PRUDENTIAL GROWTH OPPORTUNITY FUND INC, 497, 1995-12-04

PRUDENTIAL GROWTH OPPORTUNITY FUND INC
497, 1995-12-04

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<PAGE>
PRUDENTIAL
GROWTH OPPORTUNITY FUND, INC.

- ------------------------------------------

PROSPECTUS DATED NOVEMBER 29, 1995

- ----------------------------------------------------------------

Prudential Growth Opportunity Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose objective is capital growth. The Fund
intends to invest principally in a carefully selected portfolio of common
stocks--generally small company stocks having prospects of a high return on
equity, increasing earnings and increasing dividends (or an expectation of
dividends). The Fund's purchase and sale of put and call options and related
short-term trading may result in a high portfolio turnover rate. These
activities may be considered speculative and may result in higher risks and
costs to the Fund. The Fund may also buy and sell stock index futures and may
buy and sell options on stock indices in accordance with limits described
herein. There can be no assurance that the Fund's investment objective will be
achieved. See "How the Fund Invests--Investment Objective and Policies." The
Fund's address is One Seaport Plaza, New York, New York 10292, and its telephone
number is (800) 225-1852.

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated November 29, 1995, which information
is incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Fund, at the
address or telephone number noted above.

- --------------------------------------------------------------------------------

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>
FUND HIGHLIGHTS

The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.

WHAT IS PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.?

Prudential Growth Opportunity Fund, Inc. is a mutual fund. A mutual fund
pools the resources of investors by selling its shares to the public and
investing the proceeds of such sale in a portfolio of securities designed to
achieve its investment objective. Technically, the Fund is an open-end,
diversified management investment company.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is capital growth. It seeks to achieve this
objective by investing primarily in a carefully selected portfolio of common
stocks--generally small company stocks having prospects of a high return on
equity, increasing earnings, increasing dividends (or an expectation of
dividends), and price-earnings ratios which are not excessive. There can be no
assurance that the Fund's objective will be achieved. See "How the Fund
Invests--Investment Objective and Policies" at page 8.

RISK FACTORS AND SPECIAL CHARACTERISTICS

In seeking to achieve its investment objective, the Fund has generally
invested in common stocks with smaller market capitalizations than those of the
stocks included in the Dow Jones Industrial Average or the largest stocks
included in the Standard & Poor's 500 Composite Stock Index. As a result, the
Fund's portfolio has generally been made up of common stocks issued by smaller,
less well known companies selected by the investment adviser on the basis of
fundamental investment analysis. Companies in which the Fund is likely to invest
may have limited product lines, markets or financial resources and may lack
management depth. The securities of these companies may have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. See "How the Fund Invests--Investment Objective and Policies" at page
8. The Fund may also engage in various hedging and return enhancement
strategies, including derivatives. See "How the Fund Invests--Hedging and Return
Enhancement Strategies-- Risks of Hedging and Return Enhancement Strategies" at
page 9. In addition, the Fund may invest up to 15% of its total assets in
foreign securities. Investing in securities of foreign companies and countries
involves certain considerations and risks not typically associated with
investing in securities of domestic companies. See "How the Fund Invests--Other
Investments and Policies--Foreign Investments" at page 11.

WHO MANAGES THE FUND?

Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the Manager
of the Fund and is compensated for its services at an annual rate of .70 of 1%
of the Fund's average daily net assets. As of October 31, 1995, PMF served as
manager or administrator to 64 investment companies, including 37 mutual funds,
with aggregate assets of approximately $50 billion. The Prudential Investment
Corporation (PIC or the Subadviser) furnishes investment advisory services in
connection with the management of the Fund under a Subadvisory Agreement with
PMF. See "How the Fund is Managed--Manager" at page 13.

WHO DISTRIBUTES THE FUND'S SHARES?

Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the Distributor of
the Fund's Class A shares and is paid an annual distribution and service fee
which is currently being charged at the rate of .25 of 1% of the average daily
net assets of the Class A shares.

Prudential Securities Incorporated (Prudential Securities or PSI), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's Class B and Class C shares and is paid an annual
distribution and service fee at the rate of 1% of the average daily net assets
of each of the Class B and Class C shares.

See "How the Fund is Managed--Distributor" at page 13.

2
<PAGE>
WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is $100
for all classes. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. See "Shareholder Guide--How to
Buy Shares of the Fund" at page 19 and "Shareholder Guide--Shareholder Services"
at page 27.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Fund through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund, through its transfer
agent, Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent) at the
net asset value per share (NAV) next determined after receipt of your purchase
order by the Transfer Agent or Prudential Securities plus a sales charge which
may be imposed either (i) at the time of purchase (Class A shares) or (ii) on a
deferred basis (Class B or Class C shares). See "How the Fund Values its Shares"
at page 15 and "Shareholder Guide--How to Buy Shares of the Fund" at page 19.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers three classes of shares:

- Class A Shares: Sold with an initial sales charge of up to 5% of
the offering price.

- Class B Shares: Sold without an initial sales charge but are
subject to a contingent deferred sales charge or
CDSC (declining from 5% to zero of the lower of
the amount invested or the redemption proceeds)
which will be imposed on certain redemptions made
within six years of purchase. Although Class B
shares are subject to higher ongoing
distribution-related expenses than Class A shares,
Class B shares will automatically convert to Class
A shares (which are subject to lower ongoing
distribution-related expenses) approximately seven
years after purchase.

- Class C Shares: Sold without an initial sales charge and, for one
year after purchase, are subject to a 1% CDSC on
redemptions. Like Class B shares, Class C shares
are subject to higher ongoing distribution-related
expenses than Class A shares but do not convert to
another class.

See "Shareholder Guide--Alternative Purchase Plan" at page 20.

HOW DO I SELL MY SHARES?

You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order. However,
the proceeds of redemptions of Class B and Class C shares may be subject to a
CDSC. See "Shareholder Guide--How to Sell Your Shares" at page 23.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to pay dividends of net investment income, if any,
semi-annually and make distributions of any net capital gains at least annually.
Dividends and distributions will be automatically reinvested in additional
shares of the Fund at NAV without a sales charge unless you request that they be
paid to you in cash. See "Taxes, Dividends and Distributions" at page 16.

3
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES+ CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------- ------------------------------------ ------------------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................... 5% None None
Maximum Sales Load or Deferred Sales
Load Imposed on Reinvested
Dividends.......................... None None None
Deferred Sales Load (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)............................. None 5% during the first year, decreasing 1% on redemptions made within
by 1% annually to 1% in the fifth one year of purchase
and sixth years and 0% the seventh
year*
Redemption Fees..................... None None None
Exchange Fee........................ None None None

<CAPTION>
ANNUAL FUND OPERATING EXPENSES CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------- ------------------------------------ ------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees..................... .70% .70% .70%
12b-1 Fees.......................... .25++ 1.00 1.00
Other Expenses...................... .38 .38 .38
--------------- ------------------------------------ ------------------------------
Total Fund Operating Expenses....... 1.33% 2.08% 2.08%
2.08%
--------------- ------------------------------------ ------------------------------
--------------- ------------------------------------ ------------------------------
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- -------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
Class A............................................................................... $ 63 $ 90 $ 119 $ 202
Class B............................................................................... $ 71 $ 95 $ 122 $ 213
Class C............................................................................... $ 31 $ 65 $ 112 $ 241
You would pay the following expenses on the same investment, assuming no redemption:
Class A............................................................................... $ 63 $ 90 $ 119 $ 202
Class B............................................................................... $ 21 $ 65 $ 112 $ 213
Class C............................................................................... $ 21 $ 65 $ 112 $ 241
The above example is based on data for the Fund's fiscal year ended September 30, 1995. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding the various costs and expenses that an investor in the Fund
will bear, whether directly or indirectly. For more complete descriptions of the various costs and expenses, see "How the Fund
is Managed." "Other Expenses" includes operating expenses of the Fund, such as directors' and professional fees, registration
fees, reports to shareholders, transfer agency and custodian fees and franchise taxes.
<FN>

------------------
*Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion
Feature--Class B Shares."
+Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Fund may not exceed 6.25% of
total gross sales, subject to certain exclusions. This 6.25% limitation
is imposed on the Fund rather than on a per shareholder basis. Therefore,
long-term shareholders of the Fund may pay more in total sales charges
than the economic equivalent of 6.25% of such shareholders' investment in
such shares. See "How the Fund is Managed--Distributor."
++Although the Class A Distribution and Service Plan provides that the Fund
may pay a distribution fee of up to .30 of 1% per annum of the average
daily net assets of the Class A shares, the Distributor has agreed to
limit its distribution fees with respect to Class A shares of the Fund to
no more than .25 of 1% of the average daily net assets of the Class A
shares for the fiscal year ending September 30, 1996. Total operating
expenses without such limitation would be 1.38%. See "How the Fund is
Managed--Distributor."
</TABLE>

4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS A SHARES)

<TABLE>
<CAPTION>
JANUARY 22,
1990 (A)
YEAR ENDED SEPTEMBER 30, THROUGH
------------------------------------------------------------------ SEPTEMBER 30,
1995 (D) 1994 (D) 1993 (D) 1992 (D) 1991 1990
------------- ------------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................. $ 12.40 $ 13.06 $ 11.25 $ 10.16 $ 7.36 $ 8.55
------------- ------------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... .05 -- .03 .02 .05 .09
Net realized and unrealized gain
(loss) on investment
transactions....................... 2.57 .13 3.14 1.47 2.82 (1.20)
------------- ------------- -------- -------- -------- -------
Total from investment operations.... 2.62 .13 3.17 1.49 2.87 (1.11)
------------- ------------- -------- -------- -------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income............................. -- -- -- -- (.07) (.08)
Distributions from net realized
capital gains...................... (.84) (.79) (1.36) (.40) -- --
------------- ------------- -------- -------- -------- -------
Total distributions................. (.84) (.79) (1.36) (.40) (.07) (.08)
------------- ------------- -------- -------- -------- -------
Net asset value, end of period...... $ 14.18 $ 12.40 $ 13.06 $ 11.25 $ 10.16 $ 7.36
------------- ------------- -------- -------- -------- -------
------------- ------------- -------- -------- -------- -------
TOTAL RETURN (C):................... 23.29% 1.13% 30.42% 15.39% 39.39% (13.19)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $ 242,231 $ 103,078 $94,842 $44,845 $25,165 $17,222
Ratios to average net assets:
Expenses, including distribution
fees............................. 1.33% 1.33% 1.17% 1.33% 1.50% 1.61%(b)
Expenses, excluding distribution
fees............................. 1.08% 1.09% .97% 1.13% 1.30% 1.42%(b)
Net investment income (loss)...... .30% .00% .26% .19% .59% 1.54%(b)
Portfolio turnover.................. 64% 82% 68% 99% 111% 79%
<FN>

------------------
(a) Commencement of offering of Class A shares.
(b) Annualized.
(c) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(d) Calculated based upon weighted average shares outstanding during the
period.
</TABLE>

5
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS B SHARES)

The following financial highlights with respect to the five-year period
ended September 30, 1995 have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
following financial highlights contain selected data for a Class B share of
common stock outstanding, total return, ratios to average net assets and other
supplemental data for the periods indicated. The information is based on data
contained in the financial statements.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1995 (B) 1994 (B) 1993 (B) 1992 (B) 1991 1990 1989 (A)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year.............................. $ 11.99 $ 12.74 $ 11.08 $ 10.11 $ 7.34 $ 9.11 $ 7.47
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)....... (.06 ) (.09) (.06) (.07) (.02) .07 .06
Net realized and unrealized gain
(loss) on investment
transactions...................... 2.47 .13 3.08 1.44 2.82 (1.75) 1.65
-------- -------- -------- -------- -------- -------- --------
Total from investment operations... 2.41 .04 3.02 1.37 2.80 (1.68) 1.71
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income............................ -- -- -- -- (.03) (.09) (.07)
Distributions from net realized
capital gains..................... (.84 ) (.79) (1.36) (.40) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions................ (.84 ) (.79) (1.36) (.40) (.03) (.09) (.07)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of year....... $ 13.56 $ 11.99 $ 12.74 $ 11.08 $ 10.11 $ 7.34 $ 9.11
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
TOTAL RETURN (C):.................. 22.37 % .42% 29.40% 14.27% 38.33% (18.63)% 23.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)...... $361,873 $425,502 $376,068 $172,018 $118,660 $86,440 $160,995
Ratios to average net assets:
Expenses, including distribution
fees............................ 2.08 % 2.09% 1.97% 2.13% 2.30% 2.18% 1.79%
Expenses, excluding distribution
fees............................ 1.08 % 1.09% .97% 1.13% 1.30% 1.28% 1.17%
Net investment income (loss)..... (.51 %) (.76)% (.54)% (.61)% (.21)% .91% .74%
Portfolio turnover................. 64 % 82% 68% 99% 111% 79% 79%

1988 1987 1986
-------- -------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year.............................. $ 9.58 $ 9.09 $ 8.30
-------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)....... .08(d) -- .02(d)
Net realized and unrealized gain
(loss) on investment
transactions...................... (1.34) 2.40 1.89
-------- -------- -----------
Total from investment operations... (1.26) 2.40 1.91
-------- -------- -----------
LESS DISTRIBUTIONS
Dividends from net investment
income............................ (.03) -- (.02)
Distributions from net realized
capital gains..................... (.82) (1.91) (1.10)
-------- -------- -----------
Total distributions................ (.85) (1.91) (1.12)
-------- -------- -----------
Net asset value, end of year....... $ 7.47 $ 9.58 $ 9.09
-------- -------- -----------
-------- -------- -----------
TOTAL RETURN (C):.................. (10.72)% 31.61% 26.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)...... $143,263 $186,655 $87,844
Ratios to average net assets:
Expenses, including distribution
fees............................ 1.66%(d) 1.61% 1.40%(d)
Expenses, excluding distribution
fees............................ 1.05%(d) 1.07% 1.16%(d)
Net investment income (loss)..... 1.07%(d) .08% .18%(d)
Portfolio turnover................. 76% 113% 139%
<FN>

------------------
(a) On January 31, 1989, Prudential Mutual Fund Management, Inc. succeeded
The Prudential Insurance Company of America as investment adviser and
since then has acted as manager of the Fund. See "Manager" in the
Statement of Additional Information.
(b) Calculated based upon weighted average shares outstanding during the
year.
(c) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions.
(d) Net of expense reimbursement.
</TABLE>

6
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS C SHARES)

The following financial highlights have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
following financial highlights contain selected data for a Class C share of
common stock outstanding, total return, ratios to average net assets and other
supplemental data for the period indicated. The information is based on data
contained in the financial statements.

<TABLE>
<CAPTION>
AUGUST 1,
1994 (A)
YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1995 (D) 1994 (D)
-------------- --------------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period.............................. $11.99 $11.61
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)......... (.06) (.01)
Net realized and unrealized gain
(loss) on investment transactions... 2.47 .39
------ ------
Total from investment operations..... 2.41 .38
------ ------
LESS DISTRIBUTIONS
Distributions from net realized
capital gains....................... (.84) --
------ ------
Total distributions................ (.84) --
------ ------
Net asset value, end of period....... $13.56 $11.99
------ ------
------ ------
TOTAL RETURN (C):.................... 22.37% 3.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $1,545 $ 269
Ratios to average net assets:
Expenses, including distribution
fees.............................. 2.08% 2.22%(b)
Expenses, excluding distribution
fees.............................. 1.08% 1.22%(b)
Net investment income (loss)....... (.46)% (.31)%(b)
Portfolio turnover................... 64% 82%
<FN>

------------------
(a) Commencement of offering of Class C shares.
(b) Annualized.
(c) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(d) Calculated based upon weighted average shares outstanding during the
period.
</TABLE>

7
<PAGE>
HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL GROWTH. THE FUND WILL ATTEMPT TO
ACHIEVE THIS OBJECTIVE BY INVESTING PRINCIPALLY IN A CAREFULLY SELECTED
PORTFOLIO OF COMMON STOCKS. INVESTMENT INCOME IS OF INCIDENTAL IMPORTANCE, AND
THE FUND MAY INVEST IN SECURITIES WHICH DO NOT PRODUCE ANY INCOME. HOWEVER,
THERE MAY BE PERIODS WHEN, IN THE JUDGMENT OF THE FUND'S INVESTMENT ADVISER,
MARKET OR GENERAL ECONOMIC CONDITIONS JUSTIFY A TEMPORARY DEFENSIVE POSITION.
THERE CAN BE NO ASSURANCE THAT SUCH OBJECTIVE WILL BE ACHIEVED. See "Investment
Objective and Policies" in the Statement of Additional Information.

THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED (THE INVESTMENT COMPANY ACT). FUND POLICIES THAT ARE NOT FUNDAMENTAL
MAY BE MODIFIED BY THE BOARD OF DIRECTORS.

The stocks which the Fund's investment adviser generally expects to select
for the Fund's portfolio are those which, in the investment adviser's judgment,
have prospects of a high return on equity, increasing earnings and increasing
dividends (or an expectation of dividends). These criteria are not rigid, and
other stocks may be included in the Fund's portfolio if they are expected to
help the Fund attain its objective. These criteria can be changed by the Fund's
Board of Directors.

THE FUND MAY ALSO INVEST IN PREFERRED STOCKS AND BONDS, WHICH HAVE EITHER
ATTACHED WARRANTS OR A CONVERSION PRIVILEGE INTO COMMON STOCKS, AND IN WARRANTS.
IN ADDITION, THE FUND MAY PURCHASE PUT OPTIONS ON STOCKS THAT THE FUND HOLDS AS
PROTECTION AGAINST A SIGNIFICANT PRICE DECLINE, MAY PURCHASE AND SELL STOCK
INDEX OPTIONS AND FUTURES TO HEDGE OVERALL MARKET RISK AND THE INVESTMENT OF
CASH FLOWS AND WRITE LISTED PUT AND LISTED COVERED CALL OPTIONS. SEE "HEDGING
AND RETURN ENHANCEMENT STRATEGIES" BELOW. THE FUND MAY ALSO INVEST UP TO 15% OF
ITS TOTAL ASSETS IN FOREIGN SECURITIES, WHICH MAY INVOLVE ADDITIONAL RISKS. SUCH
INVESTMENT RISKS INCLUDE FUTURE ADVERSE POLITICAL AND ECONOMIC DEVELOPMENTS,
POSSIBLE SEIZURE OR NATIONALIZATION OF THE COMPANY IN WHOSE SECURITIES THE FUND
HAS INVESTED AND POSSIBLE ESTABLISHMENT OF EXCHANGE CONTROLS OR OTHER LAWS THAT
MIGHT ADVERSELY AFFECT THE REPATRIATION OF ASSETS OR THE PAYMENT OF DIVIDENDS.
IN ADDITION, A PORTFOLIO OF FOREIGN SECURITIES MAY BE ADVERSELY AFFECTED BY
FLUCTUATIONS IN THE RELATIVE RATES OF EXCHANGE BETWEEN THE CURRENCIES OF
DIFFERENT NATIONS AND BY EXCHANGE CONTROL REGULATIONS. SEE "OTHER INVESTMENTS
AND POLICIES -- FOREIGN INVESTMENTS" BELOW.

IN SEEKING TO ACHIEVE ITS INVESTMENT OBJECTIVE, THE FUND HAS GENERALLY
INVESTED IN COMMON STOCKS WITH SMALLER MARKET CAPITALIZATIONS THAN THOSE OF THE
STOCKS INCLUDED IN THE DOW JONES INDUSTRIAL AVERAGE OR THE LARGEST STOCKS
INCLUDED IN THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX. As a result, the
Fund's portfolio has generally been made up of common stocks issued by smaller,
less well known companies (with market capitalizations typically less than $1
billion or a corresponding market capitalization in foreign markets) selected by
the investment adviser on the basis of fundamental investment analysis. The Fund
may, however, invest in the securities of any issuer without regard to its size
or the market capitalization of its common stock. Companies in which the Fund is
likely to invest may have limited product lines, markets or financial resources
and may lack management depth. The securities of these companies may have
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger, more established companies or the market
averages in general.

8
<PAGE>
THE FUND MAY ALSO INVEST WITHOUT LIMIT IN HIGH QUALITY MONEY MARKET
INSTRUMENTS (A) WHEN CONDITIONS DICTATE A TEMPORARY DEFENSIVE STRATEGY, (B)
UNTIL THE PROCEEDS FROM THE SALE OF THE FUND'S SHARES HAVE BEEN INVESTED OR (C)
DURING TEMPORARY PERIODS OF PORTFOLIO RESTRUCTURING. Such instruments may
include commercial paper of domestic corporations, certificates of deposit,
repurchase agreements, bankers' acceptances and other obligations of domestic
banks, and obligations issued or guaranteed by the U.S. Government, its
instrumentalities or its agencies.

HEDGING AND RETURN ENHANCEMENT STRATEGIES

THE FUND MAY ALSO ENGAGE IN VARIOUS PORTFOLIO STRATEGIES, INCLUDING
DERIVATIVES, TO REDUCE CERTAIN RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO
ENHANCE RETURN, BUT NOT FOR SPECULATION. These strategies include the purchase
and sale of put and call options, and the purchase and sale of stock index
futures and combinations thereof. The Manager will use such techniques as market
conditions warrant. The Fund's ability to use these strategies may be limited by
market conditions, regulatory limits and tax considerations and there can be no
assurance that any of these strategies will succeed. See "Investment Objective
and Policies" in the Statement of Additional Information. New financial products
and risk management techniques continue to be developed and the Fund may use
these new investments and techniques to the extent consistent with its
investment objective and policies. In contrast to many investment companies
which invest in securities of foreign issuers, the Fund is not permitted to
enter into futures or options contracts involving foreign currencies. As a
result, there may be occasions when the investment adviser may wish, but will be
unable, to hedge the Fund's currency exposure to foreign investments.

OPTIONS TRANSACTIONS

THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON EQUITY
SECURITIES THAT ARE TRADED ON NATIONAL SECURITIES EXCHANGES OR STOCK INDICES
THAT ARE TRADED ON NATIONAL SECURITIES EXCHANGES OR LISTED ON NASDAQ.

A CALL OPTION ON EQUITY SECURITIES GIVES THE PURCHASER, IN EXCHANGE FOR A
PREMIUM PAID, THE RIGHT FOR A SPECIFIED PERIOD OF TIME TO PURCHASE THE
SECURITIES SUBJECT TO THE OPTION AT A SPECIFIED PRICE (THE "EXERCISE PRICE" OR
"STRIKE PRICE"). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms of
the option contract, the underlying securities to the purchaser upon receipt of
the exercise price. When the Fund writes a call option, the Fund gives up the
potential for gain on the underlying securities in excess of the exercise price
of the option during the period that the option is open.

