... Betty Louise Sikes TTEE 35,747/C 6.4%
Betty Louise Sikes
Rev Trust UA DTD 06/23/83
FBO Betty Louise Sikes
4011 NE 25th Ave.
Ft Lauderdale, FL 33308-5726
RELF Limited Partnership, LLLP 74,286/C 13.4%
Attn: Randall E.L. Falck, Pres
Of RELF Enterprises G.P.
8049 Whisper Lake Ln W
Ponte Vedra Bch, FL 32082-3115
Mrs. Carole L. Parsons & 15,890/Z 8.6%
Mr. William T. Parsons JT TEN
6111 Bay Lake Dr N
St. Petersburg, FL 32082-3115
Shorewood LLC 43,755/Z 23.8%
Attn: Doug Reich
11621 Kew Gardens Ave, Ste 210
Palm Beach Garde, FL 33410
Gerald W. Bobo & 12,501/Z 6.8%
Susan O. Bobo TEN ENT
8089 SE Country Estates Way
Jupiter, FL 33458-1045
Lilla A. Grim TTEE 27,111/Z 14.7%
Lilla A. Grim Revocable Living
Trust UA DTD 04-11-01
730 Osprey Ave, Apt 414
Sarasota, FL 34236
New Jersey Series....................... Mrs. Gail W. Bennett 35,862/C 6.6%
2 S Rohallion Dr
Rumson, NJ 07760-1221
Mr. Richard L. Bennet 35,862/C 6.6%
2 S Rohallion Dr
Rumson, NJ 07760-1221
Maria Claudia Fricchione 17,627/Z 5.8%
7 Pershing Blvd
Lavallette, NJ 08735-2832
Tammy Perconti 101,003/Z 33.1%
105 Waters Edge Ct
Brick, NJ 08724
</Table>
A-3
<Page>
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
Shorewood LLC 41,371/Z 13.6%
Attn: Doug Reich
11621 Kew Gardens Ave, Ste 210
Palm Beach Garden, FL 33410
New Jersey Money Market Series.......... -- -- --
New York Series......................... Raymond James & Assoc Inc. 18,904/C 6.7%
FBO Weinstock Mario
BIN# 47549721
880 Carillon PKWY
St. Petersburg, FL 33716
Henry Hocker & 20,807/C 7.4%
Gloria Hocker JT TEN
15 West Suffolk Ave
Central Islip, NY 11722-2142
Mrs. Mary B. Walsh 14,079/C 5.0%
103 Ashland Ave
Pleasantville, NY 10570
Mrs. Jill C. Davila 11,947/Z 5.2%
Mr. Sean E. Hattrick Co-TTEES
Jill C. Davila Trust
UA DTD 12-15-00
PO Box 391
South Hampton, NY 11969
Denise Oakley 35,557/Z 15.5%
33 William Puckey Dr
Cortland Mnr, NY 10567-6215
Mr. Jonathan Stern 13,964/Z 6.1%
127 E. 30th St. Apt. 14D
New York, NY 10016
Dr. Janet Jeppson Amimov 14,090/Z 6.1%
10 W 66th St. Apt. 33A
New York, NY 10023-6213
New York Money Market Series............ -- -- --
Pennsylvania Series..................... Dr. Mark J. Sey & 5,939/C 5.3%
Mrs. Merle L Sey JT TEN
2143 Mount Vernon St
Philadelphia, PA 19130-3133
Mr. Edward Dress & 10,693/C 9.5%
Mrs. Marion M. Dress JT TEN
151 Forest Rd
Mountain Top, PA 18707-1316
Mr. Rudolph J. Peischler 6,333/C 5.6%
3243 Old Post Rd
Slatington, PA 18080-3209
Mr. Trueman Helms TTEE 13,338/C 11.9%
Nichols Family 1998 Trust
UA DTD 12-12-98
1035 Boulder Hill Rd
Green Lane, PA 18504
</Table>
A-4
<Page>
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
NMF....................................... Worldwide Fowarders Inc. 35,255/C 9.2%
9706 SW 155th CT
Miami, FL 33196-3830
Pro. Pay LLC 19,355/Z 6.2%
10300 W. 103rd St, Ste 303
Overland Park, KS 66214
Mrs. Audrey L. Wittmann TTEE 16,801/Z 5.4%
Julius & Audrey Wittmann Trust
UA DTD 06/28/83
3351 257th CT SE
Sammamish, WA 98075
Principia C 29,885/Z 9.6%
C/O Northshore Capital Mgmt
11621 Kew Gardens Ave, Ste 210
Palm Bch Gdns, FL 33410
STBF
Prudential Short-Term Corporate Bond Prudential Retirement Services 224,555/Z 5.0%
