NICHOLAS APPLEGATE FUND INC, 485B24E, 1996-03-05

NICHOLAS APPLEGATE FUND INC
485B24E, 1996-03-05

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<PAGE>

As filed with the Securities and Exchange Commission on March 4, 1996
Registration No. 33-38461
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]

POST-EFFECTIVE AMENDMENT NO. 9 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 11 [X]
(Check appropriate box or boxes)

-----------

NICHOLAS-APPLEGATE FUND, INC.
(Formerly Nicholas-Applegate Growth Equity Fund, Inc.)
(Exact name of registrant as specified in charter)

ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 214-1250
S. JANE ROSE, ESQ.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):

[X] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[_] on (date) pursuant to paragraph (a) of Rule 485.
[_] 75 days after filing pursuant to paragraph (a)(ii).
[_] on (date) pursuant to paragraph (a)(ii) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.

PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HAS PREVIOUSLY REGISTERED AN INDEFINITE NUMBER OF SHARES OF COMMON STOCK, PAR
VALUE $.01 PER SHARE. THE REGISTRANT FILED A NOTICE UNDER SUCH RULE FOR ITS
FISCAL YEAR ENDED DECEMBER 31, 1995 ON FEBRUARY 28, 1996.

CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE* OFFERING PRICE* REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock par
value $0.001, per share..... Indefinite* N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
Shares of Common Stock par
value $0.001, per share..... 1,188,044 $16.61 $289,993.99 $100
</TABLE>
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- -------------------------------------------------------------------------------

* The calculation of the maximum aggregate offering price was made pursuant
to Rule 24e-2 and was based upon an offering price of $16.61 per share,
equal to the net asset value per share as of the close of business on
February 27, 1996 pursuant to Rule 457(u). The total number of shares
redeemed during the fiscal year ended December 31, 1995 amounted to
37,746,278 shares. Of this number, no shares have been used for reduction
pursuant to paragraph (a) of Rule 24e-2 in all previous filings of post-
effective amendments during the current year and 36,575,693 shares have
been used for reduction pursuant to paragraph (c) of Rule 24f-2 in all
previous filings during the current year. 1,170,585 ($15,012,003) of the
redeemed shares for the fiscal year ended December 31, 1995 are being used
for the reductions in the post-effective amendment being filed herein.

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<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
------------- --------
<C> <S> <C>
PART A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Fund Expenses; Fund Highlights
Item 3. Condensed Financial Information...... Fund Expenses; Financial
Highlights; How the Fund
Calculates Performance
Item 4. General Description of Registrant.... Cover Page; Fund Highlights;
General Information
Item 5. Management of Fund................... Financial Highlights; How the
Fund is Managed; General
Information
Item 6. Capital Stock and Other Securities... Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being Offered. Shareholder Guide: How the
Fund Values its Shares
Item 8. Redemption or Repurchase............. Shareholder Guide: How the
Fund Values its Shares;
General Information
Item 9. Pending Legal Proceedings............ Not Applicable

PART B
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Table of Contents
Item 12. General Information and History...... General Information
Item 13. Investment Objectives and Policies... Investment Objective and
Policies; Investment
Restrictions
Item 14. Management of the Fund............... Directors and Officers;
Manager; Distributor
Item 15. Control Persons and Principal Holders
of Securities........................ Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services............................. Manager; Distributor;
Custodian, Transfer and
Dividend Disbursing Agent and
Independent Accountants
Item 17. Brokerage Allocation and Other
Practices............................ Portfolio Transactions and
Brokerage
Item 18. Capital Stock and Other Securities... Not Applicable
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............. Purchase and Redemption of
Fund Shares; Shareholder
Investment Account; Net Asset
Value
Item 20. Tax Status........................... Dividends, Distributions and
Taxes
Item 21. Underwriters......................... Distributor
Item 22. Calculation of Performance Data...... Performance Information
Item 23. Financial Statements................. Financial Statements

PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment
to the Registration Statement.
</TABLE>
<PAGE>