A PUT OPTION ON EQUITY SECURITIES GIVES THE PURCHASER, IN RETURN FOR A
PREMIUM, THE RIGHT, FOR A SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES
SUBJECT TO THE OPTION TO THE WRITER OF THE PUT AT THE SPECIFIED EXERCISE PRICE.
The writer of the put option, in return for the premium, has the obligation,
upon exercise of the option, to acquire the securities underlying the option at
the exercise price. The Fund as the writer of a put option might, therefore, be
obligated to purchase underlying securities for more than their current market
price.

OPTIONS ON STOCK INDICES ARE SIMILAR TO OPTIONS ON EQUITY SECURITIES EXCEPT
THAT, rather than the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right, in return for a
premium paid, to receive, upon exercise of the option, an amount of cash if the
closing level of the stock index upon which the option is based is greater than,
in the case of a call, or less than, in the case of a put, the exercise price of
the option. The writer of an index option, in return for a premium, is obligated
to pay the amount of cash due upon exercise of the option.

THE FUND WILL WRITE ONLY "COVERED" OPTIONS. An option is covered if, so long
as the Fund is obligated under the option, it owns an offsetting position in the
underlying securities or maintains cash, U.S. Government securities or other
liquid high-grade debt obligations with a value sufficient at all times to cover
its obligations in a segregated account. See "Investment Objective and
Policies--Limitation on Purchase and Sale of Stock Options, Options on Stock
Indices and Stock Index Futures" in the Statement of Additional Information.

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<PAGE>
THERE IS NO LIMITATION ON THE AMOUNT OF CALL OPTIONS THE FUND MAY WRITE. THE
FUND MAY ONLY WRITE COVERED PUT OPTIONS TO THE EXTENT THAT COVER FOR SUCH
OPTIONS DOES NOT EXCEED 25% OF THE FUND'S NET ASSETS. THE FUND WILL NOT PURCHASE
AN OPTION IF, AS A RESULT OF SUCH PURCHASE, MORE THAN 20% OF ITS TOTAL ASSETS
WOULD BE INVESTED IN PREMIUMS FOR SUCH OPTIONS.

STOCK INDEX FUTURES

THE FUND MAY PURCHASE AND SELL STOCK INDEX FUTURES WHICH ARE TRADED ON A
COMMODITIES EXCHANGE OR BOARD OF TRADE FOR CERTAIN HEDGING AND RISK MANAGEMENT
PURPOSES IN ACCORDANCE WITH REGULATIONS OF THE COMMODITY FUTURES TRADING
COMMISSION.

A STOCK INDEX FUTURES CONTRACT IS AN AGREEMENT IN WHICH ONE PARTY AGREES TO
DELIVER TO ANOTHER AN AMOUNT OF CASH EQUAL TO A SPECIFIC DOLLAR AMOUNT TIMES THE
DIFFERENCE BETWEEN A SPECIFIC STOCK INDEX AT THE CLOSE OF THE LAST TRADING DAY
OF THE CONTRACT AND THE PRICE AT WHICH THE AGREEMENT IS MADE. No physical
delivery of the underlying stocks in the index is made.

THE FUND MAY NOT PURCHASE OR SELL STOCK INDEX FUTURES IF, IMMEDIATELY
THEREAFTER, MORE THAN ONE-THIRD OF ITS NET ASSETS WOULD BE HEDGED. IN ADDITION,
EXCEPT IN THE CASE OF A CALL WRITTEN AND HELD ON THE SAME INDEX, THE FUND WILL
WRITE CALL OPTIONS ON INDICES OR SELL STOCK INDEX FUTURES ONLY IF THE AMOUNT
RESULTING FROM THE MULTIPLICATION OF THE THEN CURRENT LEVEL OF THE INDEX (OR
INDICES) UPON WHICH THE OPTIONS OR FUTURES CONTRACT(S) IS BASED, THE APPLICABLE
MULTIPLIER(S), AND THE NUMBER OF FUTURES OR OPTIONS CONTRACTS WHICH WOULD BE
OUTSTANDING WOULD NOT EXCEED ONE-THIRD OF THE VALUE OF THE FUND'S NET ASSETS.

THE FUND'S SUCCESSFUL USE OF STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON
INDICES DEPENDS UPON ITS ABILITY TO PREDICT THE DIRECTION OF THE MARKET AND IS
SUBJECT TO VARIOUS ADDITIONAL RISKS. The correlation between movements in the
price of the stock index future and the price of the securities being hedged is
imperfect and there is a risk that the value of the securities being hedged may
increase or decrease at a greater rate than the related futures contract,
resulting in losses to the Fund. Certain futures exchanges or boards of trade
have established daily limits on the amount that the price of a futures contract
or related options may vary, either up or down, from the previous day's
settlement price. These daily limits may restrict the Fund's ability to purchase
or sell certain futures contracts or related options on any particular day. In
addition, if the Fund purchases futures to hedge against market advances before
it can invest in common stock in an advantageous manner and the market declines,
the Fund might create a loss on the futures contract. In addition, the ability
of the Fund to close out a futures position or an option depends on a liquid
secondary market. There is no assurance that liquid secondary markets will exist
for any particular futures contract or option at any particular time. See
"Investment Objective and Policies" in the Statement of Additional Information.

THE FUND'S ABILITY TO ENTER INTO STOCK INDEX FUTURES AND LISTED OPTIONS IS
LIMITED BY THE REQUIREMENTS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE INTERNAL REVENUE CODE), FOR QUALIFICATION AS A REGULATED INVESTMENT
COMPANY. See "Taxes" in the Statement of Additional Information.

RISKS OF HEDGING AND RETURN ENHANCEMENT STRATEGIES

PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS INVOLVES INVESTMENT RISKS AND
TRANSACTION COSTS TO WHICH THE FUND WOULD NOT BE SUBJECT ABSENT THE USE OF THESE
STRATEGIES. If the investment adviser's prediction of movements in the direction
of the securities markets is inaccurate, the adverse consequences to the Fund
may leave the Fund in a worse position than if such strategies were not used.
Risks inherent in the use of options and stock index futures include (1)
dependence on the investment adviser's ability to predict correctly movements in
the direction of specific securities being hedged or the movement in stock
indices; (2) imperfect correlation between the price of options and stock index
futures and options thereon and movements in the prices of the securities being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to

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<PAGE>
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; and (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences.
See "Investment Objective and Policies" and "Taxes" in the Statement of
Additional Information.

OTHER INVESTMENTS AND POLICIES

FOREIGN INVESTMENTS

The Fund may invest up to 15% of its total assets in securities of foreign
issuers (including securities of issuers domiciled outside of the U.S. which
trade on a national securities exchange, obligations of foreign branches of
domestic banks and American Depositary Receipts).

Investing in securities of foreign companies and countries involves certain
considerations and risks which are not typically associated with investing in
securities of domestic companies. Foreign companies are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to U.S. companies. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and public
companies than exists in the United States. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes which may
decrease the net return on such investments as compared to dividends and
interest paid to the Fund by domestic companies. There may be the possibility of
expropriations, confiscatory taxation, political, economic or social instability
or diplomatic developments which could affect assets of the Fund held in foreign
countries. There may be less publicly available information about foreign
companies and governments compared to reports and ratings published about U.S.
companies. Foreign securities markets have substantially less volume than, for
example, the New York Stock Exchange and securities of some foreign companies
are less liquid and more volatile than securities of comparable U.S. companies.
Brokerage commissions and other transaction costs of foreign securities
exchanges are generally higher than in the United States. In addition, a
portfolio of foreign securities may be adversely affected by fluctuations in the
relative rates of exchange between the currencies of different nations and by
exchange control regulations.

The financial condition and results of operations of many domestic issuers
in which the Fund is permitted to invest may be affected by some of the
foregoing factors to the extent that their sales are made and/or their
operations are conducted outside the U.S.

REPURCHASE AGREEMENTS

The Fund may on occasion enter into repurchase agreements whereby the seller
of a security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money is
invested in the security. The Fund's repurchase agreements will at all times be
fully collateralized in an amount at least equal to the purchase price,
including accrued interest earned on the underlying securities. The instruments
held as collateral are valued daily, and if the value of instruments declines,
the Fund will require additional collateral. If the seller defaults and the
value of the collateral securing the repurchase agreement declines, the Fund may
incur a loss. The Fund participates in a joint repurchase account with other
investment companies managed by Prudential Mutual Fund Management, Inc. pursuant
to an order of the Securities and Exchange Commission (SEC).

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase or sell securities on a when-issued or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place as much as
a month or more in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. The Fund's Custodian will maintain, in a segregated account of the
Fund, cash, U.S. Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the Fund's purchase
commitments; the Custodian

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<PAGE>
will likewise segregate securities sold on a delayed delivery basis. The
securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during the period between purchase and settlement. At
the time of delivery of the securities the value may be more or less than the
purchase price and an increase in the percentage of the Fund's assets committed
to the purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Fund's net asset value.

BORROWING

The Fund may borrow an amount equal to no more than 20% of the value of its
total assets (calculated when the loan is made) from banks for temporary,
emergency or extraordinary purposes or for the clearance of transactions. The
Fund may pledge up to 20% of its total assets to secure these borrowings.
However, the Fund will not purchase portfolio securities when borrowings exceed
5% of the value of the Fund's total assets.

SHORT SALES AGAINST-THE-BOX

The Fund may make short sales of securities or maintain a short position,
provided that at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for an equal amount of the
securities of the same issuer as the securities sold short (a short sale
against-the-box), and that not more than 25% of the Fund's net assets
(determined at the time of the short sale) may be subject to such sales. Short
sales will be made primarily to defer realization of gain or loss for federal
tax purposes. The Fund does not intend to have more than 5% of its net assets
(determined at the time of the short sale) subject to short sales
against-the-box during the coming year.

ILLIQUID SECURITIES

The Fund may invest up to 10% of its net assets in illiquid securities,
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (the Securities Act) and privately placed commercial paper,
that have a readily available market are not considered illiquid for purposes of
this limitation. The investment adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the applicable notice period.

INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.

HOW THE FUND IS MANAGED

THE FUND HAS A BOARD OF DIRECTORS WHICH, IN ADDITION TO OVERSEEING THE ACTIONS
OF THE FUND'S MANAGER, SUBADVISER AND DISTRIBUTOR, AS SET FORTH BELOW, DECIDES
UPON MATTERS OF GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND SUPERVISES THE
DAILY BUSINESS OPERATIONS OF THE FUND. THE FUND'S SUBADVISER FURNISHES DAILY
INVESTMENT ADVISORY SERVICES.

For the fiscal year ended September 30, 1995, the Fund's total expenses as a
percentage of average net assets for the Fund's Class A, Class B and Class C
shares were 1.33%, 2.08%, and 2.08%, respectively. See "Financial Highlights."

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<PAGE>
MANAGER

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (PMF OR THE MANAGER), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS THE MANAGER OF THE FUND AND IS COMPENSATED
FOR ITS SERVICES AT AN ANNUAL RATE OF .70 OF 1% OF THE FUND'S AVERAGE DAILY NET
ASSETS. It was incorporated in May 1987 under the laws of the State of Delaware.
For the fiscal year ended September 30, 1995, the Fund paid management fees to
PMF of .70% of the Fund's average net assets. See "Manager" in the Statement of
Additional Information.

As of October 31, 1995, PMF served as the manager to 37 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 27 closed-end investment companies with aggregate assets of
approximately $50 billion.

UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PMF MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. See
"Manager" in the Statement of Additional Information.

UNDER A SUBADVISORY AGREEMENT BETWEEN PMF AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC OR THE SUBADVISER), PIC FURNISHES INVESTMENT ADVISORY SERVICES
IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PMF FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PMF continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.

The current portfolio manager of the Fund is Roger E. Ford, a Managing
Director of PIC. Mr. Ford has responsibility for the day-to-day management of
the Fund's portfolio. Mr. Ford has managed the Fund's portfolio since July 1995
and manages a number of other portfolios advised by PIC. Mr. Ford has been
employed by PIC as a portfolio manager since 1972.

PMF and PIC are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

DISTRIBUTOR

PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC. (PMFD), ONE SEAPORT PLAZA, NEW
YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF
DELAWARE AND SERVES AS THE DISTRIBUTOR OF CLASS A SHARES OF THE FUND. IT IS A
WHOLLY-OWNED SUBSIDIARY OF PMF.

PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR PSI), ONE
SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE
LAWS OF THE STATE OF DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS B AND
CLASS C SHARES OF THE FUND. IT IS AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF
PRUDENTIAL.

UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND SEPARATE DISTRIBUTION AGREEMENTS
(THE DISTRIBUTION AGREEMENTS), PMFD AND PRUDENTIAL SECURITIES (COLLECTIVELY, THE
DISTRIBUTOR) INCUR THE EXPENSES OF DISTRIBUTING THE FUND'S CLASS A, CLASS B AND
CLASS C SHARES. These expenses include commissions and account servicing fees
paid to, or on account of, financial advisers of Prudential Securities and
representatives of Pruco Securities Corporation (Prusec), an affiliated
broker-dealer, commissions and account servicing fees paid to, or on account of,
other broker-dealers or financial institutions (other than national banks) which
have entered into agreements with the Distributor, advertising expenses, the
cost of printing and mailing prospectuses to potential investors and indirect
and overhead costs of Prudential Securities and Prusec associated with the sale
of Fund shares, including lease, utility, communications and sales promotion
expenses. The State of Texas requires that shares of the Fund may be sold in
that state only by dealers or other financial institutions which are registered
there as broker-dealers.

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<PAGE>
Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.

UNDER THE CLASS A PLAN, THE FUND MAY PAY PMFD FOR ITS DISTRIBUTION-RELATED
ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL RATE OF UP TO .30 OF 1%
OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES. The Class A Plan provides
that (i) up to .25 of 1% of the average daily net assets of the Class A shares
may be used to pay for personal service and/ or the maintenance of shareholder
accounts (service fee) and (ii) total distribution fees (including the service
fee of .25 of 1%) may not exceed .30 of 1% of the average daily net assets of
the Class A shares. PMFD has agreed to limit its distribution-related fees
payable under the Class A Plan to .25 of 1% of the average daily net assets of
the Class A shares for the fiscal year ending September 30, 1996.

UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS PRUDENTIAL SECURITIES FOR
ITS DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS B AND CLASS C SHARES
AT AN ANNUAL RATE OF 1% OF THE AVERAGE DAILY NET ASSETS OF EACH OF THE CLASS B
AND CLASS C SHARES. The Class B and Class C Plans provide for the payment to
Prudential Securities of (i) an asset-based sales charge of .75 of 1% of the
average daily net assets of each of the Class B and Class C shares, and (ii) a
service fee of .25 of 1% of the average daily net assets of each of the Class B
and Class C shares. The service fee is used to pay for personal service and/or
the maintenance of shareholder accounts. Prudential Securities also receives
contingent deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges."

For the fiscal year ended September 30, 1995, the Fund paid distribution
expenses of .25%, 1% and 1% of the average net assets of the Class A, Class B
and Class C shares, respectively. The Fund records all payments made under the
Plans as expenses in the calculation of net investment income.

Distribution expenses attributable to the sale of shares of the Fund will be
allocated to each class based upon the ratio of sales of each class to the sales
of all shares of the Fund other than expenses allocable to a particular class.
The distribution fee and sales charge of one class will not be used to subsidize
the sale of another class.

Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan (the Rule 12b-1 Directors), vote annually to continue the Plan. Each Plan
may be terminated at any time by vote of a majority of the Rule 12b-1 Directors
or of a majority of the outstanding shares of the applicable class of the Fund.
The Fund will not be obligated to pay expenses incurred under any plan if it is
terminated or not continued.

In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments out of its own resources to dealers and other persons who
distribute shares of the Fund. Such payments may be calculated by reference to
the net asset value of shares sold by such persons or otherwise.

The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.

On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and the NASD to
resolve allegations that from 1980 through 1990 PSI sold certain limited
partnership interests in violation of securities laws to persons for whom such
securities were not suitable and misrepresented the safety, potential returns
and liquidity of these investments. Without admitting or denying the allegations
asserted against it, PSI consented to the entry of an SEC Administrative Order
which stated that PSI's conduct violated the federal securities laws, directed
PSI to cease and desist from violating the federal securities laws, pay civil
penalties, and adopt certain remedial measures to address the violations.

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<PAGE>
Pursuant to the terms of the SEC settlement, PSI agreed to the imposition of
a $10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages by purchasers of the partnership interests. PSI has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. PSI's
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. PSI consented to a censure and to the
payment of a $5,000,000 fine in settling the NASD action.

In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these changes. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.

For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by calling 1-800-225-1852.

The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets which are held by State Street Bank and Trust Company, an
independent custodian, are separate and distinct from PSI.

PORTFOLIO TRANSACTIONS

Prudential Securities may act as a broker or futures commission merchant for
the Fund, provided that the commissions, fees or other remuneration it receives
are fair and reasonable. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Its mailing address is P. O. Box
1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and, in
those capacities, maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P. O. Box 15005, New
Brunswick, New Jersey 08906-5005.

HOW THE FUND VALUES ITS SHARES

THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. THE
BOARD OF DIRECTORS HAS FIXED THE SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE
FUND'S NAV TO BE AS OF 4:15 P.M., NEW YORK TIME.

Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information.

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<PAGE>
The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the
Fund's portfolio securities do not materially affect the NAV. The New York Stock
Exchange is closed on the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject. It is
expected, however, that the NAV of the three classes will tend to converge
immediately after the recording of dividends, which will differ by approximately
the amount of the distribution-related expense accrual differential among the
classes.

HOW THE FUND CALCULATES PERFORMANCE

FROM TIME TO TIME THE FUND MAY ADVERTISE ITS TOTAL RETURN (INCLUDING "AVERAGE
ANNUAL" TOTAL RETURN AND "AGGREGATE" TOTAL RETURN) AND YIELD IN ADVERTISEMENTS
OR SALES LITERATURE. TOTAL RETURN AND YIELD ARE CALCULATED SEPARATELY FOR CLASS
A, CLASS B AND CLASS C SHARES. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" shows
how much an investment in the Fund would have increased (decreased) over a
specified period of time (I.E., one, five or ten years or since inception of the
Fund) assuming that all distributions and dividends by the Fund were reinvested
on the reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period of
time. "Average annual" total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant over the entire period. "Average annual" total
return smooths out variations in performance and takes into account any
applicable initial or contingent deferred sales charges. Neither "average
annual" total return nor "aggregate" total return takes into account any federal
or state income taxes which may be payable upon redemption. The "yield" refers
to the income generated by an investment in the Fund over a one-month or 30-day
period. This income is then "annualized;" that is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The Fund also may include comparative
performance information in advertising or marketing the Fund's shares. Such
performance information may include data from Lipper Analytical Services, Inc.,
Morningstar Publications, Inc., other industry publications, business
periodicals and market indices. See "Performance Information" in the Statement
of Additional Information. The Fund will include performance data for each class
of shares of the Fund offered through this Prospectus in any advertisement or
information including performance data of the Fund. Further performance
information is contained in the Fund's annual and semi-annual reports to
shareholders, which may be obtained without charge. See "Shareholder Guide--
Shareholder Services-- Reports to Shareholders."

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

THE FUND HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A
REGULATED INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY, THE
FUND WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME
AND CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. See "Taxes"
in the Statement of Additional Information.

16
<PAGE>
TAXATION OF SHAREHOLDERS

Any dividends out of net investment income, together with distributions of
net short-term capital gains (I.E., the excess of net short-term capital gains
over net long-term capital losses), will be taxable as ordinary income to the
shareholder whether or not reinvested. Any net long-term capital gains (I.E.,
the excess of net long-term capital gains over net short-term capital losses)
distributed to shareholders will be taxable as such to the shareholders, whether
or not reinvested and regardless of the length of time a shareholder has owned
his or her shares. The maximum long-term capital gains rate for individuals is
28%. The maximum long-term capital gains rate for corporate shareholders is
currently the same as the maximum tax rate for ordinary income.

Dividends paid by the Fund will be eligible for the 70% dividends-received
deduction for corporate shareholders to the extent that the Fund's income is
derived from certain dividends received from domestic corporations. Capital
gains distributions are not eligible for the 70% dividends-received deduction.

Any gain or loss realized upon a sale or redemption of Fund shares by a
shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Any such loss, however,
on shares that are held for six months or less, will be treated as a long-term
capital loss to the extent of any capital gain distributions received by the
shareholder with respect to those shares.

The Fund has obtained opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of Class
B or Class C shares for Class A shares constitutes a taxable event for federal
income tax purposes. However, such opinions are not binding on the Internal
Revenue Service.

Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividends, capital gain distributions and redemption
proceeds payable to individuals and certain noncorporate shareholders who fail
to furnish correct tax identification numbers on IRS Form W-9 (or IRS Form W-8
in the case of certain foreign shareholders). Withholding at this rate is also
required from dividends and capital gains distributions (but not redemption
proceeds) payable to shareholders who are otherwise subject to backup
withholding. Dividends of net investment income and short-term capital gains to
a foreign shareholder will generally be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate).

DIVIDENDS AND DISTRIBUTIONS

THE FUND EXPECTS TO PAY DIVIDENDS OF NET INVESTMENT INCOME, IF ANY,
SEMI-ANNUALLY AND MAKE DISTRIBUTIONS AT LEAST ANNUALLY OF ANY NET CAPITAL GAINS.
Dividends paid by the Fund with respect to each class of shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount except that each class will bear
its own distribution charges, generally resulting in lower dividends for Class B
and Class C shares. Distributions of net capital gains, if any, will be paid in
the same amount for each class of shares. See "How the Fund Values its Shares."

DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL FUND SHARES BASED ON
THE NAV OF EACH CLASS ON THE RECORD DATE, OR SUCH OTHER DATE AS THE BOARD OF
DIRECTORS MAY DETERMINE, UNLESS THE SHAREHOLDER ELECTS IN WRITING NOT LESS THAN
FIVE BUSINESS DAYS PRIOR TO THE RECORD DATE TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS IN CASH. Such election should be submitted to Prudential Mutual
Fund Services, Inc., Attention: Account Maintenance, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. The Fund will notify each shareholder after
the close of the Fund's taxable year of both the dollar amount and the taxable
status of that year's dividends and distributions on a per share basis. If you
hold shares through Prudential Securities, you should contact your financial
adviser to elect to receive dividends and distributions in cash.