Fund.................................. As nominee for TTEE Cust 300215
Sierra Health Automatic
PO Box 9999
Scranton, PA 18507
Dryden Ultra Short Bond Fund............ Jeff Filmore 400,059/A 7.8%
87 Lothrop St.
Beverly, MA 01951
Mr. George Perkins Jr. 409,899/A 8.0%
PO Box 388
Park City, UT 84060
Prudential Securities C/F 291,459/A 5.7%
Dr. Herbert Kasnetz
IRA Rollover DTD 4-4-02
3883 Turtle Creek BLVD
APT# 1411
Dallas, TX 75219
Mrs. Mary Jo Schlomann 433,211/A 8.4%
EST Mrs. Frances Morris
805 Taylor Rd
Downingtown, PA 19335
Mr. Alvin E. McQuinn 300,111/A 5.8%
C/O Quinstar Investment Ptnrs
5201 Eden Ave, STE 350
Minneapolis, MN 55436
Prudential Securities C/F 8,950/B 9.3%
Mr. Thomas F. Dougherty
IRA DTD 11-16-99
331 Williams St
Pittsfield, MA 01201
Mr. Jacques Bouvard 5,969/B 6.2%
Ms. Marguerite A. Bouvard Jt Ten
6 Brookfield Cir
Wellesley, MA 02481
</Table>
A-5
<Page>
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
Jean R. Dickey 9,711/B 10.1%
PO Box 279
W. Friendship, MD 21794
Prudential Securities C/F 6,313/B 6.5%
Mrs. Marion M. Wolfert
IRA DTD 05-16-02
618 Wayland Rd
Plymouth Mtng, PA 19462
New Psalmist Baptist Church 34,372/B 35.6%
Line of Credit Account
4501 1/2 Frederick Rd
Baltimore, MD 21229
Richard R. Surles 9,377/B 9.7%
Patricia A. Surles Com. Prop.
3656 Angeles Rd
Santa Maria, CA 93455
Mr. Kevin S. Pitts 4,664/C 49.9%
Mrs. Linda M. Pitts Co-TTEES
FBO Dana Cleary Pitts Trust
Declaration UA DTD 9-24-96
1627 Highland Dr
Newport Beach, CA 92660
Mr. Kevin S. Pitts 4,664/C 49.9%
Mrs. Linda M. Pitts Co-TTEES
Allison Christin Pitts Trust
Declaration UA DTD 9-24-96
1627 Highland Dr
Newport Beach, CA 92660
Ms. Janet L. Filipowski TTEE 200,144/Z 6.2%
Janet L. Filipowski Trust
UA DTD 6-7-96
1513 Burning Tree Ct
Lisle, IL 60532
TRBF...................................... Stanton Trust Co Cust For 1,031,018/Z 19.6%
State of Hawaii Deferred
Compensation Plan
3405 Annapolis Lane N# 100
Plymouth, MN 55447
Summership & Co C/F 417,628/Z 7.9%
Moderate W14D
Attn: Hector Camacho
100 Franklin St
Boston, MA 02110
Prudential Retirement Services 1,312,969/Z 25.0%
Nominee For Trustee PI W68700
Prudential Securities Inc.
PO Box 5310
Scranton, PA 18505
</Table>
A-6
<Page>
<Table>
<Caption>
FUND NAME REGISTRATION SHARES/CLASS PERCENT
- --------- ------------------------------------ --------------- --------
Prudential Retirement Services 392,426/Z 7.5%
As Nominee for TTEE Cust S3000047
Pinnacle Health System
PO Box 9999
Scranton, PA 18507
</Table>
A-7
<Page>
EXHIBIT B
BOARD AND COMMITTEE INFORMATION(1)
<Table>
<Caption>
ANNUAL FEE(2) CMF GIF HYF MBF MSF NMF STBF TRBF
- ------------- ---- ---- ---- ---- ---- ---- ---- ----
Fee for Attendance at Board Meetings(2)...... N/A N/A N/A N/A N/A N/A N/A N/A
Fee for Attendance at Committee
Meetings(2)................................ N/A N/A N/A N/A N/A N/A N/A N/A
Number of Board Meetings during the Last
Fiscal Year................................ 4 4 4 4 4 4 4 4
Number of Audit Committee Meetings during the
Last Fiscal Year*.......................... 4 4 4 4 4 4 4 4
Number of Nominating Committee Meetings
during the Last Fiscal Year*............... -- -- -- -- -- -- -- --
Size of Current Board........................ 8 8 8 8 8 8 8 8
</Table>
* Only Independent Directors/Trustees serve on a Company's Audit and
Nominating Committees.
(1) No fund within the Fund Complex has a bonus, pension, profit sharing or
retirement plan.
(2) While Board and Committee members do not receive attendance fees, they do
receive compensation for Board and certain Committee membership. See page 5
of this proxy statement. No incumbent Director/Trustee attended fewer than
75% of the total number of Board and Committee meetings during the last
fiscal year of each Fund.
B-1
<Page>
EXHIBIT C
OFFICER INFORMATION
<Table>
<Caption>
NAME, AGE, PRINCIPAL OFFICER SINCE
BUSINESS OCCUPATION FOR THE -------------------------------------------------------------------------------------
PAST FIVE YEARS OFFICE CMF GIF HYF MBF MSF NMF STBF TRBF
- --------------------------- ------------- -------- -------- -------- -------- -------- -------- -------- --------
Judy A. Rice (55) President 2000 2000 2000 2000 2000 2000 2000 2000
President, Chief Executive
Officer, Chief Operating
Officer and
Officer-In-Charge (since
2003) of PI; Director,
Officer-in-Charge,
President, Chief Executive
Officer and Chief Operating
Officer (since May 2003) of
American Skandia Advisory
Services, Inc.; Director,
Officer-in-Charge,
President, Chief Executive
Officer and Chief Operating
Officer (since May 2003) of
American Skandia Investment
Services, Inc.; Director,
Officer-in-Charge,
President, Chief Executive
Officer (since May 2003) of
American Skandia Fund
Services, Inc.; formerly
various positions to Senior
Vice President (1992-1999)
of PSI; and various
positions to Managing
Director (1975-1992) of
Salomon Smith Barney;
Member of Board of
Governors of the Money
Management Institute.