Nicholas-Applegate Growth Equity Fund

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Prospectus dated March 4, 1996

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Nicholas-Applegate Growth Equity Fund (the Fund) is a series of Nicholas-
Applegate Fund, Inc. (the Company), an open-end, diversified management
investment company whose objective is capital appreciation. The Fund intends
to invest principally in a diversified portfolio of common stocks and
securities convertible into or exercisable for common stocks, the earnings and
securities prices of which its Investment Adviser expects to grow at a rate
above the rate of the Standard & Poor's 500 Stock Price Index (S&P 500). The
Fund intends to invest primarily in companies having middle market
capitalizations and above. Companies which have market capitalizations of $500
million to approximately $5 billion are generally referred to as "middle
market capitalization" companies. No assurance can be given that the Fund's
investment objective will be achieved. THE FUND MAY ENGAGE IN SHORT-SELLING
AND SHORT-TERM TRADING. THESE TECHNIQUES MAY BE CONSIDERED SPECULATIVE AND MAY
RESULT IN HIGHER RISKS AND COSTS TO THE FUND. See "How the Fund Invests--
Investment Objective" and "--Investment Policies and Practices."

The Fund's Manager is Prudential Mutual Fund Management, Inc. The Fund's
Investment Adviser is Nicholas-Applegate Capital Management. See "How the Fund
is Managed." 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 March 4, 1996, which information is
incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Company at the
address or telephone number noted above.

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Investors are advised to read this Prospectus and retain it for future
reference.

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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 NICHOLAS-APPLEGATE GROWTH EQUITY FUND?

Nicholas-Applegate Growth Equity Fund 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 sales 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 appreciation. It seeks to
achieve this objective by investing primarily in common stocks and
securities convertible into or exercisable for common stocks (such as
convertible preferred stocks and convertible debentures) the earnings and
securities prices of which the Investment Adviser expects to grow at a rate
above that of the S&P 500. There can be no assurance that the Fund's
objective will be achieved. See "How the Fund Invests--Investment Objective
and Policies" at page 7.

RISK FACTORS AND SPECIAL CHARACTERISTICS

In seeking to achieve its investment objective, the Fund has generally
invested in companies having middle market capitalizations, and above.
Companies which have capitalizations of $500 million to approximately $5
billion are generally referred to as "middle market capitalization"
companies. The Fund's net asset value may be subject to above average
fluctuations, and its portfolio turnover may be substantially greater than
that of many other funds. The Fund may also invest in securities of foreign
issuers, engage in short sales and borrow from banks for certain purposes,
all of which involve special risk considerations. See "How the Fund
Invests--Investment Objective and Policies" at page 7.

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 .95 of
1% of the Fund's average daily net assets. As of January 31, 1996, PMF
served as manager or administrator to 60 investment companies, including 38
mutual funds, with aggregate assets of approximately $52 billion. Nicholas-
Applegate Capital Management (NACM or the Investment Adviser) 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 11 and "How the Fund is Managed--Investment Adviser" at
page 12.

WHO DISTRIBUTES THE FUND'S 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 A, Class B and Class C 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 and
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 12.

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 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. 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 18 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 18.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers three classes of shares:

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

.Class B Sold without an initial sales charge but are subject to a
Shares: 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 Sold without an initial sales charge and, for one year after
Shares: 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 19.

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 22.

DIVIDENDS AND DISTRIBUTIONS

The Fund expects to pay dividends of net investment income annually, if any,
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 CLASS A SHARES CLASS B SHARES CLASS C SHARES
EXPENSES+ -------------- ------------------------------------- ----------------------------
<S> <C> <C> <C>
Maximum Sales Load Im-
posed on Purchases
(as a percentage of
offering price)...... 5.00% 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 5% during the first year, decreasing
proceeds, whichever by 1% annually to 1% in the fifth and 1% on redemptions made
is lower)............ None sixth years and 0% the seventh year* within one year of purchase.
Redemption Fees....... None None None
Exchange Fees......... None None None
<CAPTION>
ANNUAL FUND OPERATING CLASS A SHARES CLASS B SHARES CLASS C SHARES
EXPENSES -------------- ------------------------------------- ----------------------------
<S> <C> <C> <C>
(as a percentage of av-
erage net assets)
Management Fees....... .95% .95% .95%
12b-1 Fees............ .25++ 1.00 1.00
Other Expenses........ .32 .32 .32