17
<PAGE>
WHEN THE FUND GOES "EX-DIVIDEND," THE NAV OF EACH CLASS IS REDUCED BY THE
AMOUNT OF THE DIVIDEND OR DISTRIBUTION ALLOCABLE TO EACH CLASS. IF YOU BUY
SHARES JUST PRIOR TO THE EX-DIVIDEND DATE, THE PRICE YOU PAY WILL INCLUDE THE
DIVIDEND OR DISTRIBUTION AND A PORTION OF YOUR INVESTMENT WILL BE RETURNED TO
YOU AS A TAXABLE DIVIDEND OR DISTRIBUTION. YOU SHOULD, THEREFORE, CONSIDER THE
TIMING OF DIVIDENDS AND DISTRIBUTIONS WHEN MAKING YOUR PURCHASES.

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

THE FUND WAS INCORPORATED IN MARYLAND ON JULY 28, 1980. THE FUND IS
AUTHORIZED TO ISSUE 750 MILLION SHARES OF COMMON STOCK, $.01 PAR VALUE PER
SHARE, DIVIDED INTO THREE CLASSES, DESIGNATED CLASS A, CLASS B AND CLASS C
COMMON STOCK, EACH OF WHICH CONSISTS OF 250 MILLION AUTHORIZED SHARES. Each
class of common stock represents an interest in the same assets of the Fund and
is identical in all respects except that (i) each class bears different
distribution expenses, (ii) each class has exclusive voting rights with respect
to its distribution and service plan (except that the Fund has agreed with the
SEC in connection with the offering of a conversion feature on Class B shares to
submit any amendment of the Class A Plan to both Class A and Class B
shareholders), (iii) each class has a different exchange privilege and (iv) only
Class B shares have a conversion feature. See "How the Fund is
Managed--Distributor." The Fund has received an order from the SEC permitting
the issuance and sale of multiple classes of common stock. Currently, the Fund
is offering three classes, designated Class A, Class B and Class C shares. In
accordance with the Fund's Articles of Incorporation, the Board of Directors may
authorize the creation of additional series of common stock and classes within
such series, with such preferences, privileges, limitations and voting and
dividend rights as the Board may determine.

The Board of Directors may increase or decrease the number of authorized
shares without the approval of shareholders. Shares of the Fund, when issued,
are fully paid, nonassessable, fully transferable and redeemable at the option
of the holder. Shares are also redeemable at the option of the Fund under
certain circumstances as described under "Shareholder Guide--How to Sell Your
Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except as noted above, and each class bears the
expenses related to the distribution of its shares. Except for the conversion
feature applicable to the Class B shares, there are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of common
stock of the Fund is entitled to its portion of all of the Fund's assets after
all debt and expenses of the Fund have been paid. Since Class B and Class C
shares generally bear higher distribution expenses than Class A shares, the
liquidation proceeds to shareholders of those classes are likely to be lower
than to Class A shareholders. The Fund's shares do not have cumulative voting
rights for the election of Directors.

THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF DIRECTORS IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OF THE
FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE OR
MORE DIRECTORS OR TO TRANSACT ANY OTHER BUSINESS.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.

18
<PAGE>
SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUND

YOU MAY PURCHASE SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, PRUSEC OR
DIRECTLY FROM THE FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND
SERVICES, INC. (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES,
P.O. BOX 15020, NEW BRUNSWICK, NEW JERSEY 08906-5020. The minimum initial
investment for Class A and Class B shares is $1,000 per class and $5,000 for
Class C shares, except that the minimum initial investment for Class C shares
may be waived from time to time. The minimum subsequent investment is $100 for
all classes. All minimum investment requirements are waived for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. The minimum initial investment
requirement is waived for purchases of Class A shares effected through an
exchange of Class B shares of The BlackRock Government Income Trust. See
"Shareholder Services" below.

THE PURCHASE PRICE IS THE NAV NEXT DETERMINED FOLLOWING RECEIPT OF AN ORDER
BY THE TRANSFER AGENT OR PRUDENTIAL SECURITIES PLUS A SALES CHARGE WHICH, AT
YOUR OPTION, MAY BE IMPOSED EITHER (I) AT THE TIME OF PURCHASE (CLASS A SHARES)
OR (II) ON A DEFERRED BASIS (CLASS B OR CLASS C SHARES). SEE "ALTERNATIVE
PURCHASE PLAN" BELOW. SEE ALSO "HOW THE FUND VALUES ITS SHARES."

Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing for
each transaction. Certificates are issued only for full shares. Shareholders who
hold their shares through Prudential Securities will not receive stock
certificates.

The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.

Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the fifth business day following the investment.

Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.

PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. The following information will be requested: your name, address, tax
identification number, class election, dividend distribution election, amount
being wired, and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust Company, Boston,
Massachusetts, Custody and Shareholder Services Division, Attention: Prudential
Growth Opportunity Fund, Inc., specifying on the wire the account number
assigned by PMFS and your name and identifying the sales charge alternative
(Class A, Class B or Class C shares).

If you arrange for receipt by State Street of Federal Funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Fund as
of that day.

In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Growth
Opportunity Fund, Inc., Class A, Class B or Class C shares and your name and
individual account number. It is not necessary to call PMFS to make subsequent
purchase orders utilizing Federal Funds. The minimum amount which may be
invested by wire is $1,000.

19
<PAGE>
ALTERNATIVE PURCHASE PLAN

THE FUND OFFERS THREE CLASSES OF SHARES (CLASS A, CLASS B AND CLASS C
SHARES) WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES CHARGE STRUCTURE
FOR YOUR INDIVIDUAL CIRCUMSTANCES GIVEN THE AMOUNT OF THE PURCHASE, THE LENGTH
OF TIME YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT CIRCUMSTANCES
(ALTERNATIVE PURCHASE PLAN).

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge .30 of 1% (Currently being Initial sales charge waived or
of 5% of the public offering charged at a rate of .25 of reduced for certain purchases
price 1%)

CLASS B Maximum contingent deferred 1% Shares convert to Class A
sales charge or CDSC of 5% of shares approximately seven
the lesser of the amount years after purchase
invested or the redemption
proceeds; declines to zero
after six years

CLASS C Maximum CDSC of 1% of the 1% Shares do not convert to
lesser of the amount invested another class
or the redemption proceeds on
redemptions made within one
year of purchase
</TABLE>

The three classes of shares represent an interest in the same portfolio of
investments of the Fund and have the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan (except as
noted under the heading "General Information--Description of Common Stock"), and
(iii) only Class B shares have a conversion feature. The three classes also have
separate exchange privileges. See "How to Exchange Your Shares" below. The
income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee of each class.
Class B and Class C shares bear the expenses of a higher distribution fee which
will generally cause them to have higher expense ratios and to pay lower
dividends than the Class A shares.

Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B and Class C shares
and will generally receive more compensation initially for selling Class A and
Class B shares than for selling Class C shares.

IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER
THINGS, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted above, (3) whether you
qualify for any reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among the different classes of shares (see "How to
Exchange Your Shares" below) and (5) the fact that Class B shares automatically
convert to Class A shares approximately seven years after purchase (see
"Conversion Feature--Class B Shares" below).

The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:

If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to a maximum initial sales charge of 5% and Class B shares
are subject to a CDSC of 5% which declines to zero over a 6 year period, you
should consider purchasing Class C shares over either Class A or Class B shares.

20
<PAGE>
If you intend to hold your investment for 7 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
Class A shares approximately 7 years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or Class C shares.

If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money invested
initially because the sales charge on Class A shares is deducted at the time of
purchase.

If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed the
initial sales charge plus cumulative annual distribution-related fees on Class A
shares. This does not take into account the time value of money, which further
reduces the impact of the higher Class B or Class C distribution-related fee on
the investment, fluctuations in net asset value, the effect of the return on the
investment over this period of time or redemptions during which the CDSC is
applicable.

ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT
OR UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A
SHARES. SEE "REDUCTION AND WAIVER OF INITIAL SALES CHARGES" BELOW.

CLASS A SHARES

The offering price of Class A shares for investors choosing the initial sales
charge alternative is the next determined NAV plus a sales charge (expressed as
a percentage of the offering price and of the amount invested) as shown in the
following table:

<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------- ----------------- ----------------- -------------------
<S> <C> <C> <C>
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50 4.71 4.25
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.25 3.36 3.00
$250,000 to $499,999 2.50 2.56 2.40
$500,000 to $999,999 2.00 2.04 1.90
$1,000,000 and above None None None
</TABLE>

Selling dealers may be deemed to be underwriters, as that term is defined in
the Securities Act.

REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "Purchase and Redemption of Fund
Shares--Reduction and Waiver of Initial Sales Charges--Class A Shares" in the
Statement of Additional Information.

BENEFIT PLANS. Class A shares may be purchased at NAV, without payment of
an initial sales charge, by pension, profit-sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code and deferred
compensation and annuity plans under Sections 457 and 403(b)(7) of the Internal
Revenue Code (Benefit Plans), provided that the plan has existing assets of at
least $1 million invested in shares of Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege) or
1,000 eligible employees or participants. In the case of Benefit Plans whose
accounts are held directly with the Transfer Agent or Prudential Securities and
for which the Transfer Agent or Prudential Securities

21
<PAGE>
does individual account record keeping (Direct Account Benefit Plans) and
Benefit Plans sponsored by PSI or its subsidiaries (PSI or Subsidiary Prototype
Benefit Plans), Class A shares may be purchased at NAV by participants who are
repaying loans made from such plans to the participant.

PRUDENTIAL VISTA PROGRAM. Class A shares are offered at net asset value to
certain qualified employee retirement benefit plans under section 401 of the
Internal Revenue Code, for which Prudential Defined Contribution Services serves
as the recordkeeper provided that such plan is also participating in the
Prudential Vista Program (PruVista Plan), and provided further that (i) for
existing plans, the plan has existing assets of at least $1 million and at least
100 eligible employees or participants, and (ii) for new plans, the plan has at
least 500 eligible employees or participants. The term "existing assets" for
this purpose includes transferable cash and GICs (guaranteed investment
contracts) maturing within 4 years.

PRUARRAY PLANS. Class A shares may be purchased at NAV by certain
retirement and deferred compensation plans, qualified or non-qualified under the
Internal Revenue Code, including pension, profit-sharing, stock-bonus or other
employee benefit plans under Section 401 of the Internal Revenue Code and
deferred compensation and annuity plans under Sections 457 and 403(b)(7) of the
Code that participate in the Transfer Agent's PruArray Program (a benefit plan
record keeping service) (hereafter referred to as a PruArray Plan); provided (i)
that the plan has at least $1 million in existing assets or 1,000 eligible
employees or participants and (ii) that Prudential Mutual Funds constitute at
least one-half of the plan's investment options. The term "existing assets" for
this purpose includes stock issued by a PruArray Plan sponsor and shares of
non-money market Prudential Mutual Funds and shares of certain unaffiliated
non-money market mutual funds that participate in the PruArray Program
(Participating Funds). "Existing assets" also include shares of money market
funds acquired by exchange from a Participating Fund.

SPECIAL RULES APPLICABLE TO RETIREMENT PLANS. After a Benefit Plan,
PruVista Plan or PruArray Plan qualifies to purchase Class A shares at NAV, all
subsequent purchases will be made at NAV.

OTHER WAIVERS. In addition, Class A shares may be purchased at NAV, through
Prudential Securities or the Transfer Agent, by the following persons: (a)
Directors and officers of the Fund and other Prudential Mutual Funds, (b)
employees of Prudential Securities and PMF and their subsidiaries and members of
the families of such persons who maintain an "employee related" account at
Prudential Securities or the Transfer Agent, (c) employees and special agents of
Prudential and its subsidiaries and all persons who have retired directly from
active service with Prudential or one of its subsidiaries, (d) registered
representatives and employees of dealers who have entered into a selected dealer
agreement with Prudential Securities provided that purchases at NAV are
permitted by such person's employer and (e) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 90 days
of the commencement of the financial adviser's employment at Prudential
Securities, (ii) the purchase is made with proceeds of a redemption of shares of
any open-end, non-money market fund sponsored by the financial adviser's
previous employer (other than a fund which imposes a distribution or service fee
of .25 of 1% or less) and (iii) the financial adviser served as the client's
broker on the previous purchases.

You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec that you are entitled to the reduction or waiver
of the sales charge. The reduction or waiver will be granted subject to
confirmation of your entitlement. No initial sales charges are imposed upon
Class A shares acquired upon the reinvestment of dividends and distributions.
See "Purchase and Redemption of Fund Shares--Reduction and Waiver of Initial
Sales Charges--Class A Shares" in the Statement of Additional Information.

CLASS B AND CLASS C SHARES

The offering price of Class B and Class C shares for investors choosing one of
the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent or Prudential Securities. Although
there is no sales charge imposed at the time of purchase, redemptions of Class B
and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges."

22
<PAGE>
HOW TO SELL YOUR SHARES

YOU CAN REDEEM YOUR SHARES AT ANY TIME FOR CASH AT THE NAV NEXT DETERMINED
AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM BY THE TRANSFER AGENT OR
PRUDENTIAL SECURITIES. SEE "HOW THE FUND VALUES ITS SHARES." In certain cases,
however, redemption proceeds will be reduced by the amount of any applicable
contingent deferred sales charge, as described below. See "Contingent Deferred
Sales Charges" below.

IF YOU HOLD SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, YOU MUST
REDEEM YOUR SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.
IF YOU HOLD SHARES IN NON-CERTIFICATE FORM, A WRITTEN REQUEST FOR REDEMPTION
SIGNED BY YOU EXACTLY AS THE ACCOUNT IS REGISTERED IS REQUIRED. IF YOU HOLD
CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE FACE OF THE
CERTIFICATES, MUST BE RECEIVED BY THE TRANSFER AGENT IN ORDER FOR THE REDEMPTION
REQUEST TO BE PROCESSED. IF REDEMPTION IS REQUESTED BY A CORPORATION,
PARTNERSHIP, TRUST OR FIDUCIARY, WRITTEN EVIDENCE OF AUTHORITY ACCEPTABLE TO THE
TRANSFER AGENT MUST BE SUBMITTED BEFORE SUCH REQUEST WILL BE ACCEPTED. All
correspondence and documents concerning redemptions should be sent to the Fund
in care of its Transfer Agent, Prudential Mutual Fund Services, Inc., Attention:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.

If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power, must be guaranteed by
an "eligible guarantor institution." An "eligible guarantor institution"
includes any bank, broker, dealer or credit union. The Transfer Agent reserves
the right to request additional information from and make reasonable inquiries
of, any eligible guarantor institution. For clients of Prusec, a signature
guarantee may be obtained from the agency or office manager of most Prudential
Insurance and Financial Services or Preferred Services offices.

PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR WRITTEN
REQUEST, EXCEPT AS INDICATED BELOW. IF YOU HOLD SHARES THROUGH PRUDENTIAL
SECURITIES, PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE CREDITED TO YOUR
PRUDENTIAL SECURITIES ACCOUNT, UNLESS YOU INDICATE OTHERWISE. Such payment may
be postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on such Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the SEC, by
order, so permits; provided that applicable rules and regulations of the SEC
shall govern as to whether the conditions prescribed in (b), (c) or (d) exist.

PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL
THE FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS BEEN
HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE CHECK
BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY WIRE OR
BY CERTIFIED OR OFFICIAL BANK CHECK.

REDEMPTION IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the SEC. Securities will be readily marketable and will be valued in the same
manner as in a regular redemption. See "How the Fund Values its Shares." If your
shares are redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Fund, however, has elected to be governed by Rule 18f-1
under the Investment Company Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund during any 90-day period for any one shareholder.

23
<PAGE>
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board of
Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Fund will give
such shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption. No CDSC will be imposed on any such
involuntary redemption.

90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not previously
exercised the repurchase privilege, you may reinvest any portion or all of the
proceeds of such redemption in shares of the Fund at the NAV next determined
after the order is received, which must be within 90 days after the date of the
redemption. Any CDSC paid in connection with such redemption will be credited
(in shares) to your account. (If less than a full repurchase is made, the credit
will be on a PRO RATA basis.) You must notify the Fund's Transfer Agent, either
directly or through Prudential Securities, at the time the repurchase privilege
is exercised to adjust your account for the CDSC you previously paid. Therafter,
any redemptions will be subject to the CDSC applicable at the time of the
redemption. See "Contingent Deferred Sales Charges" below. Exercise of the
repurchase privilege will generally not affect federal income tax treatment of
any gain realized upon redemption. However, if the redemption was made within a
30-day period of the repurchase and if the redemption resulted in a loss, some
or all of the loss, depending on the amount reinvested, will generally not be
allowed for federal income tax purposes.

CONTINGENT DEFERRED SALES CHARGES

Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C shares
redeemed within one year of purchase will be subject to a 1% CDSC. The CDSC will
be deducted from the redemption proceeds and reduce the amount paid to you. The
CDSC will be imposed on any redemption by you which reduces the current value of
your Class B or Class C shares to an amount which is lower than the amount of
all payments by you for shares during the preceding six years, in the case of
Class B shares, and one year, in the case of Class C shares. A CDSC will be
applied on the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or shares acquired
through reinvestment of dividends or distributions are not subject to a CDSC.
The amount of any contingent deferred sales charge will be paid to and retained
by the Distributor. See "How the Fund is Managed--Distributor" and "Waiver of
the Contingent Deferred Sales Charges--Class B Shares" below.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchase of shares, all payments during a month will
be aggregated and deemed to have been made on the last day of the month. The
CDSC will be calculated from the first day of the month after the initial
purchase, excluding the time shares were held in a money market fund. See "How
to Exchange Your Shares."

The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES
CHARGE AS A PERCENTAGE
OF THE DOLLARS
YEAR SINCE PURCHASE INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
- ---------------------------------------------------------------------- ----------------------
<S> <C>
First................................................................. 5.0%
Second................................................................ 4.0%
Third................................................................. 3.0%
Fourth................................................................ 2.0%
Fifth................................................................. 1.0%
Sixth................................................................. 1.0%
Seventh............................................................... None
</TABLE>

In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value above the total amount of

24
<PAGE>
payments for the purchase of Fund shares made during the preceding six years
(five years for Class B shares purchased prior to January 22, 1990); then of
amounts representing the cost of shares held beyond the applicable CDSC period;
then of amounts representing the cost of shares acquired prior to July 1, 1985;
and finally, of amounts representing the cost of shares held for the longest
period of time within the applicable CDSC period.

For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided to
redeem $500 of your investment. Assuming at the time of the redemption the net
asset value had appreciated to $12 per share, the value of your Class B shares
would be $1,260 (105 shares at $12 per share). The CDSC would not be applied to
the value of the reinvested dividend shares and the amount which represents
appreciation ($260). Therefore, $240 of the $500 redemption proceeds ($500 minus
$260) would be charged at a rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $9.60.

For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC will
be waived in the case of a redemption following the death or disability of a
shareholder or, in the case of a trust account, following the death or
disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), at the time of death or initial determination of
disability, provided that the shares were purchased prior to death or
disability.

The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code for a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions include: (i) in the case of a
tax-deferred retirement plan, a lump-sum or other distribution after retirement;
(ii) in the case of an IRA or Section 403(b) custodial account, a lump-sum or
other distribution after attaining age 59 1/2; and (iii) a tax-free return of an
excess contribution or plan distributions following the death or disability of
the shareholder, provided that the shares were purchased prior to death or
disability. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from service (I.E.,
following voluntary or involuntary termination of employment or following
retirement). Under no circumstances will the CDSC be waived on redemptions
resulting from the termination of a tax-deferred retirement plan, unless such
redemptions otherwise qualify for a waiver as described above. In the case of
Direct Account and PSI or Subsidiary Prototype Benefit Plans, the CDSC will be
waived on redemptions which represent borrowings from such plans. Shares
purchased with amounts used to repay a loan from such plans on which a CDSC was
not previously deducted will thereafter be subject to a CDSC without regard to
the time such amounts were previously invested. In the case of a 401(k) plan,
the CDSC will also be waived upon the redemption of shares purchased with
amounts used to repay loans made from the account to the participant and from
which a CDSC was previously deducted.

In addition, the CDSC will be waived on redemptions of shares held by a
Director of the Fund.

You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to waiver of the CDSC and provide the Transfer Agent with such
supporting documentation as it may deem appropriate. The waiver will be granted
subject to confirmation of your entitlement. See "Purchase and Redemption of
Fund Shares--Waiver of the Contingent Deferred Sales Charge--Class B Shares" in
the Statement of Additional Information.

A quantity discount may apply to redemptions of Class B shares purchased
prior to August 1, 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to August 1, 1994" in the Statement of
Additional Information.

25
<PAGE>
CONVERSION FEATURE--CLASS B SHARES

Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will be effected at
relative net asset value without the imposition of any additional sales charge.
The first conversion of Class B shares occurred in February 1995, when the
conversion feature was first implemented.

Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula: (i)
the ratio of (a) the amounts paid for Class B shares purchased at least seven
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares purchased and then held in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or amounts
representing Class B shares then in your account that were acquired through the
automatic reinvestment of dividends and other distributions will convert to
Class A shares.

For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately seven years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (i.e., $1,000
divided by $2,100 (47.62%), multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.

Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of conversion. Thus, although
the aggregate dollar value will be the same, you may receive fewer Class A
shares than Class B shares converted. See "How the Fund Values its Shares."

For purposes of calculating the applicable holding period for conversions,
all payments for Class B shares during a month will be deemed to have been made
on the last day of the month, or for Class B shares acquired through exchange,
or a series of exchanges, on the last day of the month in which the original
payment for purchases of such Class B shares was made. For Class B shares
previously exchanged for shares of a money market fund, the time period during
which such shares were held in the money market fund will be excluded. For
example, Class B shares held in a money market fund for one year will not
convert to Class A shares until approximately eight years from purchase. For
purposes of measuring the time period during which shares are held in a money
market fund, exchanges will be deemed to have been made on the last day of the
month. Class B shares acquired through exchange will convert to Class A shares
after expiration of the conversion period applicable to the original purchase of
such shares.

The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, and Class C shares
will not constitute "preferential dividends" under the Internal Revenue Code and
(ii) that the conversion of shares does not constitute a taxable event. The
conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended, Class
B shares of the Fund will continue to be subject, possibly indefinitely, to
their higher annual distribution and service fee.