Robert F. Gunia (56) Vice 1987 1987 1987 1987 1984 1987 1988 1994
Executive Vice President President
and Chief Administrative
Officer (since June 1999)
of PI; Executive Vice
President and Treasurer
(since January 1996) of PI;
President (since April
1999) of PIMS; Corporate
Vice President (since
September 1997) of The
Prudential Insurance
Company of America;
Director, Executive Vice
President and Chief
Administrative Officer
(since May 2003) of
American Skandia Investment
Services, Inc; Director,
Executive Vice President
and Chief Administrative
Officer (since May 2003) of
American Skandia Advisory
Services, Inc.; Director
and Executive Vice
President (since May 2003)
of American Skandia Fund
Services, Inc.; formerly
Senior Vice President
(March 1987-May 1999) of
PSI; formerly Chief
Administrative Officer
(July 1989-September 1996),
Director (January
1989-September 1996) and
Executive Vice President,
Treasurer and Chief
Financial Officer (June
1987-December 1996) of
Prudential Mutual Fund
Management, Inc. (PMF);
Vice President and Director
(since May 1989) and
Treasurer (since 1999) of
The Asia Pacific
Fund, Inc.
Grace C. Torres (43) Treasurer & 1996 1996 1995 1996 1995 1995 1996 1996
Senior Vice President Principal
(since January 2000) of PI; Financial and
formerly First Vice Accounting
President (December Officer
1996-January 2000) of PI
and First Vice President
(March 1993-1999) of PSI.
Deborah A. Docs (45) Secretary 1989 1996 1996 1996 1989 1996 1996 1996
Vice President and
Corporate Counsel (since
January 2001) of
Prudential; Vice President
and Assistant Secretary
(since December 1996) of
PI; Vice President and
Assistant Secretary (since
May 2003) of American
Skandia Investment
Services, Inc.
</Table>
C-1
<Page>
<Table>
<Caption>
NAME, AGE, PRINCIPAL OFFICER SINCE
BUSINESS OCCUPATION FOR THE -------------------------------------------------------------------------------------
PAST FIVE YEARS OFFICE CMF GIF HYF MBF MSF NMF STBF TRBF
- --------------------------- ------------- -------- -------- -------- -------- -------- -------- -------- --------
Marguerite E.H. Morrison Assistant 2002 2002 2002 2002 2002 2002 2002 2002
(47) Secretary
Vice President and Chief
Legal Officer-Mutual Funds
and Unit Investment Trusts
(since August 2000) of
Prudential; Senior Vice
President and Secretary
(since April 2003) of PI;
Senior Vice President and
Secretary (since May 2003)
of American Skandia
Investment Services, Inc.;
Senior Vice President and
Secretary (since May 2003)
of American Skandia
Advisory Services, Inc.;
Senior Vice President and
Secretary (since May 2003)
of American Skandia Fund
Services, Inc.; Vice
President and Assistant
Secretary of PIMS (since
October 2001), previously
Senior Vice President and
Assistant Secretary
(February 2001-April 2003)
of PI, Vice President and
Associate General Counsel
(December 1996-February
2001) of PI and Vice
President and Associate
General Counsel (September
1987-September 1996) of
PSI.
Maryanne Ryan (38) Anti-Money 2002 2002 2002 2002 2002 2002 2002 2002
Vice President, Prudential Laundering
(since November 1998), Compliance
First Vice President of PSI Officer
(March 1997-May 1998).
</Table>
C-2
<Page>
EXHIBIT D
FUND
MANAGEMENT AGREEMENT
Agreement made the day of , 2003 between
Fund (the Fund), a [Delaware statutory trust][Massachusetts business
trust][Maryland corporation], and Prudential Investments LLC, a New York limited
liability company (the Manager).
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund and one
or more of its series (individually and collectively with the Fund, referred to
herein as 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 Fund hereby appoints the Manager to act as manager of the Fund and
each series thereof, if any (each, a Portfolio) and as 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. Subject to
the approval of the Board of [Directors][Trustees] of the Fund, the Manager
is authorized to enter into a subadvisory agreement with Prudential
Investment Management, Inc., Jennison Associates LLC, or any other
subadviser, whether or not affiliated with the Manager (each, a Subadviser),
pursuant to which such Subadviser shall furnish to the Fund the investment
advisory services in connection with the management of the Fund (each, a
Subadvisory Agreement). Subject to the approval of the Board of
[Directors][Trustees] of the Fund, the Manager is authorized to retain more
than one Subadviser for the Fund, and if the Fund has more than one
Subadviser, the Manager is authorized to allocate the Fund's assets among
the Subadvisers. The Manager will continue to have responsibility for all
investment advisory services furnished pursuant to any Subadvisory
Agreement. The Fund and Manager understand and agree that the Manager may
manage the Fund in a "manager-of-managers" style with either a single or
multiple subadvisers, which contemplates that the Manager will, among other
things and pursuant to an Order issued by the Securities and Exchange
Commission (SEC): (i) continually evaluate the performance of each
Subadviser to the Fund, if applicable, through quantitative and qualitative
analysis and consultations with such Subadviser; (ii) periodically make
recommendations to the Board as to whether the contract with one or more
Subadvisers should be renewed, modified, or terminated; and
(iii) periodically report to the Board regarding the results of its
evaluation and monitoring functions. The Fund recognizes that a Subadviser's
services may be terminated or modified pursuant to the "manager-of-managers"
process, and that the Manager may appoint a new Subadviser for a Subadviser
that is so removed.