---- ------------------------------------- ----------------------------
Total Fund Operating
Expenses............. 1.52% 2.27% 2.27%

==== ===================================== ============================
</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................................... $65 $ 96 $129 $222
Class B................................... $73 $101 $132 $215
Class C................................... $33 $ 71 $122 $261
You would pay the following expenses on the
same investment, assuming no redemption:
Class A................................... $65 $ 96 $129 $222
Class B................................... $23 $ 71 $122 $233
Class C................................... $23 $ 71 $122 $261
</TABLE>

The above example is based on restated data for the Fund's fiscal year
ended December 31, 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.
----------
* 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 December 31, 1996. Total
operating expenses without such limitation would be 1.57%. See "How the
Fund is Managed--Distributor."

4
<PAGE>

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)

The information presented in this section includes information for fiscal
periods ended prior to the Fund's conversion from a closed-end investment
company to an open-end investment company.

The following financial highlights have been audited by Ernst & Young LLP
with respect to the fiscal year ended December 31, 1995, and by Coopers &
Lybrand LLP, with respect to the fiscal years of the Fund ended December 31,
1990, December 31, 1991, December 31, 1992 December 31, 1993 and December 31,
1994, each of whom is an independent accountant, and whose respective reports
thereon were unqualified. This information should be read in conjunction with
the financial statements and the notes thereto, which appear in the Statement
of Additional Information. Further performance information is contained in
the annual report which may be obtained without charge. See "Shareholder
Guide--Shareholder Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS A(b)
------------------------------------------------------------------------------------------------------------
APRIL 9,
1987(h)
YEAR ENDED DECEMBER 31 TO
------------------------------------------------------------------------------------------ DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989(c) 1988(c) 1987(c)
-------- ------- ------- ------- -------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............ $ 11.99 $ 13.56 $ 12.77 $ 11.73 $ 10.19 $ 11.42 $ 8.55 $ 7.40 $ 9.21(f)
-------- ------- ------- ------- -------- -------- -------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:(d)
Net investment in-
come (loss)....... (.011) (.07) (0.07) (0.07) (0.10) 0.02 (0.25) (0.14) (0.04)
Net realized and
unrealized gain
(loss) on invest-
ment transactions. 3.82 (1.19) 2.63 1.11 5.50 (0.66) 3.39 1.21 (1.77)
-------- ------- ------- ------- -------- -------- -------- ------- -------
Total from invest-
ment operations... 3.71 (1.26) 2.56 1.04 5.40 (0.64) 3.14 1.07 (1.81)
-------- ------- ------- ------- -------- -------- -------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Dividends from net
investment income. -- -- -- -- -- (0.02) -- -- --
Distributions from
net realized gains
from investment
transactions...... (0.52) (0.31) (1.77) -- (3.86) (0.06) (0.28) -- --
-------- ------- ------- ------- -------- -------- -------- ------- -------
Total dividends and
distributions..... (0.52) (0.31) (1.77) -- (3.86) (0.08) (0.28) -- --
-------- ------- ------- ------- -------- -------- -------- ------- -------
Increase (decrease)
resulting from Fund
share transactions -- -- -- -- -- (0.51) 0.01 0.08 --
-------- ------- ------- ------- -------- -------- -------- ------- -------
Net asset value, end
of period......... $ 15.18 $ 11.99 $ 13.56 $ 12.77 $ 11.73 $ 10.19 $ 11.42 $ 8.55 $ 7.40
======== ======= ======= ======= ======== ======== ======== ======= =======
TOTAL RETURN(g): .. 31.20% (9.53)% 20.26% 8.87% 55.50% (10.03)% 36.83% 15.54% (20.43)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)...... $124,340 $86,069 $97,596 $84,169 $ 63,028 $120,987 $108,415 $81,559 $74,121
Average net assets
(000)............. $109,740 $93,620 $90,332 $74,005 $104,819 $116,094 $ 98,874 $79,103 $90,251
Ratios to average
net assets:
Expenses, including
distribution fee. 1.44% 1.49%(j) 1.42%(j) 1.54%(j) 1.94%(i)(j) 1.63%(i)(j) 4.55%(i)(j) 4.60%(i)(j) 3.61%(a)(i)(j)
Expenses, excluding
distribution fee. 1.27% 1.32%(j) 1.30%(j) 1.44%(j) 1.90%(j) 1.63%(j) 4.55%(j) 4.60%(j) 3.61%(a)(j)
Net investment in-
come (loss)...... (0.83)% (0.59)% (0.53)% (0.63)% (0.83)% 0.24% (2.36)% (1.64)% (0.52)%(a)
Portfolio turnover
rate(e)........... 106% 110% 112% 107% 115% 149% 120% 183% 299%
Asset coverage of
borrowing......... -- -- -- -- -- -- 371% 372% 385%
Total debt
outstanding (000
omitted).......... -- -- -- -- -- -- $ 40,000 $30,000 $26,000
Average commission
rate paid per
share............. $ .0592 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<C> <S>
(a) Annualized.
(b) Prior to June 10, 1991, the Fund was organized as a closed-end
investment company. On June 10, 1991, the Fund was re-organized as an
open-end investment company and commenced offering of Class A shares.
(c) Not audited by Ernst & Young LLP or Coopers & Lybrand LLP.
(d) Calculated based upon weighted average shares outstanding during the
periods due to effects of open-ending, Fund share sales and the
resulting share issuance from a stock rights offering.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Net of underwriting discount ($.70) and offering costs ($.09).
(g) 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 return does not
consider the effects of sales loads. Total return for periods of less
than one full year are not annualized.
(h) Commencement of investment operations of Class A shares.
(i) Ratios of expenses, before loan interest, commitment fees and
nonrecurruing expenses were 1.71% in 1991, 1.16% in 1990, 1.14% in
1989, 1.29% in 1988 and 1.25% in 1987 for Class A Shares, respectively.
(j) Current year amounts have been restated from prior periods