HOW TO EXCHANGE YOUR SHARES

AS A SHAREHOLDER OF THE FUND YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN
OTHER PRUDENTIAL MUTUAL FUNDS, INCLUDING ONE OR MORE SPECIFIED MONEY MARKET
FUNDS, SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS OF SUCH FUNDS. CLASS A,
CLASS B AND CLASS C SHARES MAY BE EXCHANGED FOR CLASS A, CLASS B AND CLASS C
SHARES, RESPECTIVELY, OF ANOTHER FUND ON THE BASIS OF THE RELATIVE NAV. No sales
charge will be imposed at the time of the exchange. Any applicable

26
<PAGE>
CDSC payable upon the redemption of shares exchanged will be calculated from the
first day of the month after the initial purchase, excluding the time shares
were held in a money market fund. Class B and Class C shares may not be
exchanged into money market funds other than Prudential Special Money Market
Fund. For purposes of calculating the holding period applicable to the Class B
conversion feature, the time period during which Class B shares were held in a
money market fund will be excluded. See "Conversion Feature--Class B Shares"
above. An exchange will be treated as a redemption and purchase for tax
purposes. See "Shareholder Investment Account--Exchange Privilege" in the
Statement of Additional Information.

IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE TRANSFER
AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may call the Fund
at (800) 225-1852 to execute a telephone exchange of shares, on weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York time. For your
protection and to prevent fraudulent exchanges, your telephone call will be
recorded and you will be asked to provide your personal identification number. A
written confirmation of the exchange transaction will be sent to you. NEITHER
THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH
RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER
THE FOREGOING PROCEDURES. All exchanges will be made on the basis of the
relative NAV of the two funds next determined after the request is received in
good order. The Exchange Privilege is available only in states where the
exchange may legally be made.

IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.

IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.

You may also exchange shares by mail by writing to Prudential Mutual Fund
Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.

IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS THE TELEPHONE EXCHANGE OF
SHARES MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD MAKE EXCHANGES BY MAIL BY
WRITING TO PRUDENTIAL MUTUAL FUND SERVICES, INC., AT THE ADDRESS NOTED ABOVE.

SPECIAL EXCHANGE PRIVILEGE. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV. See "Alternative
Purchase Plan--Class A Shares--Reduction and Waiver of Initial Sales Charges"
above. Under this exchange privilege, amounts representing any Class B and Class
C shares (which are not subject to a CDSC) held in such a shareholder's account
will be automatically exchanged for Class A shares on a quarterly basis, unless
the shareholder elects otherwise. Eligibility for this exchange privilege will
be calculated on the business day prior to the date of the exchange. Amounts
representing Class B or Class C shares which are not subject to a CDSC include
the following: (1) amounts representing Class B or Class C shares acquired
pursuant to the automatic reinvestment of dividends and distributions, (2)
amounts representing the increase in the net asset value above the total amount
of payments for the purchase of Class B or Class C shares and (3) amounts
representing Class B or Class C shares held beyond the applicable CDSC period.
Class B and Class C shareholders must notify the Transfer Agent either directly
or through Prudential Securities or Prusec that they are eligible for this
special exchange privilege.

The Exchange Privilege may be modified or terminated at any time on 60 days'
notice to shareholders.

SHAREHOLDER SERVICES

In addition to the exchange privilege, as a shareholder in the Fund, you can
take advantage of the following additional services and privileges:

- AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Fund at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold shares through
Prudential Securities, you should contact your financial adviser.

27
<PAGE>
- AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make regular
purchases of the Fund's shares in amounts as little as $50 via an automatic
debit to a bank account or Prudential Securities account (including a Command
Account). For additional information about this service, you may contact your
Prudential Securities financial adviser, Prusec representative or the Transfer
Agent directly.

- TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or the
Transfer Agent. If you are considering adopting such a plan, you should consult
with your own legal or tax adviser with respect to the establishment and
maintenance of such a plan.

- SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares-- Contingent Deferred Sales Charges."

- REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder report
and annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, New York 10292. In addition, monthly unaudited financial data
are available upon request from the Fund.

- SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at One
Seaport Plaza, New York, New York 10292, or by telephone at (800) 225-1852
(toll-free) or, from outside the U.S.A., at (908) 417-7555 (collect).

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

28
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec representative or telephone the Funds at
(800) 225-1852 for a free prospectus. Read the prospectus carefully before you
invest or send money.

TAXABLE BOND FUNDS
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust

TAX-EXEMPT BOND FUNDS
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

GLOBAL FUNDS
Prudential Europe Growth Fund, Inc.
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Global Assets Portfolio
Limited Maturity Portfolio
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Global Utility Fund, Inc.

EQUITY FUNDS
Prudential Allocation Fund
Balanced Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Growth Opportunity Fund, Inc.
Prudential Jennison Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

MONEY MARKET FUNDS
-TAXABLE MONEY MARKET FUNDS
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
-TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
-COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund
-INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

A-1
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

-------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
FUND HIGHLIGHTS................................. 2
Risk Factors and Special Characteristics...... 2
FUND EXPENSES................................... 4
FINANCIAL HIGHLIGHTS............................ 5
HOW THE FUND INVESTS............................ 8
Investment Objective and Policies............. 8
Hedging and Return Enhancement Strategies..... 9
Other Investments and Policies................ 11
Investment Restrictions....................... 12
HOW THE FUND IS MANAGED......................... 12
Manager....................................... 13
Distributor................................... 13
Portfolio Transactions........................ 15
Custodian and Transfer and Dividend Disbursing
Agent........................................ 15
HOW THE FUND VALUES ITS SHARES.................. 15
HOW THE FUND CALCULATES PERFORMANCE............. 16
TAXES, DIVIDENDS AND DISTRIBUTIONS.............. 16
GENERAL INFORMATION............................. 18
Description of Common Stock................... 18
Additional Information........................ 18
SHAREHOLDER GUIDE............................... 19
How to Buy Shares of the Fund................. 19
Alternative Purchase Plan..................... 20
How to Sell Your Shares....................... 23
Conversion Feature--Class B Shares............ 26
How to Exchange Your Shares................... 26
Shareholder Services.......................... 27
THE PRUDENTIAL MUTUAL FUND FAMILY............... A-1
</TABLE>

- -------------------------------------------
MF109A 44401I

Class A: 74435E 10 9
CUSIP Nos.: Class B: 74435E 20 8
Class C: 74435E 30 7

PRUDENTIAL
GROWTH OPPORTUNITY
FUND, INC.
- --------------------

NOVEMBER 29, 1995

PRUDENTIAL MUTUAL FUNDS
BUILDING YOUR FUTURE
ON OUR STRENGTH-SM-
[LOGO]
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1995

Prudential Growth Opportunity Fund, Inc. (the Fund), is an open-end
diversified management investment company whose objective is capital growth. The
Fund intends to invest principally in a carefully selected portfolio of common
stocks, generally stocks having prospects of a high return on equity, increasing
earnings, increasing dividends (or an expectation of dividends), and price
earnings ratios which are not excessive. The Fund's purchase and sale of put and
call options and related short-term trading may result in a high portfolio
turnover rate. These activities may be considered speculative and may result in
higher risks and costs to the Fund. The Fund may also buy and sell stock index
futures and may buy and sell options on stock indices pursuant to limits
described herein. There can be no assurance that the Fund's investment objective
will be achieved. See "Investment Objective and Policies."

The Fund's address is One Seaport Plaza, New York, New York 10292, and its
telephone number is (800) 225-1852.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated November 29, 1995. A copy
of the Prospectus may be obtained from the Fund upon request.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
---- ---------------
<S> <C> <C>
General Information................................... B-2 18
Investment Objective and Policies..................... B-2 8
Investment Restrictions............................... B-7 12
Directors and Officers................................ B-8 12
Manager............................................... B-11 13
Distributor........................................... B-13 13
Portfolio Transactions and Brokerage.................. B-15 15
Purchase and Redemption of Fund Shares................ B-17 19
Shareholder Investment Account........................ B-20 27
Net Asset Value....................................... B-23 15
Performance Information............................... B-24 16
Taxes................................................. B-26 16
Custodian, Transfer and Dividend Disbursing Agent and
Independent Accountants.............................. B-28 15
Financial Statements.................................. B-29 --
Report of Independent Accountants..................... B-39 --
Appendix A -- General Investment Information.......... A-1 --
Appendix B -- Historical Performance Data............. B-1 --
</TABLE>

- --------------------------------------------------------------------------------

MF109B 444081A
<PAGE>
GENERAL INFORMATION

At a special meeting held on July 19, 1994, shareholders approved an
amendment to the Fund's Articles of Incorporation to change the Fund's name from
Prudential-Bache Growth Opportunity Fund, Inc. to Prudential Growth Opportunity
Fund, Inc.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is capital growth. It attempts to achieve
such objective by investing principally in a carefully selected portfolio of
common stocks. There can be no assurance that the Fund's investment objective
will be achieved. See "How the Fund Invests--Investment Objective and Policies"
in the Prospectus.

The investment adviser believes that, in seeking to attain capital
appreciation, it is important to attempt to minimize losses. Accordingly, the
investment adviser will attempt to anticipate periods when stock prices
generally decline. When, in the investment adviser's judgment, such a period is
imminent, the Fund will take defensive measures, such as investing all or part
of the Fund's assets in money market instruments during this period. The Fund
may also purchase put options on stocks that the Fund holds as protection
against a significant price decline and may purchase and sell stock index
options and futures to hedge overall market risk and the investment of cash
flows.

The Fund may invest without limit in high quality money market instruments
(a) when conditions dictate a temporary defensive strategy, (b) until the
proceeds from the sale of the Fund's shares have been invested or (c) during
temporary periods of portfolio restructuring. Such instruments may include
commercial paper of domestic corporations, certificates of deposit, repurchase
agreements, bankers' acceptances and other obligations of domestic banks, and
obligations issued or guaranteed by the United States Government, its
instrumentalities or its agencies.

LIMITATIONS ON PURCHASE AND SALE OF STOCK OPTIONS, OPTIONS ON STOCK INDICES AND
STOCK INDEX FUTURES

The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund has undertaken with certain state securities commissions that,
so long as shares of the Fund are registered in those states, it will not (a)
write puts having aggregate exercise prices greater than 25% of total net
assets; or (b) purchase (i) put options on stocks not held in the Fund's
portfolio, (ii) put options on stock indices or (iii) call options on stocks or
stock indices if, after any such purchase, the aggregate premiums paid for such
options would exceed 20% of the Fund's total net assets.

CALL OPTIONS ON STOCK. The Fund may, from time to time, write call options
on its portfolio securities. The Fund may write only call options which are
"covered," meaning that the Fund either owns the underlying security or has an
absolute and immediate right to acquire that security, without additional cash
consideration, upon conversion or exchange of other securities currently held in
its portfolio. In addition, the Fund will not permit the call to become
uncovered prior to the expiration of the option or termination through a closing
purchase transaction as described below. If the Fund writes a call option, the
purchaser of the option has the right to buy (and the Fund has the obligation to
sell) the underlying security at the exercise price throughout the term of the
option. The amount paid to the Fund by the purchaser of the option is the
"premium." The Fund's obligation to deliver the underlying security against
payment of the exercise price would terminate either upon expiration of the
option or earlier if the Fund were to effect a "closing purchase transaction"
through the purchase of an equivalent option on an exchange. There can be no
assurance that a closing purchase transaction can be effected.

The Fund would not be able to effect a closing purchase transaction after it
had received notice of exercise. In order to write a call option, the Fund is
required to comply with the rules of The Options Clearing Corporation and the
various exchanges with respect to collateral requirements. The Fund may not
purchase call options except in connection with a closing purchase transaction.
It is possible that the cost of effecting a closing purchase transaction may be
greater than the premium received by the Fund for writing the option.

Generally, the investment adviser intends to write listed covered call
options during periods when it anticipates declines in the market values of
portfolio securities because the premiums received may offset to some extent the
decline in the Fund's net asset value occasioned by such declines in market
value. Except as part of the "sell discipline" described below, the investment
adviser will generally not write listed covered call options when it anticipates
that the market values of the Fund's portfolio securities will increase.

B-2
<PAGE>
One reason for the Fund to write call options is as part of a "sell
discipline." If the investment adviser decides that a portfolio security would
be overvalued and should be sold at a certain price higher than the current
price, the Fund could write an option on the stock at the higher price. Should
the stock subsequently reach that price and the option be exercised, the Fund
would, in effect, have increased the selling price of that stock, which it would
have sold at that price in any event, by the amount of the premium. In the event
the market price of the stock declined and the option were not exercised, the
premium would offset all or some portion of the decline. It is possible that the
price of the stock could increase beyond the exercise price; in that event, the
Fund would forego the opportunity to sell the stock at that higher price.

In addition, call options may be used as part of a different strategy in
connection with sales of portfolio securities. If, in the judgment of the
investment adviser, the market price of a stock is overvalued and it should be
sold, the Fund may elect to write a call option with an exercise price
substantially below the current market price. As long as the value of the
underlying security remains above the exercise price during the term of the
option, the option will, in all probability, be exercised, in which case the
Fund will be required to sell the stock at the exercise price. If the sum of the
premium and the exercise price exceeds the market price of the stock at the time
the call option is written, the Fund would, in effect, have increased the
selling price of the stock. The Fund would not write a call option in these
circumstances if the sum of the premium and the exercise price were less than
the current market price of the stock.

PUT OPTIONS ON STOCK. The Fund may also write listed put options. If the
Fund writes a put option, it is obligated to purchase a given security at a
specified price at any time during the term of the option.

Writing listed put options is a useful portfolio investment strategy when
the Fund has cash or other reserves available for investment as a result of
sales of Fund shares or, more importantly, because the investment adviser
believes a more defensive and less fully invested position is desirable in light
of market conditions. If the Fund wishes to invest its cash or reserves in a
particular security at a price lower than current market value, it may write a
put option on that security at an exercise price which reflects the lower price
it is willing to pay. The buyer of the put option generally will not exercise
the option unless the market price of the underlying security declines to a
price near or below the exercise price. If the Fund writes a listed put, the
price of the underlying stock declines and the option is exercised, the premium,
net of transaction charges, will reduce the purchase price paid by the Fund for
the stock. The price of the stock may decline by an amount in excess of the
premium, in which event the Fund would have foregone an opportunity to purchase
the stock at a lower price.

If, prior to the exercise of a put option, the investment adviser determines
that it no longer wishes to invest in the stock on which the put option had been
written, the Fund may be able to effect a closing purchase transaction on an
exchange by purchasing a put option of the same series as the one which it has
previously written. The cost of effecting a closing purchase transaction may be
greater than the premium received on writing the put option and there is no
guarantee that a closing purchase transaction can be effected.

At the time a put option is written, the Fund will be required to establish,
and will maintain until the put is exercised or has expired, a segregated
account with its custodian consisting of cash, short-term U. S. Government
securities or other high-grade short-term debt obligations equal in value to the
amount the Fund will be obligated to pay upon exercise of the put option.

STOCK INDEX OPTIONS. Except as described below, the Fund will write call
options on indices only if on such date it holds a portfolio of stocks at least
equal to the value of the index times the multiplier times the number of
contracts. When the Fund writes a call option on a broadly-based stock market
index, the Fund will segregate or put into escrow with its Custodian, or pledge
to a broker as collateral for the option, cash, U.S. Government securities,
liquid high-grade debt securities or a portfolio of stocks substantially
replicating the movement of the index, in the judgment of the Fund's investment
adviser, with a market value at the time the option is written of not less than
100% of the current index value times the multiplier times the number of
contracts.

If the Fund has written an option on an industry or market segment index, it
will segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, at least ten "qualified securities," which are
securities of an issuer in such industry or market segment, with a market value
at the time the option is written of not less than 100% of the current index
value times the multiplier times the number of contracts. Such securities will
include stocks which represent at least 50% of the weighting of the industry or
market segment index and will represent at least 50% of the Fund's holdings in
that industry or market segment. No individual security will represent more than
25% of the amount so segregated, pledged or escrowed. If at the close of
business on any day the market value of such qualified securities so segregated,
escrowed or pledged falls below 100% of the current index value times the
multiplier times the number of contracts, the Fund will so segregate, escrow or
pledge an

B-3
<PAGE>
amount in cash, Treasury bills or other high-grade short-term obligations equal
in value to the difference. In addition, when the Fund writes a call on an index
which is in-the-money at the time the call is written, the Fund will segregate
with its Custodian or pledge to the broker as collateral cash, short-term U.S.
Government securities or other high-grade short-term debt obligations equal in
value to the amount by which the call is in-the-money times the multiplier times
the number of contracts. Any amount segregated pursuant to the foregoing
sentence may be applied to the Fund's obligation to segregate additional amounts
in the event that the market value of the qualified securities falls below 100%
of the current index value times the multiplier times the number of contracts. A
"qualified security" is an equity security which is listed on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System against which the Fund has not written a stock call
option and which has not been hedged by the Fund by the sale of stock index
futures. However, if the Fund holds a call on the same index as the call written
where the exercise price of the call held is equal to or less than the exercise
price of the call written or greater than the exercise price of the call written
if the difference is maintained by the Fund in cash, Treasury bills or other
high-grade short-term obligations in a segregated account with its Custodian, it
will not be subject to the requirements described in this paragraph.

STOCK INDEX FUTURES. The Fund will engage in transactions in stock index
futures contracts as a hedge against changes resulting from market conditions in
the values of securities which are held in the Fund's portfolio or which it
intends to purchase. The Fund will engage in such transactions when they are
economically appropriate for the reduction of risks inherent in the ongoing
management of the Fund. The Fund may not purchase or sell stock index futures
if, immediately thereafter, more than one-third of its net assets would be
hedged and, in addition, except as described above in the case of a call written
and held on the same index, will write call options on indices or sell stock
index futures only if the amount resulting from the multiplication of the then
current level of the index (or indices) upon which the option or future
contract(s) is based, the applicable multiplier(s), and the number of futures or
options contracts which would be outstanding, would not exceed one-third of the
value of the Fund's net assets. In instances involving the purchase of stock
index futures contracts by the Fund, an amount of cash, short-term
U.S.Government securities or other high-grade short-term debt obligations, equal
to the market value of the futures contracts, will be deposited in a segregated
account with the Fund's Custodian and/or in a margin account with a broker to
collateralize the position and thereby insure that the use of such futures is
unleveraged.

Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the Investment
Company Act), are exempt from the definition of "commodity pool operator,"
provided all of the Fund's commodity futures or commodity options transactions
constitute bona fide hedging transactions within the meaning of the CFTC's
regulations. The Fund will use stock index futures and options on futures as
described herein in a manner consistent with this requirement.

RISKS OF TRANSACTIONS IN STOCK OPTIONS. Writing options involves the risk
that there will be no market in which to effect a closing transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. Although the Fund will generally write only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange may exist. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.

RISKS OF OPTIONS ON INDICES. The Fund's purchase and sale of options on
indices will be subject to risks described above under "Risks of Transactions in
Stock Options." In addition, the distinctive characteristics of options on
indices create certain risks that are not present with stock options.

Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of stock prices in the stock market generally or in
an industry or market segment rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on

B-4
<PAGE>
exercise were imposed, may be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the Fund's policy to purchase or
write options only on indices which include a number of stocks sufficient to
minimize the likelihood of a trading halt in the index.

Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the CBOE 100). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in the investment
adviser's opinion, the market for such options has developed sufficiently that
such risk in connection with such transactions is no greater than such risk in
connection with options on stocks.

SPECIAL RISKS OF WRITING CALLS ON INDICES. Because exercises of index
options are settled in cash, a call writer such as the Fund cannot determine the
amount of its settlement obligations in advance and, unlike call writing on
specific stocks, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities.
However, the Fund will write call options on indices only under the
circumstances described above under "Limitations on Purchase and Sale of Stock
Options, Options on Stock Indices, Stock Index Futures and Options on Stock
Index Futures."

Price movements in the Fund's portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, the Fund
bears the risk that the price of the securities held by the Fund may not
increase as much as the index. In such event, the Fund would bear a loss on the
call which is not completely offset by movements in the price of the Fund's
portfolio. It is also possible that the index may rise when the Fund's portfolio
of stocks does not rise. If this occurred, the Fund would experience a loss on
the call which is not offset by an increase in the value of its portfolio and
might also experience a loss in its portfolio. However, because the value of a
diversified portfolio will, over time, tend to move in the same direction as the
market, movements in the value of the Fund in the opposite direction as the
market would be likely to occur for only a short period or to a small degree.

Unless the Fund has other liquid assets which are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio securities
in order to satisfy the exercise. Because an exercise must be settled within
hours after receiving the notice of exercise, if the Fund fails to anticipate an
exercise, it may have to borrow (in amounts not exceeding 20% of the Fund's
total assets) pending settlement of the sale of securities in its portfolio and
would incur interest charges thereon.

When the Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a price
which is fixed as of the closing level of the index on the date of exercise, and
the time the Fund is able to sell stocks in its portfolio. As with stock
options, the Fund will not learn that an index option has been exercised until
the day following the exercise date but, unlike a call on stock where the Fund
would be able to deliver the underlying securities in settlement, the Fund may
have to sell part of its stock portfolio in order to make settlement in cash,
and the price of such stocks might decline before they can be sold. This timing
risk makes certain strategies involving more than one option substantially more
risky with index options than with stock options. For example, even if an index
call which the Fund has written is "covered" by an index call held by the Fund
with the same strike price, the Fund will bear the risk that the level of the
index may decline between the close of trading on the date the exercise notice
is filed with the clearing corporation and the close of trading on the date the
Fund exercises the call it holds or the time the Fund sells the call which in
either case would occur no earlier than the day following the day the exercise
notice was filed.

SPECIAL RISKS OF PURCHASING PUTS AND CALLS ON INDICES. If the Fund holds an
index option and exercises it before final determination of the closing index
value for that day, it runs the risk that the level of the underlying index may
change before closing. If such a change causes the exercised option to fall
out-of-the-money, the Fund will be required to pay the difference between the
closing index value and the exercise price of the option (times the applicable
multiple) to the assigned writer. Although the Fund may be able to minimize this
risk by withholding exercise instructions until just before the daily cut off
time or by selling rather than exercising an option when the index level is
close to the exercise price, it may not be possible to eliminate this risk
entirely because the cut off times for index options may be earlier than those
fixed for other types of options and may occur before definitive closing index
values are announced.

B-5
<PAGE>
ILLIQUID SECURITIES

The Fund may not invest more than 10% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (Securities Act),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold on an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.

Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
and foreign securities will expand further as a result of this regulation and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (i) it
must be rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations (NRSRO), or if only one
NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable
quality in the view of the investment adviser; and (ii) it must not be "traded
flat" (i.e., without accrued interest) or in default as to principal or
interest. Repurchase agreements subject to demand are deemed to have a maturity
equal to the notice period.

PORTFOLIO TURNOVER

The Fund anticipates that its annual portfolio turnover rate will not exceed
150% in normal circumstances. For the years ended September 30, 1994 and 1995,
the Fund's portfolio turnover rate was 82% and 64%, respectively.