2. Subject to the supervision of the Board of [Directors][Trustees], 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 any 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
D-1
<Page>
thereof, in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Fund's SEC registration statement, and subject
to the following understandings:
(a) The Manager (or a Subadviser under the Manager's supervision) shall
provide supervision of the Fund's investments, and shall 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][Articles of Incorporation] of the Fund and the Fund's SEC
registration statement and with the instructions and directions of the Board
of [Trustees][Directors], and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state laws
and regulations. In connection therewith, the Manager shall, among other
things, prepare and file (or cause to be prepared and filed) such reports as
are, or may in the future be, required by the SEC.
(c) The Manager (or the Subadviser under the Manager's supervision)
shall determine the securities and futures contracts to be purchased or sold
by the Fund and will place orders pursuant to its determinations with or
through such persons, brokers, dealers or futures commission merchants
(including but not limited to Prudential Securities Incorporated) in
conformity with the policy with respect to brokerage as set forth in the
Fund's registration statement or as the Board of [Trustees][Directors] may
direct from time to time. In providing the Fund with investment supervision,
it is recognized that the Manager (or the Subadviser under the Manager's
supervision) will give primary consideration to securing the most favorable
price and efficient execution. Consistent with this policy, the Manager (or
Subadviser under the Manager's supervision) 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 (or Subadviser) may be a party, the size and
difficulty in executing an order, and the value of the expected contribution
of the broker-dealer to the investment performance of the Fund on a
continuing basis. The Manager (or Subadviser) to the Fund each shall have
discretion to effect investment transactions for the Fund through
broker-dealers (including, to the extent legally permissible, broker-dealers
affiliated with the Manager or Subadviser(s)) qualified to obtain best
execution of such transactions who provide brokerage and/or research
services, as such services are defined in Section 28(e) of the Securities
Exchange Act, as amended (the "1934 Act"), and to cause the Fund to pay any
such broker-dealers an amount of commission for effecting a portfolio
transaction in excess of the amount of commission another broker-dealer
would have charged for effecting that transaction, if the brokerage or
research services provided by such broker-dealer, viewed in light of either
that particular investment transaction or the overall responsibilities of
the Manager (or the Subadviser) with respect to the Fund and other accounts
as to which they or it may exercise investment discretion (as such term is
defined in Section 3(a)(35) of the 1934 Act), are reasonable in relation to
the amount of commission.
On occasions when the Manager (or a Subadviser under the Manager's
supervision) deems the purchase or sale of a security or a futures contract
to be in the best interest of the Fund as well as other clients of the
Manager (or the Subadviser), the Manager (or 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 so sold
or purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities or futures contracts so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Manager (or the
Subadviser) in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients.
D-2
<Page>
(d) The Manager (or the Subadviser under the Manager's supervision)
shall maintain all books and records with respect to the Fund's portfolio
transactions and shall render to the Fund's Board of Trustees such periodic
and special reports as the Board may reasonably request.
(e) The Manager (or the Subadviser under the Manager's supervision)
shall be responsible for the financial and accounting records to be
maintained by the Fund (including those being maintained by the Fund's
Custodian).
(f) The Manager (or the Subadviser under the Manager's supervision)
shall provide the Fund'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.
(h) The Manager shall make reasonably available its employees and
officers for consultation with any of the [Trustees][Directors] or officers
or employees of the Fund with respect to any matter discussed herein,
including, without limitation, the valuation of the Fund's securities.
3. The Fund has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if
any:
(a) [Declaration of Trust][Articles of Incorporation];
(b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of [Trustees][Directors] of the
Fund 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 SEC relating to the Fund and its shares of [beneficial interest][common
stock], and all amendments thereto; and
(e) Prospectus and Statement of Additional Information of the Fund.
4. The Manager shall authorize and permit any of its officers and employees
who may be elected as [Trustees][Directors] or officers of the Fund to serve
in the capacities in which they are elected. All services to be furnished by
the Manager under this Agreement may be furnished through the medium of any
such 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 that 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 employees of the Fund and the
Manager, except the fees and expenses of [Directors] [Trustees] who are not
affiliated persons of the Manager or any Subadviser,
(ii) all expenses incurred by the Manager in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund herein, and
(iii) the fees, costs and expenses payable to a Subadviser pursuant to a
Subadvisory Agreement.
D-3
<Page>
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][Directors] who are not
"interested persons" of the Fund within the meaning of the 1940 Act,
(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 provision 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 or valuation of the shares
of the Fund, including the cost of any pricing or valuation service or
services which may be retained pursuant to the authorization of the Board of
[Trustees][Directors], and (iv) for both mail and wire orders, the
cashiering function in connection with the issuance and redemption of the
Fund's securities,
(d) the fees and expenses of the Fund's Transfer and Dividend Disbursing
Agent 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 share certificates representing, and/or non-negotiable
share deposit receipts evidencing, shares of the Fund,
(j) the cost of fidelity, directors' and officers' and errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the SEC, and paying notice
filing fees under state securities laws, including the preparation and
printing of the Fund's registration statement and the Fund's prospectuses
and statements of additional information for filing under federal and state
securities laws for such purposes,
(l) allocable communications expenses with respect to investor services
and all expenses of shareholders' and [Trustees'][Directors'] meetings and
of preparing, printing and mailing reports and notices 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 Distribution and
Service Plan adopted in a manner that is consistent with Rule 12b-1 under
the 1940 Act.
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 the annual rate(s) as described on the attached Schedule A with
respect to the average daily net assets of the Fund. This fee will be
computed daily, and will be paid to the Manager monthly. The Fund shall not
pay any fee or other compensation to the Manager for the services provided
and the expenses assumed pursuant to this Agreement.
D-4
<Page>
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.
The Fund shall indemnify the Manager and hold it harmless from and against
all damages, liabilities, costs and expenses (including reasonable
attorneys' fees and amounts reasonably paid in settlements) incurred by the
Manager in or by reason of any pending, threatened or completed action,
suit, investigation or other proceeding (including an action or suit by or
in the right of the Fund or its security holders) arising out of or
otherwise based upon any action actually or allegedly taken or omitted to be
taken by the Manager in connection with the performance of any of its duties
or obligations under this Agreement; provided, however, that nothing
contained herein shall protect or be deemed to protect the Manager against
or entitle or be deemed to entitle the Manager to indemnification in respect
of any liability to the Fund or its security holders to which the Manager
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, by reason of its reckless
disregard of their duties and obligations 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 with respect
to the Fund at any time, without the payment of any penalty, by the Board of
[Trustees][Directors] of the Fund or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, or
by the Manager at any time, without the payment of any penalty, on not more
than 60 days' nor less than 30 days' written notice to the Fund. 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
officer or employee of the Manager who may also be a [Trustee][Director],
officer or employee of the Fund to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of
any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Manager to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association.
11. Except as otherwise provided herein or authorized by the Board of
[Trustees][Directors] of the Fund from time to time, the Manager shall for
all purposes herein be deemed to be an independent contractor, and shall
have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
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.
D-5
<Page>
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, 4th Floor, Newark, NJ 07102-4077, Attention: Secretary; or
(2) to the Fund 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 the name " Fund" or any name
including the word "Prudential" only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
Manager's business as Manager or any extension, renewal or amendment thereof
remain in effect. At such time as such an agreement shall no longer be in
effect, the Fund will (to the extent that it lawfully can) cease to use such
a name or any other name indicating that it is advised by, managed by or
otherwise connected with the Manager, or any organization which shall have
so succeeded to such businesses. In no event shall the Fund use the name
" Fund" or any name including the word "Prudential" if
the Manager's function is transferred or assigned to a company of which The
Prudential Insurance Company of America does not have control.
[17. Notice is hereby given that this instrument is not binding upon any of
the Trustees or shareholders individually but is binding only upon the
assets and property of the Fund.] [A copy of the Declaration of Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts.]
18. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act, shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to the 1940 Act. In addition, where the effect of
a requirement of the 1940 Act, reflected in any provision of this Agreement,
is related by rules, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year above
written.
<Table>
FUND
By: /s/
--------------------------------------------
PRUDENTIAL INVESTMENTS LLC
By: /s/
--------------------------------------------
</Table>
D-6
<Page>
SCHEDULE A
Schedule dated , 2003
D-7
<Page>
EXHIBIT E
FUND
SUBADVISORY AGREEMENT
Agreement made as of this day of , 2003 between Prudential
Investments LLC (PI or the Manager), a New York limited liability company and
(or the Subadviser),
WHEREAS, the Manager has entered into a Management Agreement (the Management
Agreement) dated , with Fund, a [Delaware statutory
trust][Massachusetts business trust][Maryland corporation] (the Fund) and a
diversified, open-end management investment company registered under the
Investment Company Act of 1940 as amended (the 1940 Act), pursuant to which PI
acts as Manager of the Fund; and
WHEREAS, the Manager desires to retain the Subadviser to provide investment
advisory services to the Fund and one or more of its series as specified in
Schedule A hereto (individually and collectively, with the Fund, referred to
herein as the Fund) and to manage such portion of the Fund as the Manager shall
from time to time direct, and the Subadviser is willing to render such
investment advisory services; and
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of
[Directors][Trustees] of the Fund, the Subadviser shall manage such portion
of the Fund's portfolio, including the purchase, retention and disposition
thereof, in accordance with the Fund's investment objectives, policies and
restrictions as stated in its then current prospectus and statement of
additional information (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 such portion of
the Fund's investments as the Manager shall direct, and shall
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 copies of
the [Declaration of Trust][Articles of Incorporation], By-Laws and
Prospectus of the Fund provided to it by the Manager (the Fund
Documents) and with the instructions and directions of the Manager
and of the Board of [Directors][Trustees] of the Fund, co-operate
with the Manager's (or its designee's) personnel responsible for
monitoring the Fund's compliance and will conform to and comply with
the requirements of the 1940 Act, the Internal Revenue Code of 1986,
as amended, and all other applicable federal and state laws and
regulations. In connection therewith, the Subadviser shall, among
other things, prepare and file such reports as are, or may in the
future be, required by the Securities and Exchange Commission (the
Commission). The Manager shall provide Subadviser timely with copies
of any updated Fund documents.