B-6
<PAGE>
INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the Fund's
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more than 50% of the outstanding voting
shares.

The Fund may not:

(1) With respect to 75% of the Fund's total assets, invest more than 5% of
the value of its total assets in the securities of any one issuer (other than
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities). It is the current policy (but not a fundamental policy)
of the Fund not to invest more than 5% of the value of its total assets in
securities of any one issuer.

(2) Purchase more than 10% of the outstanding voting securities of any one
issuer.

(3) Invest more than 25% of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.

(4) Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation issued
or guaranteed by the United States Government, its agencies or
instrumentalities.

(5) Purchase or sell real estate or interests therein, although the Fund may
purchase securities of issuers which engage in real estate operations and
securities which are secured by real estate or interests therein.

(6) Purchase or sell commodities or commodity futures contracts, except
financial futures contracts as described under "Investment Objective and
Policies" in the Prospectus and this Statement of Additional Information.

(7) 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 operate, invest in or sponsor such programs.

(8) Purchase securities of other investment companies except in connection
with a merger, consolidation, reorganization or acquisition of assets.

(9) Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow up to 20% of the value of the total assets (calculated when
the loan is made) for temporary, extraordinary or emergency purposes or for the
clearance of transactions. The Fund may pledge up to 20% of the value of its
total assets to secure such borrowings. Secured borrowings may take the form of
reverse repurchase agreements, pursuant to which the Fund would sell portfolio
securities for cash and simultaneously agree to repurchase them at a specified
date for the same amount of cash plus an interest component. 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.

(10) Make loans of money or securities, except by the purchase of debt
obligations in which the Fund may invest consistently with its investment
objective and policies or by investment in repurchase agreements.

(11) Make short sales of securities except short sales against-the-box.

(12) Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities. (For the
purpose of this restriction, the deposit or payment by the Fund of initial or
maintenance margin in connection with financial futures contracts is not
considered the purchase of a security on margin.)

(13) Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended (the
"Securities Act"), in disposing of a portfolio security.

(14) Invest for the purpose of exercising control or management of any other
issuer.

B-7
<PAGE>
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take prompt action
to reduce its borrowings, as required by applicable law.

In order to comply with certain state "blue sky" restrictions, the Fund will
not as a matter of operating policy:

1. Purchase warrants if as a result the Fund would then have more than 5% of
its net assets (determined at the time of investment) invested in warrants.
Warrants will be valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange will be limited to 2% of the Fund's net assets (determined at the time
of investment). For the purpose of this limitation, warrants acquired in units
or attached to securities are deemed to be without value.

2. Purchase the securities of any one issuer if any officer or director of
the Fund or the Manager or Subadviser owns more than 1/2 of 1% of the
outstanding securities of such issuer, and such officers and directors who own
more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.

3. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, or securities of
issuers which are restricted as to disposition, if more than 15% of its total
assets would be invested in such securities. This restriction shall not apply to
mortgage-backed securities, asset-backed securities or obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.

DIRECTORS AND OFFICERS

<FN>
- ------------------------
* "Interested" director, as defined in the Investment Company Act, by reason of his affiliation with Prudential Securities or
PMF.
</TABLE>

B-8
<PAGE>

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUND DURING PAST FIVE YEARS
- ------------------------------ ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
Stephen P. Munn (53) Director Chairman (since January 1994), Director and President (since
101 South Salina Street 1988) and Chief Executive Officer (1988-December 1993) of
Syracuse, NY Carlisle Companies Incorporated.
*Richard A. Redeker (52) President and Director President, Chief Executive Officer and Director (since October
One Seaport Plaza 1993), PMF; Executive Vice President, Director and Member of the
New York, NY Operating Committee (since October 1993), Prudential Securities;
Director (since October 1993) of Prudential Securities Group,
Inc.; Executive Vice President, The Prudential Investment
Corporation (since July 1994); Director (since January 1994) of
Prudential Mutual Fund Distributors, Inc. (PMFD) and Prudential
Mutual Fund Services, Inc. (PMFS); formerly Senior Executive
Vice President and Director of Kemper Financial Services, Inc.
(September 1978-September 1993); Director of The Global
Government Plus Fund, Inc., The Global Total Return Fund, Inc.
and The High Yield Income Fund, Inc.
Louis A. Weil, III (54) Director Publisher and Chief Executive Officer, Phoenix Newspapers, Inc.
120 East Van Buren (since August 1991); Director of Central Newspapers, Inc. (since
Phoenix, AZ September 1991); prior thereto, Publisher of Time Magazine (May
1989-March 1991); formerly, President, Publisher and Chief
Executive Officer, The Detroit News (February
1986-August 1989); formerly member of the Advisory Board, Chase
Manhattan Bank-Westchester; Director of The Global Government
Plus Fund,Inc.
David W. Drasnin (58) Vice President Vice President and Branch Manager of Prudential Securities.
39 Public Square Suite 500
Wilkes-Barre, PA
Robert F. Gunia (48) Vice President Chief Administrative Officer (since July 1990), Director (since
One Seaport Plaza January 1989), Executive Vice President, Treasurer and Chief
New York, NY Financial Officer of PMF; Senior Vice President (since March
1987) of Prudential Securities; Executive Vice President,
Treasurer, Comptroller and Director (since March 1991) of PMFD;
Director (since June 1987) of PMFS; Vice President and Director
of The Asia Pacific Fund, Inc. (since May 1989).
Eugene S. Stark (37) Treasurer and Principal First Vice President (since January 1990) of PMF; First Vice
One Seaport Plaza Financial and President of Prudential Securities (since January 1992).
New York, NY Accounting Officer
Stephen M. Ungerman (42) Assistant Treasurer First Vice President of PMF (since February 1993). Prior thereto,
One Seaport Plaza Senior Tax Manager at Price Waterhouse.
New York, NY

<FN>
- ------------
* "Interested" director, as defined in the Investment Company Act, by reason of
his affiliation with Prudential Securities or PMF.
</TABLE>

B-9
<PAGE>

Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities or Prudential Mutual Fund Distributors, Inc. (PMFD).

The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.

The Fund pays each of its Directors who is not an affiliated person of PMF
annual compensation of $6,000, in addition to certain out-of-pocket expenses.
The Chairman of the Audit Committee receives an additional $200 per year.

Directors may receive their Director's fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Director's fee which accrues interest at a rate
equivalent to the prevailing rate applicable to 90-day U.S. Treasury Bills at
the beginning of each calendar quarter or, pursuant to an SEC exemptive order,
at the daily rate of return of the Fund (the Fund rate). Payment of the interest
so accrued is also deferred and accruals become payable at the option of the
Director. The Fund's obligation to make payments of deferred Director's fees,
together with interest thereon, is a general obligation of the Fund.

The Directors have adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Messrs.
Hauspurg and Jacobs are scheduled to retire on December 31, 1999 and 1998,
respectively.

Pursuant to the terms of the Management Agreement with the Fund, the Manager
pays all compensation of officers and employees of the Fund as well as the fees
and expenses of all Directors of the Fund who are affiliated persons of the
Manager.

The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended September 30, 1995 to the Directors who are not
affiliated with the Manager and the aggregate compensation paid to such
Directors for service on the Fund's board and that of all other funds managed by
Prudential Mutual Fund Management, Inc. (Fund Complex) for the calendar year
ended December 31, 1994.

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF TRUST BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND EXPENSES RETIREMENT TO TRUSTEES
- ----------------------------------------------------- ------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Delayne Dedrick Gold -- Director $ 6,200 None N/A $ 185,000(24/43)*
Arthur Hauspurg -- Director $ 6,000 None N/A $ 37,500(5/7)*
Stephen P. Munn -- Director $ 6,000 None N/A $ 42,500(6/8)*
Louis A. Weil, Ill -- Director $ 6,000 None N/A $ 97,500(12/17)*
</TABLE>

- ------------------------
*Indicates number of funds/portfolios in Fund Complex (including the Fund) to
which aggregate compensation relates.

B-10
<PAGE>
As of November 3, 1995, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.
As of November 3, 1995, the only beneficial owner, directly or indirectly,
of more than 5% of the outstanding shares of any class of beneficial interest
was: Robert I. Orestein, P.O. Box 2009, Peck Slip Station, New York, NY, who
held 10,528 Class C shares (8.1%).

As of November 3, 1995, Prudential Securities was the record holder for
other beneficial owners of 7,052,591 Class A shares (or 41% of the outstanding
Class A shares), 18,605,128 Class B shares (or 70% of the outstanding Class B
shares) and 85,773 Class C shares (or 66% of the outstanding Class C shares) of
the Fund. In the event of any meetings of shareholders, Prudential Securities
will forward, or cause the forwarding of, proxy materials to the beneficial
owners for which it is the record holder.

MANAGER

The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF or
the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as manager
to all of the other open-end management investment companies that, together with
the Fund, comprise the Prudential Mutual Funds. See "How the Fund Is
Managed--Manager" in the Prospectus. As of October 31, 1995, PMF managed and/or
administered open-end and closed-end management investment companies with assets
of approximately $50 billion. According to the Investment Company Institute, as
of September 30, 1995, the Prudential Mutual Funds were the 13th largest family
of mutual funds in the United States.

PMF is a subsidiary of Prudential Securities Incorporated and The Prudential
Insurance Company of America (Prudential). PMF has three wholly-owned
subsidiaries: Prudential Mutual Fund Distributors, Inc., Prudential Mutual Fund
Services, Inc. (PMFS or the Transfer Agent) and Prudential Mutual Fund
Investment Management, Inc. PMFS serves as the transfer agent for the Prudential
Mutual Funds and, in addition, provides customer service, record keeping and
management and administration services to qualified plans.

Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors and
in conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, PMF is obligated to keep certain books and records of the Fund. PMF
also administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary clerical
and bookkeeping services which are not being furnished by State Street Bank and
Trust Company, the Fund's custodian, and Prudential Mutual Fund Services, Inc.
(PMFS or the Transfer Agent), the Fund's transfer and dividend disbursing agent.
The management services of PMF for the Fund are not exclusive under the terms of
the Management Agreement and PMF is free to, and does, render management
services to others.

For its services, PMF receives, pursuant to the Management Agreement, a fee
at an annual rate of .70 of 1% of the Fund's average daily net assets. The fee
is computed daily and payable monthly. The Management Agreement also provides
that, in the event the expenses of the Fund (including the fees of PMF, but
excluding interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the Fund's
shares are qualified for offer and sale, the compensation due to PMF will be
reduced by the amount of such excess. Reductions in excess of the total
compensation payable to PMF will be paid by PMF to the Fund. No such reductions
were required during the fiscal year ended September 30, 1995. Currently, the
Fund believes that the most restrictive expense limitation of state securities
commissions is 2 1/2% of the Fund's average daily net assets up to $30 million,
2% of the next $70 million of such assets and 1 1/2% of such assets in excess of
$100 million.

In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:

(a) the salaries and expenses of all of its and the Fund's personnel except
the fees and expenses of Directors who are not affiliated persons of PMF or the
Fund's investment adviser;

(b) all expenses incurred by PMF or by the Fund in connection with managing
the ordinary course of the Fund's business, other than those assumed by the Fund
as described below; and

B-11
<PAGE>
(c) the costs and expenses payable to The Prudential Investment Corporation
(PIC) pursuant to the subadvisory agreement between PMF and PIC (the Subadvisory
Agreement).

Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses: (a) the fees payable to the Manager, (b) the
fees and expenses of Directors who are not affiliated persons of the Manager or
the Fund's investment adviser, (c) the fees and certain expenses of the
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of legal counsel and independent accountants for the
Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Fund to governmental agencies, (g) the fees of any
trade associations of which the Fund may be a member, (h) the cost of stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the Securities and
Exchange Commission, registering the Fund and qualifying its shares under state
securities laws, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
reports, proxy statements and prospectuses to shareholders in the amount
necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business, and (m) distribution fees.

The Management Agreement provides that PMF will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the matters
to which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Management Agreement provides that it will terminate automatically if assigned,
and that it may be terminated without penalty by either party upon not more than
60 days' nor less than 30 days' written notice. The Management Agreement will
continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act. The Management Agreement
was last approved by the Board of Directors of the Fund, including a majority of
the Directors who are not parties to the contract or interested persons of any
such party as defined in the Investment Company Act on May 2, 1995 and by
shareholders of the Fund on April 28, 1988.

For the fiscal years ended September 30, 1995, 1994 and 1993, the Fund paid
management fees to PMF of $3,676,126, $3,484,730 and $2,439,222, respectively.

PMF has entered into the Subadvisory Agreement with PIC (the Subadviser), a
wholly-owned subsidiary of Prudential. The Subadvisory Agreement provides that
PIC will furnish investment advisory services in connection with the management
of the Fund. In connection therewith, PIC is obligated to keep certain books and
records of the Fund. PMF continues to have responsibility for all investment
advisory services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable costs
and expenses incurred by PIC in furnishing those services. Investment advisory
services are provided to the Fund by a unit of the Subadviser, known as
Prudential Mutual Fund Investment Management.

The Subadvisory Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not parties to the contract or
interested persons of any such party as defined in the Investment Company Act,
on May 2, 1995, and by shareholders of the Fund on April 28, 1988.

The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PMF or PIC upon not more than 60 days', nor less than 30
days', written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved at least annually in accordance with
the requirements of the Investment Company Act.

The Manager and Subadviser are subsidiaries of Prudential, which is one of
the largest diversified financial services institutions in the world and, based
on total assets, the largest insurance company in North America as of December
31, 1994. Its primary business is to offer a full range of products and services
in three areas: insurance, investments and home ownership for individuals and
families; health-care management and other benefit programs for employees of
companies and members of groups; and asset management for institutional clients
and their associates. Prudential (together with its subsidiaries) employs nearly
100,000 persons worldwide, and maintains a sales force of approximately 19,000
agents, 3,400 insurance brokers and

B-12
<PAGE>
6,000 financial advisors. It insures or provides other financial services to
more than 50 million people worldwide. Prudential is a major issuer of
annuities, including variable annuities. Prudential seeks to develop innovative
products and services to meet consumer needs in each of its business areas. For
the year ended December 31, 1994, Prudential through its subsidiaries provided
financial services to more than 50 million people worldwide--more than one of
every five people in the United States. As of December 31, 1994, Prudential
through its subsidiaries provided automobile insurance for more than 1.8 million
cars and insured more than 1.5 million homes. For the year ended December 31,
1994, The Prudential Bank, a subsidiary of Prudential, served 940,000 customers
in 50 states providing credit card services and loans totaling more than $1.2
billion. Assets held by Prudential Securities Incorporated (PSI) for its clients
totaled approximately $150 billion at December 31, 1994. During 1994, over
28,000 new customer accounts were opened each month at PSI. The Prudential Real
Estate Affiliates, the fourth largest real estate brokerage network in the
United States, has more than 34,000 brokers and agents and more than 1,100
offices in the United States.

Based on data for the year ended December 31, 1994 for the Prudential Mutual
Funds, on an average day, there are approximately $80 million in common stock
transactions, over $100 million in bond transactions and over $4.1 billion in
money market transactions. In 1994, the Prudential Mutual Funds effected more
than 57,000 trades in money market securities and held on average $21 billion of
money market securities. Based on complex-wide data for the year ended December
31, 1994, on an average day, 7,168 shareholders telephoned Prudential Mutual
Fund Services, Inc., the Transfer Agent of the Prudential Mutual Funds, on the
Prudential Mutual Funds' toll-free number. On an annual basis, that represents
approximately 1.8 million telephone calls and approximately 1.1 million fund
transactions.

From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
The Wall Street Journal, The New York Times, Barron's and USA Today.

DISTRIBUTOR

Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Class A shares of the Fund.
Prudential Securities Incorporated, One Seaport Plaza, New York, New York 10292
(Prudential Securities or PSI), acts as the distributor of the Class B and Class
C shares of the Fund.

Pursuant to separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively, the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. See "How the Fund is Managed--Distributor"
in the Prospectus.

Prior to January 22, 1990, the Fund offered only one class of shares (the
then existing Class B shares). On October 6, 1989, the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Class A or Class B Plan or in any agreement related to either Plan (the Rule
12b-1 Directors), at a meeting called for the purpose of voting on each Plan,
adopted a new plan of distribution for the Class A shares of the Fund (the Class
A Plan) and approved an amended and restated plan of distribution with respect
to the Class B shares of the Fund (the Class B Plan). On February 8, 1993, the
Board of Directors, including a majority of the Rule 12b-1 Directors, at a
meeting called for the purpose of voting on each Plan, approved modifications to
the Fund's Class A and Class B Plans and Distribution Agreements to conform them
to recent amendments to the National Association of Securities Dealers, Inc.
(NASD) maximum sales charge rule described below. As so modified, the Class A
Plan provides that (i) up to .25 of 1% of the average daily net assets of the
Class A shares may be used to pay for personal service and the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1%. As so modified, the
Class B Plan provides that (i) up to .25 of 1% of the average daily net assets
of the Class B shares may be paid as a service fee and (ii) up to.75 of 1% (not
including the service fee) of the average daily net assets of the Class B shares
(asset-based sales charge) may be used as reimbursement for distribution-related
expenses with respect to the Class B shares. On May 3, 1993, the Board of
Directors, including a majority of the Rule 12b-1 Directors, at a meeting called
for the purpose of voting on each Plan, adopted a plan of distribution for the
Class C shares of the Fund and approved further amendments to the plans of
distribution for the Fund's Class A and Class B shares changing them from
reimbursement type plans to compensation type plans. The Plans were last
approved by the Board of Directors, including a majority of the Rule 12b-1

B-13
<PAGE>
Directors, on May 2, 1995. The Class A Plan, as amended, was approved by Class A
and Class B shareholders, and the Class B Plan, as amended, was approved by
Class B shareholders on July 19, 1994. The Class C Plan was approved by the sole
shareholder of Class C shares on August 1, 1994.

CLASS A PLAN. For the fiscal year ended September 30, 1995 PMFD received
payments of $436,121 under the Class A Plan. This amount was primarily expended
for payment of account servicing fees to financial advisers and other persons
who sell Class A shares. For the fiscal year ended September 30, 1995, PMFD also
received approximately $295,000 in initial sales charges.

CLASS B PLAN. For the fiscal year ended September 30, 1995, Prudential
Securities received $3,499,288 from the Fund under the Class B Plan and spent
approximately $2,483,700 in distributing the Fund's Class B shares. It is
estimated that of the latter amount, approximately $71,900 (2.9%) was spent on
printing and mailing of prospectuses to other than current shareholders;
$415,400 (16.7%) on compensation to Pruco Securities Corporation, an affiliated
broker-dealer, for commissions to its representatives and other expenses,
including an allocation on account of overhead and other branch office
distribution-related expenses, incurred by it for distribution of Fund shares;
and $1,996,400 (80.4%) on the aggregate of (i) payments of commissions and
account servicing fees to financial advisers ($940,000 or 37.9%) and (ii) an
allocation on account of overhead and other branch office distribution-related
expenses ($1,056,400 or 42.5%). The term "overhead and other branch office
distribution-related expenses" represents (a) the expenses of operating
Prudential Securities' branch offices in connection with the sale of Fund
shares, including lease costs, the salaries and employee benefits of operations
and sales support personnel, utility costs, communications costs and the costs
of stationery and supplies, (b) the costs of client sales seminars, (c) expenses
of mutual fund sales coordinators to promote the sale of Fund shares; and (d)
other incidental expenses relating to branch promotion of Fund shares.

Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by investors upon certain redemptions of Class B shares. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges"
in the Prospectus. For the fiscal year ended September 30, 1995, Prudential
Securities received approximately $931,000 in contingent deferred sales charges.

CLASS C PLAN. For the fiscal year ended September 30, 1995, Prudential
Securities received $7,835 under the Class C Plan and spent approximately
$14,200 in distributing Class C shares. Prudential Securities also receives the
proceeds of contingent deferred sales charges paid by investors upon certain
redemptions of Class C shares. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus. For the fiscal
year ended September 30, 1995, Prudential Securities received approximately $360
in contingent deferred sales charges.

The Class A, Class B and Class C Plans continue in effect from year to year,
provided that each such continuance is approved at least annually by a vote of
the Board of Directors, including a majority vote of the Rule 12b-1 Directors,
cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class on not more than
30 days' written notice to any other party to the Plans. The Plans may not be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class
(by both Class A and Class B shareholders, voting separately, in the case of
material amendments to the Class A Plan), and all material amendments are
required to be approved by the Board of Directors in the manner described above.
Each Plan will automatically terminate in the event of its assignment. The Fund
will not be contractually obligated to pay expenses incurred under any Plan if
it is terminated or not continued.

Pursuant to each Plan, the Board of Directors will review at least quarterly
a written report of the distribution expenses incurred on behalf of each class
of shares of the Fund by the Distributor. The report will include an itemization
of the distribution expenses and the purposes of such expenditures. In addition,
as long as the Plans remain in effect, the selection and nomination of the Rule
12b-1 Directors shall be committed to the Rule 12b-1 Directors.

Pursuant to each Distribution Agreement, the Fund has agreed to indemnify
PMFD and Prudential Securities to the extent permitted by applicable law against
certain liabilities under the Securities Act of 1933, as amended. Each
Distribution Agreement was last approved by the Board of Directors, including a
majority of the Rule 12b-1 Directors, on May 2, 1995.

On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators in 51 jurisdictions and the NASD to resolve
allegations that PSI sold interests in more than 700 limited partnerships (and a
limited number of other types of securities) from January 1, 1980 through
December 31, 1990, in violation of securities laws to persons for whom such

B-14
<PAGE>
securities were not suitable in light of the individuals' financial condition or
investment objectives. It was also alleged that the safety, potential returns
and liquidity of the investments had been misrepresented. The limited
partnerships principally involved real estate, oil and gas producing properties
and aircraft leasing ventures. The SEC Order (i) included findings that PSI's
conduct violated the federal securities laws and that an order issued by the SEC
in 1986 requiring PSI to adopt, implement and maintain certain supervisory
procedures had not been complied with; (ii) directed PSI to cease and desist
from violating the federal securities laws and imposed a $10 million civil
penalty; and (iii) required PSI to adopt certain remedial measures including the
establishment of a Compliance Committee of its Board of Directors. Pursuant to
the terms of the SEC settlement, PSI established a settlement fund in the amount
of $330,000,000 and procedures, overseen by a court approved Claims
Administrator, to resolve legitimate claims for compensatory damages by
purchasers of the partnership interests. PSI has agreed to provide additional
funds, if necessary, for that purpose. PSI's settlement with the state
securities regulators included an agreement to pay a penalty of $500,000 per
jurisdiction. PSI consented to a censure and to the payment of a $5,000,000 fine
in settling the NASD action. In settling the above referenced matters, PSI
neither admitted nor denied the allegations asserted against it.

On January 18, 1994, PSI agreed to the entry of a Final Consent Order and a
Parallel Consent Order by the Texas Securities Commissioner. The firm also
entered into a related agreement with the Texas Securities Commissioner. The
allegations were that the firm had engaged in improper sales practices and other
improper conduct resulting in pecuniary losses and other harm to investors
residing in Texas with respect to purchases and sales of limited partnership
interests during the period of January 1, 1980 through December 31, 1990.
Without admitting or denying the allegations, PSI consented to a reprimand,
agreed to cease and desist from future violations, and to provide voluntary
donations to the State of Texas in the aggregate amount of $1,500,000. The firm
agreed to suspend the creation of new customer accounts, the general
solicitation of new accounts, and the offer for sale of securities in or from
PSI's North Dallas office to new customers during a period of twenty consecutive
business days, and agreed that its other Texas offices would be subject to the
same restrictions for a period of five consecutive business days. PSI also
agreed to institute training programs for its securities salesmen in Texas.

On October 27, 1994, Prudential Securities Group, Inc. and PSI entered into
agreements with the United States Attorney deferring prosecution (provided PSI
complies with the terms of the agreement for three years) for any alleged
criminal activity related to the sale of certain limited partnership programs
from 1983 to 1990. In connection with these agreements, PSI agreed to add the
sum of $330,000,000 to the Fund established by the SEC and executed a
stipulation providing for a reversion of such funds to the United States Postal
Inspection Service. PSI further agreed to obtain a mutually acceptable outside
director to sit on the Board of Directors of PSG and the Compliance Committee of
PSI. The new director will also serve as an independent "ombudsman" whom PSI
employees can call anonymously with complaints about ethics and compliance.
Prudential Securities shall report any allegations or instances of criminal
conduct and material improprieties to the new director. The new director will
submit compliance reports which shall identify all such allegations or instances
of criminal conduct and material improprieties every three months for a
three-year period.

NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of each
class of shares. Interest charges on unreimbursed distribution expenses equal to
the prime rate plus one percent per annum may be added to the 6.25% limitation.
Sales from the reinvestment of dividends and distributions are not included in
the calculation of the 6.25% limitation. The annual asset-based sales charge on
shares of the Fund may not exceed .75 of 1% per class. The 6.25% limitation
applies to the Fund rather than on a per shareholder basis. If aggregate sales
charges were to exceed 6.25% of total gross sales of any class, all sales
charges on shares of that class would be suspended.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Manager is responsible for decisions to buy and sell securities, options
on securities and futures contracts for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section, the
term "Manager" includes the "Subadviser." Purchases and sales of securities or
futures contracts on a securities exchange or board of trade are effected
through brokers or futures commission merchants who charge a commission for
their services. Orders may be directed to any broker or futures commission
merchant, including, to the extent and in the manner permitted by applicable
law, Prudential Securities and its affiliates. Brokerage commissions on United
States securities, options and futures exchanges or boards of trade are subject
to negotiation between the Manager and the broker or futures commission
merchant.

B-15
<PAGE>
In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. The Fund will not deal with Prudential
Securities in any transaction in which Prudential Securities acts as principal.
Thus it will not deal in over-the-counter securities with Prudential Securities
acting as market maker, and it will not execute a negotiated trade with
Prudential Securities if execution involves Prudential Securities acting as
principal with respect to any part of the Fund's order. In placing orders for
portfolio securities or futures contracts of the Fund, the Manager is required
to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker, dealer or
futures commission merchant in the light of generally prevailing rates. The
Manager's policy is to pay higher commissions to brokers, other than Prudential
Securities, for particular transactions than might be charged if a different
broker had been selected, on occasions when, in the Manager's opinion, this
policy furthers the objective of obtaining best price and execution. In
addition, the Manager is authorized to pay higher commissions on brokerage
transactions for the Fund to brokers, dealers or futures commission merchants
other than Prudential Securities in order to secure research and investment
services described above, subject to review by the Fund's Board of Directors
from time to time as to the extent and continuation of this practice. The
allocation of orders among brokers, dealers and futures commission merchants and
the commission rates paid are reviewed periodically by the Fund's Board of
Directors. Portfolio securities may not be purchased from any underwriting or
selling syndicate of which Prudential Securities (or any affiliate), during the
existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the SEC. This
limitation, in the opinion of the Fund, will not significantly affect the Fund's
ability to pursue its present investment objective. However, in the future in
other circumstances, the Fund may be at a disadvantage because of this
limitation in comparison to other funds with similar objectives but not subject
to such limitations.

Subject to the above considerations, the Manager may use Prudential
Securities as a broker or futures commission merchant for the Fund. In order for
Prudential Securities (or any affiliate) to effect any portfolio transactions
for the Fund, the commissions, fees or other remuneration received by Prudential
Securities (or any affiliate) must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures being purchased or sold on a securities or
commodities exchange during a comparable period of time. This standard would
allow Prudential Securities (or any affiliate) to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker or
futures commission merchant in a commensurate arm's-length transaction.
Furthermore, the Board of Directors of the Fund, including a majority of the
noninterested Directors, has adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to Prudential
Securities (or any affiliate) are consistent with the foregoing standard. In
accordance with Section 11(a) of the Securities Exchange Act of 1934, Prudential
Securities may not retain compensation for effecting transactions on a national
securities exchange for the Fund unless the Fund has expressly authorized the
retention of such compensation. Prudential Securities must furnish to the Fund
at least annually a statement setting forth the total amount of all compensation
retained by Prudential Securities from transactions effected for the Fund during
the applicable period. Brokerage and futures transactions with Prudential
Securities (or any affiliate) are also subject to such fiduciary standards as
may be imposed upon Prudential Securities (or such affiliate) by applicable law.

Transactions in options by the Fund will be subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options are written or held on the same or
different exchanges or are written or held in one or more accounts or

B-16
<PAGE>
through one or more brokers. Thus, the number of options which the Fund may
write or hold may be affected by options written or held by the Manager and
other investment advisory clients of the Manager. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

The table presented below shows certain information regarding the payment of
commissions by the Fund, including the amount of such commissions paid to
Prudential Securities for the three-year period ended September 30, 1995.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Total brokerage commissions paid by the
Fund................................... $1,055,207 $1,222,849 $889,308
Total brokerage commissions paid to
Prudential Securities.................. $ 0 $ 11,325 $ 10,875
Percentage of total brokerage
commissions paid to Prudential
Securities............................. 0% .93% 1.22%
</TABLE>

The Fund did not effect any transactions through Prudential Securities
during the fiscal year ended September 30, 1995. Of the total brokerage
commissions paid by the Fund for the fiscal year ended September 30, 1995,
$777,243 (74% of gross brokerage transactions) was paid to firms which provided
research, statistical or other services provided to PMF. PMF has not separately
identified a portion of such brokerage commissions as applicable to the
provision of such research, statistical or other service.

PURCHASE AND REDEMPTION OF FUND SHARES

Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares) or
(ii) on a deferred basis (Class B or Class C shares). See "Shareholder
Guide--How to Buy Shares of the Fund" in the Prospectus.

Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan (except
that the Fund has agreed with the SEC in connection with the offering of a
conversion feature on Class B shares to submit any amendment of the Class A
distribution and service plan to both Class A and Class B shareholders) and
(iii) only Class B shares have a conversion feature. See "Distributor." Each
class also has separate exchange privileges. See "Shareholder Investment
Account--Exchange Privilege."

SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class
B* and Class C* shares are sold at net asset value. Using the Fund's net asset
value at September 30, 1995, the maximum offering price of the Fund's shares is
as follows:

<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A share................... $ 14.18
Maximum sales charge (5% of offering price).............................. .75
---------
Offering price to public................................................. $ 14.93
---------
---------
CLASS B
Net asset value, offering price and redemption price per Class B
share*.................................................................. $ 13.56
---------
---------
CLASS C
Net asset value, offering price and redemption price per Class C
share*.................................................................. $ 13.56
---------
---------
<FN>

--------------------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
</TABLE>

B-17
<PAGE>
REDUCTION AND WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES

COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of breakpoints under "Shareholder
Guide--Alternative Purchase Plan" in the Prospectus.

An eligible group of related Fund investors includes any combination of the
following:

(a) an individual;

(b) the individual's spouse, their children and their parents;

(d) any company controlled by the individual (a person, entity or group that
holds 25% or more of the outstanding voting securities of a corporation will be
deemed to control the corporation, and a partnership will be deemed to be
controlled by each of its general partners);

(e) a trust created by the individual, the beneficiaries of which are the
individual, his or her spouse, parents or children;

(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse; and

(g) one or more employee benefit plans of a company controlled by an
individual.

In addition, an eligible group of related Fund investors may include an
employer (or group of related employers) and one or more qualified retirement
plans of such employer or employers (an employer controlling, controlled by or
under common control with another employer is deemed related to that employer).

The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charges will be granted
subject to confirmation of the investor's holdings. The Combined Purchase and
Cumulative Purchase Privilege does not apply to individual participants in any
retirement or group plans.

RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) to determine the
reduced sales charge. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be aggregated to
determine the reduced sales charge. All shares must be held either directly with
the Transfer Agent or through Prudential Securities. The value of existing
holdings for purposes of determining the reduced sales charge is calculated
using the maximum offering price (net asset value plus maximum sales charge) as
of the previous business day. See "How the Fund Values its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charges will
be granted subject to confirmation of the investor's holdings. Rights of
accumulation are not available to individual participants in any retirement or
group plans.

LETTERS OF INTENT. Reduced sales charges are also available to investors (or
an eligible group of related investors), including retirement and group plans,
who enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of the Fund and shares of other Prudential
Mutual Funds. All shares of the Fund and shares of other Prudential Mutual Funds
(excluding money market funds other than those acquired pursuant to the exchange
privilege) which were previously purchased and are still owned are also included
in determining the applicable reduction. However, the value of shares held
directly with the Transfer Agent and through Prudential Securities will not be
aggregated to determine the reduced sales charge. All shares must be held either
directly with the Transfer Agent or through Prudential Securities. The
Distributor must be notified at the time of purchase that the investor is
entitled to a reduced sales charge. The reduced sales charges will be granted
subject to confirmation of the investor's holdings. Letters of Intent are not
available to individual participants in any retirement or group plans.

A Letter of Intent permits a purchaser to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Escrowed Class A shares totaling 5% of the dollar amount of the
Letter

B-18
<PAGE>
of Intent will be held by the Transfer Agent in the name of the purchaser,
except in the case of retirement and group plans where the employer or plan
sponsor will be responsible for paying any applicable sales charge. The
effective date of a Letter of Intent may be back-dated up to 90 days, in order
that any investments made during this 90-day period, valued at the purchaser's
cost, can be applied to the fulfillment of the Letter of Intent goal, except in
the case of retirement and group plans.

The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the purchaser (or the employer or
plan sponsor in the case of any retirement or group plan) is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. Such payment may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain such difference. Investors electing to
purchase Class A shares of the Fund pursuant to a Letter of Intent should
carefully read such Letter of Intent.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES

The Contingent Deferred Sales Charge is waived under circumstances described
in the Prospectus. See "Shareholder Guide--How to Sell Your Shares--Waiver of
Contingent Deferred Sales Charges--Class B Shares" in the Prospectus. In
connection with these waivers, the Transfer Agent will require you to submit the
supporting documentation set forth below.

<TABLE>
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
<S> <C>
Death A copy of the shareholder's death certificate or,
in the case of a trust, a copy of the grantor's
death certificate, plus a copy of the trust
agreement identifying the grantor.

Disability - An individual will be A copy of the Social Security Administration award
considered disabled if he or she is letter or a letter from a physician on the
unable to engage in any substantial physician's letterhead stating that the shareholder
gainful activity by reason of any (or, in the case of a trust, the grantor) is
medically determinable physical or permanently disabled. The letter must also indicate
mental impairment which can be expected the date of disability.
to result in death or to be of
long-continued and indefinite duration.

Distribution from an IRA or 403(b) A copy of the distribution form from the custodial
Custodial Account firm indicating (i) the date of birth of the
shareholder and (ii) that the shareholder is over
age 59 1/2 and is taking a normal
distribution--signed by the shareholder.

Distribution from Retirement Plan A letter signed by the plan administrator/trustee
indicating the reason for the distribution.

Excess Contributions A letter from the shareholder (for an IRA) or the
plan administrator/ trustee on company letterhead
indicating the amount of the excess and whether or
not taxes have been paid.
</TABLE>

The Transfer Agent reserves the right to request such additional documents
as it may deem appropriate.

QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO AUGUST 1, 1994

The CDSC is reduced on redemptions of Class B shares of the Fund purchased
prior to August 1, 1994 if immediately after a purchase of such shares, the
aggregate cost of all Class B shares of the Fund owned by you in a single
account exceeded $500,000. For example, if you purchased $100,000 of Class B
shares of the Fund and the following year purchase an additional $450,000 of
Class B shares with the result that the aggregate cost of your Class B shares of
the Fund following the second

B-19
<PAGE>
purchase was $550,000, the quantity discount would be available for the second
purchase of $450,000 but not for the first purchase of $100,000. The quantity
discount will be imposed at the following rates depending on whether the
aggregate value exceeded $500,000 or $1 million:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
OR REDEMPTION PROCEEDS
YEAR SINCE PURCHASE ------------------------------------------
PAYMENT MADE $500,001 TO $1 MILLION OVER $1 MILLION
- ------------------------- ----------------------- ----------------
<S> <C> <C>
First.................... 3.0% 2.0%
Second................... 2.0% 1.0%
Third.................... 1.0% 0%
Fourth and thereafter.... 0% 0%
</TABLE>

You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to the reduced CDSC. The reduced CDSC will be granted subject to
confirmation of your holdings.

SHAREHOLDER INVESTMENT ACCOUNT

Upon the initial purchase of Fund shares, a Shareholder Investment Account
is established for each investor under which the shares are held for the
investor by the Transfer Agent. If a stock certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for full
shares and may be redeposited in the Account at any time. There is no charge to
the investor for issuance of a certificate. The Fund makes available to the
shareholders the following privileges and plans.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS

For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund. An investor
may direct the Transfer Agent in writing not less than 5 full business days
prior to the record date to have subsequent dividends and/or distributions sent
in cash rather than reinvested. In the case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payment will be made directly to the dealer. Any shareholder who receives a cash
payment representing a dividend or distribution may reinvest such distribution
at net asset value by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. Such investment will be made at the net
asset value per share next determined after receipt of the check or proceeds by
the Transfer Agent. Such shareholder will receive credit for any contingent
deferred sales charge paid in connection with the amount of proceeds being
reinvested.

EXCHANGE PRIVILEGE

The Fund makes available to its shareholders the privilege of exchanging
their shares of the Fund for shares of certain other Prudential Mutual Funds,
including one or more specified money market funds, subject in each case to the
minimum investment requirements of such funds. Shares of such other Prudential
Mutual Funds may also be exchanged for shares of the Fund. All exchanges are
made on the basis of relative net asset value next determined after receipt of
an order in proper form. An exchange will be treated as a redemption and
purchase for tax purposes. Shares may be exchanged for shares of another fund
only if shares of such fund may legally be sold under applicable state laws. For
retirement and group plans having a limited menu of Prudential Mutual Funds, the
Exchange Privilege is available for those funds eligible for investment in the
particular program.

It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.

CLASS A. Shareholders of the Fund may exchange their Class A shares for
Class A shares of certain other Prudential Mutual Funds, shares of Prudential
Government Securities Trust (Short-Intermediate Term Series) and shares of the
money market funds specified below. No fee or sales load will be imposed upon
the exchange. Shareholders of money market funds who acquired such shares upon
exchange of Class A shares may use the Exchange Privilege only to acquire Class
A shares of the Prudential Mutual Funds participating in the Exchange Privilege.

B-20
<PAGE>
The following money market funds participate in the Class A Exchange
Privilege:

Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund, Inc.

CLASS B AND CLASS C. Shareholders of the Fund may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds and shares of Prudential Special Money Market Fund, a
money market fund. No CDSC will be payable upon such exchange, but a CDSC may be
payable upon the redemption of the Class B and Class C shares acquired as a
result of an exchange. The applicable sales charge will be that imposed by the
fund in which shares were initially purchased and the purchase date will be
deemed to be the first day of the month after the initial purchase, rather than
the date of the exchange.

Class B and Class C shares of the Fund may also be exchanged for shares of
Prudential Special Money Market Fund without imposition of any CDSC at the time
of exchange. Upon subsequent redemption from such money market fund or after re-
exchange into the Fund, such shares will be subject to the CDSC calculated by
excluding the time such shares were held in the money market fund. In order to
minimize the period of time in which shares are subject to a CDSC, shares
exchanged out of the money market fund will be exchanged on the basis of their
remaining holding periods, with the longest remaining holding periods being
transferred first. In measuring the time period shares are held in a money
market fund and "tolled" for purposes of calculating the CDSC holding period,
exchanges are deemed to have been made on the last day of the month. Thus, if
shares are exchanged into the Fund from a money market fund during the month
(and are held in the Fund at the end of the month), the entire month will be
included in the CDSC holding period. Conversely, if shares are exchanged into a
money market fund prior to the last day of the month (and are held in the money
market fund on the last day of the month), the entire month will be excluded
from the CDSC holding period. For purposes of calculating the seven year holding
period applicable to the Class B conversion feature, the time period during
which Class B shares were held in a money market fund will be excluded.

At any time after acquiring shares of other funds participating in the Class
B or Class C exchange privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B or Class C shares
of the Fund, respectively, without subjecting such shares to any CDSC. Shares of
any fund participating in the Class B or Class C exchange privilege that were
acquired through reinvestment of dividends or distributions may be exchanged for
Class B or Class C shares of other funds, respectively, without being subject to
any CDSC.

Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days' notice, and any fund, including the Fund,
or the Distributor, has the right to reject any exchange application relating to
such fund's shares.

DOLLAR COST AVERAGING

Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The average cost
per share is lower than it would be if a constant number of shares were bought
at set intervals.

Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages

B-21
<PAGE>
around $14,000 at a private college and around $6,000 at a public university.
Assuming these costs increase at a rate of 7% a year, as has been projected, for
the freshman class of 2011, the cost of four years at a private college could
reach $210,000 and over $90,000 at a public university.(1)

The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals.(2)

<TABLE>
<CAPTION>
PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
25 Years.......................................................... $ 110 $ 165 $ 220 $ 275
20 Years.......................................................... 176 264 352 440
15 Years.......................................................... 296 444 592 740
10 Years.......................................................... 555 833 1,110 1,388
5 Years.......................................................... 1,371 2,057 2,742 3,428
See "Automatic Savings Accumulation Plan."
<FN>
- ------------------------

(1)Source information concerning the costs of education at public and
private universities is available from The College Board Annual Survey of
Colleges, 1993. Average costs for private institutions include tuition, fees,
room and board.

(2)The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not intended
to reflect the performance of an investment in shares of the Fund. The
investment return and principal value of an investment will fluctuate so that an
investor's shares when redeemed may be worth more or less than their original
cost.
</TABLE>

AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP)

Under ASAP, an investor may arrange to have a fixed amount automatically
invested in shares of the Fund monthly by authorizing his or her bank account or
Prudential Securities account (including a Command Account) to be debited to
invest specified dollar amounts in shares of the Fund. The investor's bank must
be a member of the Automatic Clearing House System. Share certificates are not
issued to ASAP participants.

Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.

SYSTEMATIC WITHDRAWAL PLAN

A systematic withdrawal plan is available to shareholders through Prudential
Securities or the Transfer Agent. Such withdrawal plan provides for monthly or
quarterly checks in any amount, except as provided below, up to the value of the
shares in the shareholder's account. Withdrawals of Class B or Class C shares
may be subject to a CDSC. See "Shareholder Guide-- How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.

In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and (iii)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See "Shareholder Investment Account--
Automatic Reinvestment of Dividends and/or Distributions."

Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may
be, terminated at any time, and the Distributor reserves the right to initiate a
fee of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.

Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.

Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must generally be recognized for federal income tax
purposes. In addition, withdrawals made concurrently with purchases of
additional shares are

B-22
<PAGE>
inadvisable because of the sales charge applicable to (i) the purchase of Class
A shares and (ii) the withdrawal of Class B and Class C shares. Each shareholder
should consult his or her own tax adviser with regard to the tax consequences of
the systematic withdrawal plan, particularly if used in connection with a
retirement plan.

TAX-DEFERRED RETIREMENT PLANS

Various tax-deferred retirement plans, including a 401(k) plan,
self-directed individual retirement accounts and "tax-sheltered accounts" under
Section 403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, the administration, custodial fees and other
details is available from Prudential Securities or the Transfer Agent.

Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.

TAX-DEFERRED RETIREMENT ACCOUNTS

INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, an 8% rate of return and a 39.6% federal income tax bracket
and shows how much more retirement income can accumulate within an IRA as
opposed to a taxable individual savings account.

<TABLE>
<CAPTION>
TAX-DEFERRED COMPOUNDING(1)
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
- ------------------------ ---------- ----------
<S> <C> <C>
10 years................ $ 26,165 $ 31,291
15 years................ 44,675 58,649
20 years................ 68,109 98,846
25 years................ 97,780 157,909
30 years................ 135,346 244,692
<FN>
- ------------------------
(1) The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings in
the IRA account will be subject to tax when withdrawn from the account.
</TABLE>

MUTUAL FUND PROGRAMS

From time to time, the Fund may be included in a mutual fund program with
other Prudential Mutual Funds. Under such a program, a group of portfolios will
be selected and thereafter promoted collectively. Typically, these programs are
created with an investment theme, e.g., to seek greater diversification,
protection from interest rate movements or access to different management
styles. In the event such a program is instituted, there may be a minimum
investment requirement for the program as a whole. The Fund may waive or reduce
the minimum initial investment requirements in connection with such a program.

The mutual funds in the program may be purchased individually or as a part
of the program. Since the allocation of portfolios included in the program may
not be appropriate for all investors, investors should consult their Prudential
Securities Financial Advisor or Prudential/Pruco Securities Representative
concerning the appropriate blend of portfolios for them. If investors elect to
purchase the individual mutual funds that constitute the program in an
investment ratio different from that offered by the program, the standard
minimum investment requirements for the individual mutual funds will apply.