(iii) The Subadviser shall determine the securities and futures
contracts to be purchased or sold by such portion of the Fund's
portfolio, as applicable, and will place orders with or through such
persons, brokers, dealers or futures commission merchants (including
but not limited to Prudential Securities Incorporated (or any broker
or dealer affiliated with the Subadviser)) to carry out the policy
with respect to brokerage as set forth in the Fund's Prospectus or as
the Board of [Directors][Trustees] may direct from time to time. In
providing the Fund with investment supervision, it is recognized that
the Subadviser will give primary consideration to securing the most
favorable price and efficient execution. Within the framework of this
policy, the Subadviser may consider the financial responsibility,
E-1
<Page>
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. The Manager (or
Subadviser) to the Fund each shall have discretion to effect
investment transactions for the Fund through broker-dealers
(including, to the extent legally permissible, broker-dealers
affiliated with the Subadviser(s)) qualified to obtain best execution
of such transactions who provide brokerage and/or research services,
as such services are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and to cause the
Fund to pay any such broker-dealers an amount of commission for
effecting a portfolio transaction in excess of the amount of
commission another broker-dealer would have charged for effecting
that transaction, if the brokerage or research services provided by
such broker-dealer, viewed in light of either that particular
investment transaction or the overall responsibilities of the Manager
(or the Subadviser) with respect to the Fund and other accounts as to
which they or it may exercise investment discretion (as such term is
defined in Section 3(a)(35) of the 1934 Act), are reasonable in
relation to the amount of commission.
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 effected by it as
required by subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act, and shall render to
the Fund's Board of [Directors] [Trustees] such periodic and special
reports as the [Trustees][Directors] may reasonably request. The
Subadviser shall make reasonably available its employees and officers
for consultation with any of the [Trustees][Directors] or officers or
employees of the Fund with respect to any matter discussed herein,
including, without limitation, the valuation of the Fund's
securities.
(v) The Subadviser or an affiliate shall provide the Fund's
Custodian on each business day with information relating to all
transactions concerning the portion of the Fund's assets it manages,
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.
Conversely, the Subadviser and Manager understand and agree that if
the Manager manages the Fund in a "manager-of-managers" style, the
Manager will, among other things, (i) continually evaluate the
performance of the Subadviser through quantitative and qualitative
analysis and consultations with the Subadviser, (ii) periodically
make recommendations to the Fund's Board as to whether the contract
with one or more subadvisers should be renewed, modified, or
terminated, and (iii) periodically report to the Fund's Board
regarding the results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or modified
pursuant to this process.
(vii) The Subadviser acknowledges that the Manager and the Fund
intend to rely on Rules 17a-10 and 10f-3 under the 1940 Act, and the
Subadviser hereby agrees that it shall not
E-2
<Page>
consult with any other subadviser to the Fund with respect to
transactions in securities for the Fund's portfolio or any other
transactions of Fund assets.
The Subadviser further acknowledges that it shall not consult with any
other subadviser of the Fund that is a principal underwriter or an
affiliated person of a principal underwriter with respect to transactions in
securities for the Fund's portfolio or any other transaction of Fund assets,
and that its investment advisory responsibilities as set forth in this
Agreement are limited to such discrete portion of the Fund's portfolio as
determined by the Manager.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as [Trustees][Directors] or
officers of the Fund to serve in the capacities in which they are elected.
Services to be furnished by the Subadviser under this Agreement may be
furnished through the medium of any of such directors, officers or
employees.
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and records
of the Fund required by Rule 31a-1 under the 1940 Act or any successor
regulation. 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 or any successor regulation
any such records as are required to be maintained by it pursuant to
paragraph 1(a) hereof.
(d) In connection with its duties under this Agreement, the Subadviser
agrees to maintain adequate compliance procedures to ensure its compliance
with the 1940 Act, the Investment Advisers Act of 1940, as amended, and
other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph 1(d)
hereof as the Manager may reasonably request.
(f) The Subadviser shall be responsible for the voting of all
shareholder proxies with respect to the investments and securities held in
the Fund's portfolio, subject to such reporting and other requirements as
shall be established by the Manager.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and, as more
particularly discussed above, shall oversee and review the Subadviser's
performance of its duties under this Agreement. The Manager shall provide
(or cause the Fund's custodian to provide) timely information to the
Subadviser regarding such matters as the composition of assets in the
portion of the Fund managed by the Subadviser, cash requirements and cash
available for investment in such portion of the Fund, and all other
information as may be reasonably necessary for the Subadviser to perform its
duties hereunder (including any excerpts of minutes of meetings of the Board
of [Trustees][Directors] of the Fund that affect the duties of the
Subadviser).
3. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager shall pay the Subadviser as full compensation
therefor, a fee equal to the percentage of the Fund's average daily net
assets of the portion of the Fund managed by the Subadviser as described in
the attached Schedule A. Liability for payment of compensation by the
Manager to the Subadviser under this Agreement is contingent upon the
Manager's receipt of payment from the Fund for management services described
under the Management Agreement between the Fund and the Manager. Expense
caps or fee waivers for the Fund that may be agreed to by the Manager, but
not agreed to by the
E-3
<Page>
Subadviser, shall not cause a reduction in the amount of the payment to the
Subadviser by the Manager.