NET ASSET VALUE

Under the Investment Company Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Board of Directors, the value of
investments listed on a

B-23
<PAGE>
securities exchange and NASDAQ National Market System securities (other than
options on stock and stock indices) are valued at the last sales price on the
day of valuation or, if there was no sale on such day, the mean between the last
bid and asked prices on such day, as provided by a pricing service. Corporate
bonds (other than convertible debt securities) and U.S. Government securities
that are actively traded in the over-the-counter market, including listed
securities for which the primary market is believed to be over-the-counter, are
valued on the basis of valuations provided by a pricing service which uses
information with respect to transactions in bonds, quotations from bond dealers,
agency ratings, market transactions in comparable securities and various
relationships between securities in determining value. Convertible debt
securities that are actively traded in the over-the-counter market, including
listed securities for which the primary market is believed to be
over-the-counter, are valued at the mean between the last reported bid and asked
prices provided by principal market makers or independent pricing agents.
Options on stock and stock indices traded on an exchange are valued at the mean
between the most recently quoted bid and asked prices on the respective exchange
and futures contracts and options thereon are valued at their last sales prices
as of the close of the commodities exchange or board of trade. Should an
extraordinary event, which is likely to affect the value of the security, occur
after the close of an exchange on which a portfolio security is traded, such
security will be valued at fair value considering factors determined in good
faith by the investment adviser under procedures established by and under the
general supervision of the Fund's Board of Directors.

Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
Board of Directors. Short-term debt securities are valued at cost, with interest
accrued or discount amortized to the date of maturity, if their original
maturity was 60 days or less, unless this is determined by the Board of
Directors not to represent fair value. Short-term securities with remaining
maturities of 60 days or more, for which market quotations are readily
available, are valued at their current market quotations as supplied by an
independent pricing agent or principal market maker. The Fund will compute its
net asset value at 4:15 P.M., New York time, on each day the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem Fund shares have been received or days on which changes in the value
of the Fund's portfolio securities do not affect net asset value. In the event
the New York Stock Exchange closes early on any business day, the net asset
value of the Fund's shares shall be determined at a time between such closing
and 4:15 P.M., New York time.

Net asset value is calculated separately for each class. The net asset value
of Class B and Class C shares will generally be lower than the net asset value
of Class A shares as a result of the larger distribution-related fee to which
Class B and Class C shares are subject. It is expected, however, that the net
asset value per share of each class will tend to converge immediately after the
recording of dividends which will differ by approximately the amount of the
distribution expense accrual differential among the classes.

PERFORMANCE INFORMATION

AVERAGE ANNUAL TOTAL RETURN. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B and Class C shares. See "How the Fund Calculates
Performance" in the Prospectus.

Average annual total return is computed according to the following formula:

P(1+T)to the power of n = ERV

Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1000 investment
made at the beginning of the 1, 5 or 10 year periods.

Average annual total return takes into account any applicable initial or
contingent deferred sales charges but does not take into account any federal or
state income taxes that may be payable upon redemption.

The average annual total return for Class A shares for the one year, five
year and since inception (January 22, 1990) periods ended September 30, 1995 was
17.12%, 19.95% and 14.49%, respectively. The average annual total return for
Class B shares for the one, five and ten year periods ended on September 30,
1995 was 17.37%, 20.12% and 14.09%, respectively. The average annual total
return for Class C shares for the one year and since inception period (August 1,
1994) ended September 30, 1995 was 21.37% and 22.26%, respectively.

B-24
<PAGE>
AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B and
Class C shares. See "How the Fund Calculates Performance" in the Prospectus.

Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:

ERV - P
-------

Where: P = a hypothetical initial payment of $1000.
ERV = Ending Redeemable Value at the end of the 1, 5, or 10 year
periods (or fractional portion thereof) of a hypothetical $1000
investment made at the beginning of the 1, 5 or 10 year
periods.

Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.

The aggregate total return for Class A shares for the one year and since
inception (January 22, 1990) periods ended on September 30, 1995 was 23.29%,
161.52% and 127.28%, respectively. The aggregate total return for Class B shares
for the one, five and ten year periods ended on September 30, 1995 was 22.37%,
151.17% and 273.35%, respectively. The aggregate total return for Class C shares
for the one year and since inception period (August 1, 1994) ended September 30,
1995 was 22.37% and 22.27%, respectively.

YIELD. The Fund may from time to time advertise its yield as calculated over
a 30-day period. Yield is calculated separately for Class A, Class B and Class C
shares. This yield will be computed by dividing the Fund's net investment income
per share earned during this 30-day period by the maximum offering price per
share on the last day of this period. Yield is calculated according to the
following formula:

a - b
YIELD = 2[( ------- +1)to the power of 6 - 1]
cd

Where: a=dividends and interest earned during the period.
b=expenses accrued for the period (net of reimbursements).
c=the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d=the maximum offering price per share on the last day of the period.

Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period.

The Fund's 30-day yields for the period ended September 30, 1995 were .14%,
- -.58% and -.58% for Class A, Class B and Class C shares, respectively.

B-25
<PAGE>
From time to time, the performance of the Fund may be measured against
various indices. Set forth below is a chart which compares the performance of
different types of investments over the long-term and the rate of inflation.(1)
-------------------------------------------------------

PERFORMANCE
COMPARISON OF DIFFERENT
TYPES OF INVESTMENTS
OVER THE LONG TERM
(1/1926 - 12/1994)

[CHART]
____________

(1)Source:Ibbotson Associates Stocks, Bonds, Bills and Inflation--1995
Yearbook (annually updates the work of Roger G. Ibbotson and Rex
A. Sinquefield). Used with permission. All rights reserved. Common
stock returns are based on the Standard and Poor's 500 Stock
Index, a market-weighted, unmanaged index of 500 common stocks in
a variety of industry sectors. It is a commonly used indicator of
broad stock price movements. This chart is for illustrative
purposes only and is not intended to represent the performance of
any particular investment or fund. Investors cannot invest
directly in an index. Past performance is not a guarantee of
future results.

TAXES

The Fund expects to pay dividends of net investment income, if any,
semi-annually. The Board of Directors of the Fund will determine at least once a
year whether to distribute any net long-term capital gains in excess of any net
short-term capital losses. In determining amounts of capital gains to be
distributed, any capital loss carryforwards from prior years will offset capital
gains. Distributions will be paid in additional Fund shares based on the net
asset value at the close of business on the record date, unless the shareholder
elects in writing not less than five full business days prior to the record date
to receive such distributions in cash.

The Fund is qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code.
Qualification as a regulated investment company under the Internal Revenue Code
requires, among other things, that (a) at least 90% of the Fund's annual gross
income (without offset for losses from the sale or other disposition of
securities or foreign currencies) be derived from dividends, interest, proceeds
from loans of securities and gains from the sale or other disposition of
securities or foreign currencies and certain financial futures, options and
forward contracts; (b) the Fund derive less than 30% of its gross income from
gains (without offset for losses) from the sale or other disposition of
securities or options thereon held for less than three months; and (c) the Fund
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by
cash, government securities and other securities limited in respect of any one
issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
government securities). In addition, in order not to be subject to federal
income tax, the Fund must distribute to its shareholders as ordinary dividends
at least 90% of its net investment income other than net capital gains earned in
each year. A 4% nondeductible excise tax will be imposed on the Fund to the
extent the Fund does not meet certain minimum distribution requirements by the
end of each calendar year. For this purpose, any income or gain retained by the
Fund which is subject to tax

B-26
<PAGE>
will be considered to have been distributed by year-end. In addition, dividends
declared in October, November and December payable to shareholders of record on
a specified date in October, November and December and paid in the following
January will be treated as having been paid by the Fund and received by each
shareholder in such prior year. Under this rule, therefore, a shareholder may be
taxed in one year on dividends or distributions actually received in January of
the following year.

Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by it for more than one year,
except in certain cases where the Fund acquires a put or writes a call thereon
or otherwise holds an offsetting position with respect to the securities. Other
gains or losses on the sale of securities will be short-term capital gains or
losses. If an option written by the Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. If securities are sold by the Fund pursuant to the
exercise of a call option written by it, the Fund will add the premium received
to the sale price of the securities delivered in determining the amount of gain
or loss on the sale. If securities are purchased by the Fund pursuant to the
exercise of a put option written by it, the Fund will subtract the premium
received from its cost basis in the securities purchased. The requirement that
the Fund derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit the Fund's ability to write
options.

Certain futures contracts and certain listed options held by the Fund will
be required to be "marked to market" for federal income tax purposes, i.e.,
treated as having been sold at their fair market value on the last day of the
Fund's taxable year (referred to as Section 1256 Contracts). 60% of any gain or
loss recognized on actual or deemed sales of such Section 1256 Contracts will be
treated as long-term capital gain or loss, and 40% of such gain or loss will be
treated as short-term capital gain or loss. The Fund may be required to defer
the recognition of losses on securities and options and futures contracts to the
extent of any recognized gain on offsetting positions held by the Fund.

Any loss realized on a sale, redemption or exchange of shares of the Fund by
a shareholder will be disallowed to the extent the shares are replaced within a
61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend or distribution will
constitute a replacement of shares.

A shareholder who acquires shares of the Fund and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the Fund.

The per share dividends on Class B and Class C shares, if any, will be lower
than the per share dividends on Class A shares as a result of the higher
distribution-related fee applicable with the Class B and Class C shares. The per
share distributions of net capital gains, if any, will be paid in the same
amount for Class A, Class B and Class C shares. See "Net Asset Value."

Any dividends or distributions paid shortly after a purchase by an investor
may have the effect of reducing the per share net asset value of the investor's
shares by the per share amount of the dividends or distributions. Furthermore,
such dividends or distributions, although in effect a return of capital, are
subject to federal income taxes. Prior to purchasing shares of the Fund,
therefore, the investor should carefully consider the impact of dividends or
capital gains distributions which are expected to be or have been announced.

Dividends and distributions may also be subject to state and local taxes.

The Fund may, from time to time, invest in Passive Foreign Investment
Companies (PFICs). PFICs are foreign corporations which derive a majority of
their income from passive sources. For tax purposes, the Fund's investments in
PFICs may subject the Fund to federal income taxes on certain income and gains
realized by the Fund. Under proposed Treasury regulations, the Fund would be
able to avoid such taxes and interest by electing to "mark-to-market" its
investments in PFICs (i.e., treat them as sold for fair market value at the end
of the year).

Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries is not known.

PENNSYLVANIA PERSONAL PROPERTY TAX. The Fund has received a written letter
of determination from the Pennsylvania Department of Revenue that the Fund will
be subject to the Pennsylvania foreign franchise and corporate net income tax.
Accordingly, it is believed that Fund shares are exempt from Pennsylvania
personal property taxes. The Fund anticipates that it will continue such
business activities but reserves the right to suspend them at any time,
resulting in the termination of the exemption.

B-27
<PAGE>
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. See "How the Fund Is
Managed--Custodian and Transfer and Dividend Disbursing Agent" in the
Prospectus.

Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the Fund.
It is a wholly-owned subsidiary of PMF. PMFS provides customary transfer agency
services to the Fund, including the handling of shareholder communications, the
processing of shareholder transactions, the maintenance of shareholder account
records, payment of dividends and distributions, and related functions. For
these services, PMFS receives an annual fee per shareholder account, a new
account set-up fee for each manually-established account and a monthly inactive
zero balance account fee per shareholder account. PMFS is also reimbursed for
its out-of-pocket expenses, including, but not limited to, postage, stationery,
printing, allocable communications expenses and other costs. For the fiscal year
ended September 30, 1995, the Fund incurred fees of approximately $850,500 for
the services of PMFS.

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Fund's independent accountants and in that capacity examines the
Fund's annual financial statements.

B-28
<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS AS OF SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------
LONG-TERM INVESTMENTS--89.7%
COMMON STOCKS--89.7%
- ---------------------------------------------------------------
AEROSPACE/DEFENSE--4.6%
758,000 Precision Castparts Corp. $ 27,667,000
- ---------------------------------------------------------------
AUTOMOBILES--0.6%
250,000(b) Jason, Inc.(a)
(cost $2,200,000; purchase
date--1/21/94) 1,968,750
94,300 Walbro Corp. 1,886,000
------------
3,854,750
- ---------------------------------------------------------------
BANKING--0.6%
190,000 Community First Bankshares, Inc. 3,657,500
- ---------------------------------------------------------------
CABLE & PAY TELEVISION SYSTEMS--0.3%
68,000 TCA Cable TV, Inc. 1,955,000
- ---------------------------------------------------------------
COMPUTER HARDWARE--4.3%
529,700 Black Box Corp.(a) 9,799,450
30,100 Opti, Inc.(a) 395,063
456,400 Telxon Corp. 10,896,550
327,700 Western Digital Corp.(a) 5,202,237
------------
26,293,300
- ---------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES--4.8%
92,000 Analysts International Corp. 2,944,000
281,300 Continuum Co., Inc.(a) 10,794,887
20,300 Software Spectrum, Inc.(a) 499,888
232,700 Sterling Software, Inc.(a) 10,587,850
287,800 Westcott Communications, Inc.(a) 4,352,975
------------
29,179,600
- ---------------------------------------------------------------
CONSUMER PRODUCTS--5.1%
404,600 Big B, Inc. 6,018,425
95,500 Block Drug Co., Inc. Cl. A 3,700,625
82,000 Eckerd, Jack Corp.(a) $ 3,280,000
297,800 Fays, Inc. 2,456,850
560,050 Fedders Corp. Cl. A non-voting 2,730,244
591,900 Fedders Corp. 3,921,337
240,000 Libbey, Inc. 5,730,000
180,400 Russ Berrie & Co., Inc. 2,751,100
------------
30,588,581
- ---------------------------------------------------------------
CONSUMER SERVICES--1.6%
264,900 Regis Corp. 5,695,350
136,700 Pittston Services Group 3,707,987
------------
9,403,337
- ---------------------------------------------------------------
CONTAINERS & PACKAGING--0.7%
234,000 Applied Extrusion Technologies(a) 4,299,750
- ---------------------------------------------------------------
DRUGS & MEDICAL SUPPLIES--1.9%
310,300 Endosonics Corp.(a) 4,111,475
278,081 Healthdyne, Inc.(a) 3,788,854
122,300 Sofamor/Danek Group, Inc.(a) 3,393,825
------------
11,294,154
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.5%
221,100 Belden, Inc. 5,803,875
157,200 GTI Corp.(a) 3,144,000
------------
8,947,875
- ---------------------------------------------------------------
ELECTRONICS--6.6%
36,100 Burr-Brown Corp.(a) 1,371,800
91,400 Kemet Corp.(a) 3,130,450
440,000 Marshall Industries(a) 16,610,000
589,200 Methode Electronics, Inc. Cl. A 13,551,600
245,000 Woodhead Industries, Inc. 3,506,562
48,200 Zilog, Inc.(a) 2,006,325
------------
40,176,737
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-29

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS AS OF SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------
ENVIRONMENTAL SERVICES--1.4%
216,000 BHA Group, Inc. Cl. A $ 2,916,000
287,300 USA Waste Services, Inc.(a) 5,602,350
------------
8,518,350
- ---------------------------------------------------------------
ENGINEERING--0.5%
150,000 Baker (Michael) Corp.(a) 834,375
88,000 Valmont Industries, Inc. 2,134,000
------------
2,968,375
- ---------------------------------------------------------------
FINANCIAL SERVICES--5.2%
261,800 Finova Group, Inc. 11,650,100
146,700 GATX Capital Corp. 7,591,725
350,200 Interpool, Inc.(a) 6,040,950
165,000 McDonald & Co. Investments, Inc. 2,805,000
140,000 RCSB Financial, Inc. 3,377,500
------------
31,465,275
- ---------------------------------------------------------------
FOOD & BEVERAGE--5.1%
531,100 JP Foodservice, Inc.(a) 9,427,025
478,300 Michaels Foods, Inc. 6,397,263
522,500 Rykoff-Sexton, Inc. 12,344,062
240,900 Sanderson Farms, Inc. 2,920,913
------------
31,089,263
- ---------------------------------------------------------------
FOREST PRODUCTS--1.7%
130,000 Mercer International, Inc.(a) 3,250,000
185,420 Mosinee Paper Corp. 4,635,500
90,700 Wausau Paper Mills Co. 2,199,475
------------
10,084,975
- ---------------------------------------------------------------
HEALTH CARE SERVICES--1.0%
177,900 Grancare, Inc.(a) 3,091,013
22,200 Multicare Cos, Inc.(a) 516,150
523,600 Unilab Corp.(a) 2,225,300
------------
5,832,463
- ---------------------------------------------------------------
HOSPITAL MANAGEMENT--1.3%
18,400 Coastal Physician Group, Inc.(a) $ 322,000
215,700 Physician Corp. of America(a) 3,397,275
128,800 Universal Health Services, Inc. Cl.
B(a) 4,411,400
------------
8,130,675
- ---------------------------------------------------------------
INDUSTRIALS--6.0%
100,000 Carlisle Companies, Inc. 4,162,500
232,700 Figgie International, Inc. Cl. A(a) 3,083,275
23,700 Insituform Mid-America, Inc. 379,200
303,300 ITI Technologies, Inc.(a) 8,227,012
138,700 Mark IV Industries, Inc. 3,086,075
125,100 Pentair, Inc. 5,629,500
247,500 Rogers Corp.(a) 5,940,000
238,000 Schulman (A.), Inc. 5,950,000
------------
36,457,562
- ---------------------------------------------------------------
INFORMATION SERVICES--0.9%
277,500 American Business Information,
Inc.(a) 5,619,375
- ---------------------------------------------------------------
INSURANCE--2.2%
179,500 AmVestors Financial Corp. 2,064,250
245,700 Philadelphia Consolidated Holding
Corp.(a) 5,221,125
246,300 Poe & Brown, Inc. 6,034,350
------------
13,319,725
- ---------------------------------------------------------------
LEISURE--1.0%
348,800 Topps Company, Inc. 2,267,200
165,300 WMS Industries, Inc.(a) 3,491,963
------------
5,759,163
- ---------------------------------------------------------------
MACHINERY & EQUIPMENT--8.0%
186,200 Albany International Corp. Cl. A 4,352,425
225,150 Bearings, Inc. 7,626,956
412,600 Brenco, Inc. 4,641,750
160,000 Gerber Scientific, Inc. 2,860,000
321,100 Measurex Corp. 10,997,675
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-30

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS AS OF SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------
MACHINERY & EQUIPMENT (CONT'D.)
393,400 Regal Beloit Corp. $ 7,327,075
271,300 Roper Industries 10,512,875
------------
48,318,756
- ---------------------------------------------------------------
OIL & GAS EXPLORATION/PRODUCTION--3.0%
139,600 Diamond Shamrock, Inc. 3,437,650
228,614 KN Energy, Inc. 6,229,732
157,100 Mitchell Energy & Development
Corp. Cl. A 2,827,800
285,650 Mitchell Energy & Development
Corp. Cl. B 5,034,581
51,000 Western Gas Resources, Inc. 854,250
------------
18,384,013
- ---------------------------------------------------------------
OIL SERVICES--0.4%
156,700 Dreco Energy Services Ltd.(a) 2,350,500
- ---------------------------------------------------------------
REALTY INVESTMENT TRUST--0.6%
116,300 Duke Realty Investments, Inc. 3,619,838
- ------------------------------------------------------------
RETAIL--1.8%
394,780 Neostar Retail Group, Inc.(a) 6,760,607
102,300 Tiffany & Co. 4,283,813
------------
11,044,420
- ---------------------------------------------------------------
SPECIALTY CHEMICALS--7.4%
93,600 Agrium, Inc. (Canada) 3,416,400
16,300 Arcadian Corp.(a) 332,113
628,500 Brush Wellman, Inc. 11,627,250
327,100 Cabot Corp. 17,377,187
100,800 Potash Corp. of Saskatchewan, Inc.
(Canada) 6,274,800
140,900 Vigoro Corp. 5,953,025
------------
44,980,775
- ---------------------------------------------------------------
STEEL--1.9%
231,200 Huntco, Inc. 3,496,900
112,500 Lukens, Inc. 3,276,563
232,700 Quanex Corp. 5,032,137
------------
11,805,600
- ---------------------------------------------------------------
TRANSPORTATION--7.6%
280,950 Air Express International Corp. $ 7,093,987
462,900 Expeditors International of
Washington, Inc. 12,498,300
409,900 Harper Group, Inc. 7,788,100
204,200 Kansas City Southern Industries,
Inc. 9,291,100
295,600 Trinity Industries, Inc. 9,163,600
------------
45,835,087
- ---------------------------------------------------------------
UTILITIES--0.1%
38,800 AES China Generating Cl. A(a) 349,200
------------
Total Long-Term Investments
(cost $420,680,613) 543,250,974
------------
PRINCIPAL
AMOUNT
(000)
SHORT-TERM INVESTMENT
- ---------------------------------------------------------------
REPURCHASE AGREEMENT--10.8%
Joint Repurchase Agreement Account,
$ 65,691 6.3936%, 10/2/95, (cost
$65,691,000; Note 5) 65,691,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS--100.5%
(cost $486,371,613; Note 4) 608,941,974
Liabilities in excess of other
assets--(0.5%) (3,292,539)
------------
Net Assets--100% $605,649,435
------------
------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Private placement restricted as to resale; includes registration rights
under which the Fund may demand registration by the issuer.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-31

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS September 30, 1995
------------------
<S> <C>
Investments, at value (cost $486,371,613).................................................................... $608,941,974
Cash......................................................................................................... 58,119
Receivable for investments sold.............................................................................. 4,948,831
Receivable for Fund shares sold.............................................................................. 1,098,709
Dividends and interest receivable............................................................................ 591,480
Other assets................................................................................................. 8,561
------------
Total assets.............................................................................................. 615,647,674
------------
LIABILITIES
Payable for Fund shares reacquired........................................................................... 5,092,181
Payable for investments purchased............................................................................ 3,904,870
Distribution fee payable..................................................................................... 355,147>
Management fee payable....................................................................................... 348,807
Accrued expenses............................................................................................. 297,234
------------
Total liabilities......................................................................................... 9,998,239
------------
NET ASSETS................................................................................................... $605,649,435
------------
------------
Net assets were comprised of:
Common stock, at par...................................................................................... $ 438,813
Paid-in capital in excess of par.......................................................................... 454,127,152
------------
454,565,965
Undistributed net investment income....................................................................... 1,954,545
Accumulated net realized gain on investments.............................................................. 26,558,564
Net unrealized appreciation on investments................................................................ 122,570,361
------------
Net assets, September 30, 1995............................................................................... $605,649,435
------------
------------
Class A:
Net asset value and redemption price per share
($242,230,640 / 17,083,836 shares of common stock issued and outstanding).............................. $14.18
Maximum sales charge (5.0% of offering price)............................................................. .75
------------
Maximum offering price to public.......................................................................... $14.93
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($361,873,443 / 26,683,556 shares of common stock issued and outstanding).............................. $13.56
------------
------------
Class C:
Net asset value, offering price and redemption price per share
($1,545,352 / 113,948 shares of common stock issued and outstanding)................................... $13.56
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-32

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY
FUND, INC.
STATEMENT OF OPERATIONS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
NET INVESTMENT INCOME 1995
-------------
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $12,641)..................... $ 5,667,728
Interest................................. 2,657,849
---------------
Total income.......................... 8,325,577
---------------
Expenses
Distribution fee--Class A................ 436,121
Distribution fee--Class B................ 3,499,288
Distribution fee--Class C................ 7,835
Management fee........................... 3,676,126
Transfer agent's fees and expenses....... 1,021,000
Reports to shareholders.................. 366,000
Custodian's fees and expenses............ 180,000
Registration fees........................ 167,000
Franchise taxes.......................... 105,000
Audit fee................................ 46,000
Legal fees............................... 35,000
Directors' fees.......................... 30,200
Miscellaneous............................ 35,835
---------------
Total expenses........................ 9,605,405
---------------
Net investment loss......................... (1,279,828)
---------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investment
transactions............................. 29,417,664
Net change in unrealized appreciation
of investments........................... 83,509,332
---------------
Net gain on investments..................... 112,926,996
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ 111,647,168
---------------
---------------
</TABLE>

PRUDENTIAL GROWTH OPPORTUNITY
FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED SEPTEMBER 30,
IN NET ASSETS ---------------------------
1995 1994
------------ -----------
<S> <C> <C>
Operations
Net investment loss............ $ (1,279,828) $ (3,041,729)
Net realized gain on
investments................. 29,417,664 44,673,230
Net change in unrealized
appreciation (depreciation)
of investments.............. 83,509,332 (38,737,408)
------------ ------------
Net increase in net assets
resulting from operations... 111,647,168 2,894,093
------------ ------------
Net equalization credits.......... 1,510,164 70,234
------------ ------------
Distributions from net realized
capital gains (Note 1)
Class A........................ (6,672,537) (5,775,787)
Class B........................ (28,252,159) (24,227,795)
Class C........................ (23,735) --
------------ ------------
(34,948,431) (30,003,582)
------------ ------------
Fund share transactions (net of
conversion) (Note 6)
Net proceeds from shares
sold........................ 369,521,600 433,710,426
Net asset value of shares
issued in reinvestment of
distributions............... 33,299,692 28,758,329
Cost of shares reacquired...... (404,229,931) (377,490,019)
------------ ------------
Net increase (decrease) in net
assets from Fund share
transactions................ (1,408,639) 84,978,736
------------ ------------
Total increase.................... 76,800,262 57,939,481
NET ASSETS
Beginning of year................. 528,849,173 470,909,692
------------ ------------
End of year....................... $605,649,435 $528,849,173
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-33

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Prudential Growth Opportunity Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The investment objective of the Fund is to achieve capital growth,
consistent with reasonable risk, by investing in a carefully selected portfolio
of common stocks having prospects of a high return on equity, increasing
earnings, increasing dividends and price-earnings ratios which are not
excessive.

- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.

SECURITIES VALUATIONS : Investments traded on a national securities exchange are
valued at the last reported sales price on the primary exchange on which they
are traded. Securities traded in the over-the-counter market (including
securities listed on exchanges whose primary market is believed to be
over-the-counter) and listed securities for which no sale was reported on that
date are valued at the mean between the last reported bid and asked prices. Any
security for which a reliable market quotation is unavailable is valued at fair
value as determined in good faith by or under the direction of the Fund's Board
of Directors.

Short-term securities which mature in more than 60 days are valued based upon
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost.

In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction, including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
All securities are valued as of 4:15 P.M., New York time.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis.

Net investment income (loss), other than distribution fees, and unrealized and
realized gains or losses are allocated daily to each class of shares of the Fund
based upon the relative proportion of net assets of each class at the beginning
of the day.

FEDERAL INCOME TAXES: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required.

Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.

EQUALIZATION: The Fund follows the accounting practice known as equalization, by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income, if any, semi-annually and make distributions at least annually of any
net capital gains. Dividends and distributions are recorded on the ex-dividend
date.

Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.

RECLASSIFICATION OF CAPITAL ACCOUNTS: The Fund accounts and reports for
distributions to shareholders in accordance with AICPA Statement of Position
93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
During the year ended September 30, 1995, the Fund reclassified current and
prior net operating losses by increasing undistributed net investment income by
$1,279,828 and decreasing accumulated net realized gains by $2,378,272 and
increasing paid in capital by $1,098,444. Net investment income, net realized
gains, and net assets were not affected by this change.

- --------------------------------------------------------------------------------

B-34

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2. AGREEMENTS

The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
("PMF"). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation ("PIC"); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.

The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .70 of 1% of the Fund's average daily net assets.

The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. ("PMFD"), which acts as the distributor of the Class A shares of the
Fund, and with Prudential Securities Incorporated ("PSI"), which acts as
distributor of the Class B and Class C shares of the Fund (collectively the
"Distributors"). The Fund compensates the Distributors for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution, (the "Class A, B and C Plans"). The distribution fees are
accrued daily and payable monthly.

Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, 1% and
1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1% of the average daily
net assets of Class A shares and 1% of the average daily net assets of both the
Class B and C shares for the year ended September 30, 1995.

PMFD has advised the Fund that it has received approximately $295,000 in
front-end sales charges resulting from sales of Class A shares during the year
ended September 30, 1995. From these fees, PMFD paid such sales charges to PSI
and Pruco Securities Corporation, affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the year ended September 30, 1995, it received
approximately $931,000 in contingent deferred sales charges imposed upon certain
redemptions by Class B and C shareholders.

PMFD is a wholly-owned sudsidiary of PMF; PSI, PMF and PIC are indirect
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- --------------------------------------------------------------------------------
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES

Prudential Mutual Fund Services, Inc. ("PMFS"), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the year ended September 30,
1995, the Fund incurred fees of approximately $850,500 for the services of PMFS.
As of September 30, 1995, approximately $76,000 of such fees were due to PMFS.
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO SECURITIES

Purchases and sales of investment securities, other than short-term investments,
for the year ended September 30, 1995 were $309,191,999 and $381,993,783,
respectively.

The federal income tax basis of the Fund's investments at September 30, 1995 was
$486,611,307 and, accordingly, net unrealized appreciation for federal income
tax purposes was $122,330,667 (gross unrealized appreciation--$129,690,928 gross
unrealized depreciation--$7,360,261).
- --------------------------------------------------------------------------------
NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT

The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of September 30, 1995, the
Fund had a 9.0% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represented $65,691,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefor were as follows:

Bear, Stearns & Co., Inc., 6.375%, in the principal amount of $225,000,000,
repurchase price $225,119,531, due 10/2/95. The value of the collateral
including accrued interest was $229,660,959.

BT Securities Corp., 6.10%, in the principal amount of $56,863,000, repurchase
price $56,891,905, due 10/2/95. The value of the collateral including accrued
interest was $58,082,904.

Goldman Sachs & Co., 6.45%, in the principal amount of $225,000,000, repurchase
price $225,120,938, due 10/2/95. The value of the collateral including accrued
interest was $229,500,013.
- --------------------------------------------------------------------------------

B-35

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Smith Barney, Inc., 6.43%, in the principal amount of $225,000,000, repurchase
price $225,120,563, due 10/2/95. The value of the collateral including accrued
interest was $229,500,366.
- --------------------------------------------------------------------------------
NOTE 6. CAPITAL

The Fund issues Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Commencing in February 1995,
Class B shares automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase. A special exchange privilege is also
available for shareholders who qualified to purchase Class A shares at net asset
value.

There are 750 million shares of common stock, $.01 par value per share, divided
into three classes, designated Class A, Class B and Class C common stock, each
of which consists of 250 million authorized shares.

Transactions in shares of common stock for the years ended September 30, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ----------------------------------- ----------- -------------
<S> <C> <C>
Year ended September 30, 1995:
Shares sold........................ 16,264,230 $ 199,059,220
Shares issued in reinvestment of
distributions.................... 614,029 6,502,568
Shares reacquired.................. (16,750,855) (207,402,318)
----------- -------------
Net increase in shares outstanding
before conversion................ 127,404 (1,840,530)
Shares issued upon conversion from
Class B.......................... 8,645,131 97,904,973
----------- -------------
Net increase in shares
outstanding...................... 8,772,535 $ 96,064,443
----------- -------------
----------- -------------
Year ended September 30, 1994:
Shares sold........................ 9,370,171 $ 115,130,689
Shares issued in reinvestment of
distributions.................... 467,222 5,644,046
Shares reacquired.................. (8,789,620) (108,081,971)
----------- -------------
Net increase in shares
outstanding...................... 1,047,773 $ 12,692,764
----------- -------------
----------- -------------
<CAPTION>
Class B Shares Amount
- ----------------------------------- ----------- -------------
<S> <C> <C>
Year ended September 30, 1995:
Shares sold........................ 14,302,262 $ 168,922,003
Shares issued in reinvestment of
distributions.................... 2,601,937 26,773,935
Shares reacquired.................. (16,720,969) (196,352,189)
----------- -------------
Net increase in shares outstanding
before conversion................ 183,230 (656,251)
Shares reacquired upon conversion
into Class A..................... (8,999,868) (97,904,973)
----------- -------------
Net decrease in shares
outstanding...................... (8,816,638) $ (98,561,224)
----------- -------------
----------- -------------
Year ended September 30, 1994:
Shares sold........................ 26,537,335 $ 318,270,570
Shares issued in reinvestment of
distributions.................... 1,960,499 23,114,283
Shares reacquired.................. (22,525,818) (269,363,510)
----------- -------------
Net increase in shares
outstanding...................... 5,972,016 $ 72,021,343
----------- -------------
----------- -------------
<CAPTION>
Class C
- -------
<S> <C> <C>
Year ended September 30, 1995:
Shares sold........................ 129,738 $ 1,540,377
Shares issued in reinvestment of
distributions.................... 2,254 23,189
Shares reacquired.................. (40,456) (475,424)
----------- -------------
Net increase in shares
outstanding...................... 91,536 $ 1,088,142
----------- -------------
----------- -------------
August 1, 1994(a) through
September 30, 1994:
Shares sold........................ 26,125 $ 309,167
Shares reacquired.................. (3,713) (44,538)
----------- -------------
Net increase in shares
outstanding...................... 22,412 $ 264,629
----------- -------------
----------- -------------
- ---------------
(a) Commencement of offering of Class C shares.
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7. DIVIDENDS AND DISTRIBUTIONS

On November 20, 1995 the Board of Directors of the Fund declared dividends from
net capital gains to Class A, B and C shareholders of $.668 per share, payable
on November 29, 1995 to shareholders of record on November 24, 1995.

- --------------------------------------------------------------------------------

B-36

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Class A
---------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------
1995(a) 1994(a) 1993(a) 1992(a) 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 12.40 $ 13.06 $ 11.25 $ 10.16 $ 7.36
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................... .05 -- .03 .02 .05
Net realized and unrealized gain on investment
transactions............................... 2.57 .13 3.14 1.47 2.82
-------- -------- ------- ------- -------
Total from investment operations........... 2.62 .13 3.17 1.49 2.87
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income.......... -- -- -- -- (.07)
Distributions from net realized capital
gains...................................... (.84) (.79) (1.36) (.40) --
-------- -------- ------- ------- -------
Total distributions........................ (.84) (.79) (1.36) (.40) (.07)
-------- -------- ------- ------- -------
Net asset value, end of year.................. $ 14.18 $ 12.40 $ 13.06 $ 11.25 $ 10.16
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
TOTAL RETURN(b):.............................. 23.29% 1.13% 30.42% 15.39% 39.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $242,231 $103,078 $94,842 $44,845 $25,165
Average net assets (000)...................... $174,449 $ 97,877 $69,801 $36,011 $20,650
Ratios to average net assets:
Expenses, including distribution fees...... 1.33% 1.33% 1.17% 1.33% 1.50%
Expenses, excluding distribution fees...... 1.08% 1.09% .97% 1.13% 1.30%
Net investment income...................... .30% .00% .26% .19% .59%
Portfolio turnover............................ 64% 82% 68% 99% 111%
</TABLE>
- ---------------
(a) Calculated based upon weighted average shares outstanding during the
period.
(b) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-37

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
------------------------------------------------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Year
Year Ended September 30, Ended
------------------------------------------------------------ September 30,
1995(a) 1994(a) 1993(a) 1992(a) 1991 1995(a)
-------- -------- -------- -------- -------- -------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 11.99 $ 12.74 $ 11.08 $ 10.11 $ 7.34 $ 11.99
-------- -------- -------- -------- -------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss........................... (.06) (.09) (.06) (.07) (.02) (.06)
Net realized and unrealized gain on investment
transactions............................... 2.47 .13 3.08 1.44 2.82 2.47
-------- -------- -------- -------- -------- -------------
Total from investment operations........... 2.41 .04 3.02 1.37 2.80 2.41
-------- -------- -------- -------- -------- -------------
LESS DISTRIBUTIONS
Dividends from net investment income.......... -- -- -- -- (.03) --
Distributions from net realized capital
gains...................................... (.84) (.79) (1.36) (.40) -- (.84)
-------- -------- -------- -------- -------- -------------
Total distributions........................ (.84) (.79) (1.36) (.40) (.03) (.84)
-------- -------- -------- -------- -------- -------------
Net asset value, end of period................ $ 13.56 $ 11.99 $ 12.74 $ 11.08 $ 10.11 $ 13.56
-------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------------
TOTAL RETURN(b):.............................. 22.37% .34% 29.40% 14.27% 38.33% 22.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $361,873 $425,502 $376,068 $172,018 $118,660 $ 1,545
Average net assets (000)...................... $349,929 $399,920 $278,659 $154,601 $104,508 $ 784
Ratios to average net assets:
Expenses, including distribution fees...... 2.08% 2.09% 1.97% 2.13% 2.30% 2.08%
Expenses, excluding distribution fees...... 1.08% 1.09% .97% 1.13% 1.30% 1.08%
Net investment loss........................ (.51)% (.76)% (.54)% (.61)% (.21)% (.46)%
Portfolio turnover............................ 64% 82% 68% 99% 111% 64%
<CAPTION>
August 1,
1994(d)
Through
September 30,
1994(a)
-----
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 11.61
-----

INCOME FROM INVESTMENT OPERATIONS
Net investment loss........................... (.01)
Net realized and unrealized gain on investment
transactions............................... .39
-----

Total from investment operations........... .38
-----

LESS DISTRIBUTIONS
Dividends from net investment income.......... --
Distributions from net realized capital
gains...................................... --
-----

Total distributions........................ --
-----

Net asset value, end of period................ $ 11.99
-----
-----

TOTAL RETURN(b):.............................. 3.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 269
Average net assets (000)...................... $ 179
Ratios to average net assets:
Expenses, including distribution fees...... 2.22%(c)
Expenses, excluding distribution fees...... 1.22%(c)
Net investment loss........................ (.31)%(c)
Portfolio turnover............................ 82%
</TABLE>

- ---------------
(a) Calculated based upon weighted average shares outstanding during the
period.
(b) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than
a full year are not annualized.
(c) Annualized.
(d) Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.

B-38

<PAGE>

PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

The Shareholders and Board of Directors of
Prudential Growth Opportunity Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Growth Opportunity Fund,
Inc. (the "Fund") at September 30, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
New York, New York
November 20, 1995

B-39

<PAGE>
APPENDIX A--GENERAL INVESTMENT INFORMATION

The following terms are used in mutual fund investing.

ASSET ALLOCATION

Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns, while
enabling investors to work toward their financial goal(s). Asset allocation is
also a strategy to gain exposure to better performing asset classes while
maintaining investment in other asset classes.

DIVERSIFICATION

Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable returns.
Owning a portfolio of securities mitigates the individual risks (and returns) of
any one security. Additionally, diversification among types of securities
reduces the risks and (general returns) of any one type of security.

DURATION

Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.

Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).

MARKET TIMING

Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.

POWER OF COMPOUNDING

Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.

A-1
<PAGE>
APPENDIX B--HISTORICAL PERFORMANCE DATA

The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.

This chart shows the long-term performance of various asset classes and the rate
of inflation.

[CHART]
Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. This chart is for illustrative
purposes only and is not indicative of the past, present, or future performance
of any asset class of any Prudential Mutual Fund.

Generally, stock returns are attributable to capital appreciation and the
reinvestment of distributions. Bond returns are attributable mainly to the
reinvestment of distributions. Also, stock prices are usually more volatile than
bond prices over the long-term.

Small stock returns for 1926-1989 are those of stocks comprising the 5th
quintile of the New York Stock Exchange. Thereafter, returns are those of the
Dimensional Fund Advisors (DFA) Small Company Fund. Common stock returns are
based on the S&P Composite Index, a market-weighted, unmanaged index of 500
stocks (currently) in a variety of industries. It is often used as a broad
measure of stock market performance.

Long-term government bond returns are represented by a portfolio that contains
only one bond with a maturity of roughly 20 years. At the beginning of each year
a new bond with a then-current coupon replaces the old bond. Treasury bill
returns are for a one-month bill. Treasuries are guaranteed by the government as
to the timely payment of principal and interest; equities are not. Inflation is
measured by the consumer price index (CPI).

Impact of Inflation. The "real" rate of investment return is that which exceeds
the rate of inflation, the percentage change in the value of consumer goods and
the general cost of living. A common goal of long-term investors is to outpace
the erosive impact of inflation on investment returns.

B-1
<PAGE>
Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1987 to
May 1995. The total returns of the indices include accrued interest, plus the
price changes (gains or losses) of the underlying securities during the period
mentioned. The data is provided to illustrate the varying historical total
returns and investors should not consider this performance data as an indication
of the future performance of the Fund or of any sector in which the Fund
invests.

All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees of
a mutual fund. See "Fund Expenses" in the prospectus. The net effect of the
deduction of the operating expenses of a mutual fund on these historical total
returns, including the compounded effect over time, could be substantial.

Historical Total Returns of Different Bond Market Sectors

<TABLE>
<CAPTION>
YTD
'87 '88 '89 '90 '91 '92 '93 '94 9/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT
TREASURY
BONDS(1) 2.0% 7.0% 14.4% 8.5% 15.3% 7.2% 10.7% (3.4)% 13.2%
- ------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT
MORTGAGE
SECURITIES(2) 4.3% 8.7% 15.4% 10.7% 15.7% 7.0% 6.8% (1.6)% 13.1%
- ------------------------------------------------------------------------------------------------------
U.S. INVESTMENT GRADE
CORPORATE
BONDS(3) 2.6% 9.2% 14.1% 7.1% 18.5% 8.7% 12.2% (3.9)% 16.5%
- ------------------------------------------------------------------------------------------------------
U.S.
HIGH YIELD
CORPORATE
BONDS(4) 5.0% 12.5% 0.8% (9.6)% 46.2% 15.8% 17.1% (1.0)% 15.6%
- ------------------------------------------------------------------------------------------------------
WORLD
GOVERNMENT
BONDS(5) 35.2% 2.3% (3.4)% 15.3% 16.2% 4.8% 15.1% 6.0% 17.1%
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
DIFFERENCE BETWEEN HIGHEST
AND LOWEST RETURN PERCENT 33.2 10.2 18.8 24.9 30.9 11.0 10.3 9.9 4.0
</TABLE>

(1)LEHMAN BROTHERS TREASURY BOND INDEX is an unmanaged index made up of over 150
public issues of the U.S. Treasury having maturities of at least one year.
(2)LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index that
includes over 600 15- and 30-year fixed-rate mortgage-backed securities of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
(3)LEHMAN BROTHERS CORPORATE BOND INDEX includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S. dollar-denominated
issues and include debt issued or guaranteed by foreign sovereign governments,
municipalities, governmental agencies or international agencies. All bonds in
the index have maturities of at least one year.
(4)LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index comprising over
750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or Fitch
Investors Service). All bonds in the index have maturities of at least one year.
(5)SALOMON BROTHERS WORLD GOVERNMENT INDEX (NON U.S.) includes over 800 bonds
issued by various foreign governments or agencies, excluding those in the U.S.,
but including those in Japan, Germany, France, the U.K., Canada, Italy,
Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and Austria. All
bonds in the index have maturities of at least one year.

B-2
<PAGE>
This chart illustrates the performance of major
world stock markets for the period from 1985
through 1994. It does not represent the
performance of any Prudential Mutual Fund.

[CHART]

Source: Morgan Stanley Capital International (MSCI) and
Lipper Analytical New Applications. Used with permission.
Morgan Stanley Country indices are unmanaged indices which
include those stocks making up the largest two-thirds of each
country's total stock market capitalization. Returns reflect the
reinvestment of all distributions. This chart is for illustrative
purposes only and is not indicative of the past, present or
future performance of any specific investment. Investors
cannot invest directly in stock indices.
This chart shows the growth of a hypothetical
$10,000 investment made in the stocks representing
the S&P 500 stock index with and without reinvested
dividends.

[CHART]

Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook, Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson
and Rex A. Sinquefield). Used with permission. All rights reserved.
This chart is used for illustrative purposes only and is not intended to
represent the past, present or future performance of any Prudential
Mutual Fund. Common stock total return is based on the Standard
& Poor's 500 Stock Index, a market-value-weighted index made up
of 500 of the largest stocks in the U.S. based upon their stock
market value. Investors cannot invest directly in indices.

[CHART]
Source: Morgan Stanley Capital International, December 1994.
Used with permission. This chart represents the capitalization of
major world stock markets as measured by the Morgan Stanley
Capital International (MSCI) World Index. The total market
capitalization is based on the value of 1577 companies in 22
countries (representing approximately 60% of the aggregate
market value of the stock exchanges). This chart is for illustrative purposes
only and does not represent the allocation of any Prudential Mutual Fund.

B-3
<PAGE>

This chart below shows the historical volatility of general
interest rates as measured by the long U.S. Treasury Bond.

[CHART]

---------------------------------------------------------------

Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook,
Ibbotson Associates, Chicago (annually updates work by Roger G.
Ibbotson and Rex A. Sinquefield). Used with permission. All
rights reserved. This chart illustrates the historical yield of
the long- term U.S. Treasury Bond from 1926-1994. Yields
represent that of an annually renewed one-bond portfolio with a
remaining maturity of approximately 20 years. This chart is for
illustrative purposes only and should not be construed to
represent the yields of any Prudential Mutual Fund.

B-4