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, provided, however, that nothing in this
Agreement shall be deemed to waive any rights the Manager or the Fund may
have against the Subadviser under federal or state securities laws. The
Manager shall indemnify the Subadviser, its affiliated persons, its
officers, directors and employees, for any liability and expenses, including
attorneys' fees, which may be sustained as a result of the Manager's willful
misfeasance, bad faith, gross negligence, reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation, the
1940 Act and federal and state securities laws. The Subadviser shall
indemnify the Manager, its affiliated persons, its officers, directors and
employees, for any liability and expenses, including attorneys' fees, which
may be sustained as a result of the Subadviser's willful misfeasance, bad
faith, gross negligence, or reckless disregard of its duties hereunder or
violation of applicable law, including, without limitation, the 1940 Act and
federal and state securities laws.
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][Directors] of the Fund or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, or
by the Manager or the Subadviser at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event
of its assignment (as defined in the 1940 Act) or upon the termination of
the Management Agreement. The Subadviser agrees that it will promptly notify
the Fund and the Manager of the occurrence or anticipated occurrence of any
event that would result in the assignment (as defined in the 1940 Act) of
this Agreement, including, but not limited to, a change or anticipated
change in control (as defined in the 1940 Act) of the Subadviser; provided
that the Subadviser need not provide notice of such an anticipated event
before the anticipated event is a matter of public record.
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, 4th Floor, Newark, NJ 07102-4077, Attention: Secretary;
(2) to the Fund at Gateway Center Three, 4th Floor, 100 Mulberry Street,
Newark, NJ 07102-4077, Attention: Secretary; or (3) to the Subadviser at
.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers or employees who may also be a
[Trustee][Director], officer or employee of the Fund to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or a
dissimilar nature, nor limit or restrict the Subadviser's right to engage in
any other business or to render services of any kind to any other
corporation, firm, individual or association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other material prepared for
distribution to shareholders of the Fund or the public, which refer to the
Subadviser in any way, prior to use thereof and not to use material if the
Subadviser reasonably objects in writing five business days (or such other
time as may be mutually agreed) after receipt thereof. Sales literature may
be furnished to the Subadviser hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery.
E-4
<Page>
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
10. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act, shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Commission issued
pursuant to the 1940 Act. In addition, where the effect of a requirement of
the 1940 Act, reflected in any provision of this Agreement, is related by
rules, regulation or order of the Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
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.
<Table>
PRUDENTIAL INVESTMENTS LLC
By: /s/
--------------------------------------------
Name:
Title:
By: /s/
--------------------------------------------
Name:
Title:
</Table>
E-5
<Page>
SCHEDULE A
FUND
As compensation for services provided by, Prudential Investments LLC will
pay a fee equal, on an annualized basis, to the following:
Dated as of , 2003.
E-6
<Page>
PRUDENTIAL TOTAL RETURN BOND FUND INC.
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Common Stock of the Company held of record by the undersigned on
May 16, 2003 at the Meeting to be held on July 17, 2003 or any adjournment
thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. THE PROXY
WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5 IF YOU DO NOT
SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY STATEMENT DATED JUNE 6, 2003
FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P00003 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON DIRECTORS
1. To elect ten Directors.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company.
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Articles / / / / / /
of Incorporation.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL HIGH YIELD FUND, INC.
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Common Stock of the Company held of record by the undersigned on
May 16, 2003 at the Meeting to be held on July 17, 2003 or any adjournment
thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. THE PROXY
WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5 IF YOU DO NOT
SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY STATEMENT DATED JUNE 6, 2003
FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P000011 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON DIRECTORS
1. To elect ten Directors.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company.
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Articles / / / / / /
of Incorporation.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Common Stock of the Company held of record by the undersigned on
May 16, 2003 at the Meeting to be held on July 17, 2003 or any adjournment
thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. THE PROXY
WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5 IF YOU DO NOT
SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY STATEMENT DATED JUNE 6, 2003
FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P000013 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON DIRECTORS
1. To elect ten Directors.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company.
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Articles / / / / / /
of Incorporation.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Common Stock of the Company held of record by the undersigned on
May 16, 2003 at the Meeting to be held on July 17, 2003 or any adjournment
thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. THE PROXY
WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5 IF YOU DO NOT
SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY STATEMENT DATED JUNE 6, 2003
FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P000015 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON DIRECTORS
1. To elect ten Directors.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company.
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Articles / / / / / /
of Incorporation.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL SHORT-TERM BOND FUND, INC.
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Common Stock of the Company held of record by the undersigned on
May 16, 2003 at the Meeting to be held on July 17, 2003 or any adjournment
thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
THE PROXY WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5, AS
APPLICABLE, IF YOU DO NOT SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY
STATEMENT DATED JUNE 6, 2003 FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P00005 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON DIRECTORS
1. To elect ten Directors.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. * To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. * To Permit an Amendment to the Management Contract / / / / / /
Between PI and the Company (on behalf of the Fund).
4. * To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Articles / / / / / /
of Incorporation.
* Not applicable to Dryden Ultra Short Bond Fund.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL MUNICIPAL SERIES FUND
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Beneficial Interest of the Company held of record by the
undersigned on May 16, 2003 at the Meeting to be held on July 17, 2003 or any
adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
THE PROXY WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5, AS
APPLICABLE, IF YOU DO NOT SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY
STATEMENT DATED JUNE 6, 2003 FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P00007 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON TRUSTEES
1. To elect ten Trustees.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company (on behalf of each Fund).
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) * fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) ** fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Declaration / / / / / /
of Trust.
* Not applicable to New Jersey Money Market Series and Florida Series.
** Not applicable to any Fund.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL MUNICIPAL BOND FUND
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Beneficial Interest of the Company held of record by the
undersigned on May 16, 2003 at the Meeting to be held on July 17, 2003 or any
adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. THE PROXY
WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5 IF YOU DO NOT
SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY STATEMENT DATED JUNE 6, 2003
FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P00009 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON TRUSTEES
1. To elect ten Trustees.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company (on behalf of each Fund).
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Declaration / / / / / /
of Trust.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
PROXY
SPECIAL MEETING OF SHAREHOLDERS (MEETING)-
JULY 17, 2003, 10:00 A.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The undersigned
hereby appoints Grace C. Torres, Marguerite E.H. Morrison and Deborah A. Docs
as Proxies, each with the power of substitution, and hereby authorizes each
of them to represent and to vote, as designated on the reverse side, all the
shares of Beneficial Interest of the Company held of record by the
undersigned on May 16, 2003 at the Meeting to be held on July 17, 2003 or any
adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN THIS PROXY IS PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
THE PROXY WILL BE VOTED FOR THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5, AS
APPLICABLE, IF YOU DO NOT SPECIFY OTHERWISE. PLEASE REFER TO THE PROXY
STATEMENT DATED JUNE 6, 2003 FOR DISCUSSION OF THE PROPOSALS.
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE INDICATED
AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
<Page>
PRUDENTIAL INVESTMENTS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow
the simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
P00001 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL OF THE NOMINEES AND EACH OF THE
PROPOSALS.
VOTE ON TRUSTEES.
1. To elect ten Trustees.
Nominees: 01) David E. A. Carson, 02)
Robert E. La Blanc, 03) Douglas H.
McCorkindale, 04) Stephen P. Munn, 05)
Richard A. Redeker, 06) Robin B. Smith,
07) Stephen Stoneburn, 08) Clay T.
Whitehead, 09) Judy A. Rice, 10) Robert
F. Gunia
<Table>
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR
ALL ALL EXCEPT ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER
ON THE LINE BELOW.
/ / / / / /
-------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. To Approve a Proposal to Permit the Manager to Enter / / / / / /
into, or Make Material Changes to, Subadvisory
Agreements Without Shareholder Approval.
3. To Permit an Amendment to the Management Contract Between / / / / / /
PI and the Company (on behalf of each Fund).
4. To Approve Changes to Fundamental / / / / / /
Investment Restrictions or Policies,
relating to:
a) fund diversification; / / / / / /
b) issuing senior securities,
borrowing money or pledging assets; / / / / / /
c) buying and selling real estate; / / / / / /
d) buying and selling commodities and / / / / / /
commodity contracts;
e) * fund concentration; / / / / / /
f) making loans; / / / / / /
g) other investment restrictions, / / / / / /
including investing in securities
of other investment companies.
5. To Approve Amendments to the Company's Declaration / / / / / /
of Trust.
* Not applicable to California Series and California Money Market Series.
</Table>
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please be sure to sign and date this Proxy.
- --------------------------------- ----------
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE
- --------------------------------- ----------
SIGNATURE (JOINT OWNERS) DATE
<Page>
WE NEED YOUR VOTE!
YOU REALLY CAN MAKE A DIFFERENCE!
Your vote is important!
We hope that we can count on your participation.
WHAT YOU SHOULD DO NOW.
(1) READ THE ENCLOSED PROXY STATEMENT.
(2) SEE YOUR PERSONALIZED VOTING INSTRUCTIONS.
(3) VOTE.
THREE EASY WAYS TO VOTE.
(1) BY PHONE.
(2) BY INTERNET.
(3) BY MAIL.
Voting is available 24 hours a day, 7 days a week.
NOTE: PHONE OR INTERNET VOTES ARE LESS COSTLY TO PROCESS. REMINDER MAILINGS ARE
EXPENSIVE, SO VOTE TODAY!
[PRUDENTIAL FINANCIAL LOGO]
<Page>
AN ELECTRONIC SOLUTION FOR REDUCING PAPER FLOW TO YOUR
HOME. ENROLLMENT IS FAST AND SIMPLE
HELP THE ENVIRONMENT. ENROLL TODAY FOR FUTURE ELECTRONIC DELIVERY OF
SHAREHOLDER MATERIALS.
We are pleased to offer our shareholders the convenience of viewing proxy
statements, annual reports and other shareholder material online. With your
consent, we will stop sending paper copies of these documents beginning next
year and until you notify us otherwise.
TO PARTICIPATE, FOLLOW THESE EASY STEPS:
- - LOG ONTO THE INTERNET AT www.proxyvote.com
- - ENTER YOUR CONTROL NUMBER FOUND BY YOUR NAME ON THE ENCLOSED VOTE INSTRUCTION
FORM
- - VOTE YOUR SHARES
- - ENTER YOUR E-MAIL ADDRESS
- - ENTER A PIN (PERSONAL IDENTIFICATION NUMBER) OF YOUR CHOICE - WE SUGGEST THE
LAST FOUR DIGITS OF YOUR SOCIAL SECURITY NUMBER
www.proxyvote.com