</TABLE>
---------

5
<PAGE>

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)

The information presented in this section includes information for fiscal
periods ended prior to the Fund's conversion from a closed-end investment
company to an open-end investment company.

The following financial highlights have been audited by Ernst & Young LLP
with respect to the fiscal year ended December 31, 1995, and by Coopers &
Lybrand LLP, with respect to the fiscal years of the Fund ended December 31,
1990, December 31, 1991, December 31, 1992, December 31, 1993 and December
31, 1994, each of whom is an independent accountant, and whose respective
reports thereon were unqualified. This information should be read in
conjunction with the financial statements and the notes thereto, which appear
in the Statement of Additional Information. Further performance information
is contained in the annual report which may be obtained without charge. See
"Shareholder Guide--Shareholder Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS B(b)
--------------------------------------------------------------
JUNE 10,
YEAR ENDED 1991
DECEMBER 31, THROUGH
--------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period. $ 11.56 $ 13.18 $ 12.56 $ 11.65 $ 12.43
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS(c):
Net investment income (loss)......... (.22) (0.17) (0.18) (0.16) (0.08)
Net realized and unrealized gain
(loss) on investment transactions... 3.67 (1.14) 2.57 1.07 3.16
-------- -------- -------- -------- -------
Total from investment operations..... 3.45 (1.31) 2.39 0.91 3.08
-------- -------- -------- -------- -------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income. -- -- -- -- --
Distributions from net realized gains
from investment transactions........ (0.52) (0.31) (1.77) -- (3.86)
-------- -------- -------- -------- -------
Total dividends and distributions.... (0.52) (0.31) (1.77) -- (3.86)
-------- -------- -------- -------- -------
Increase (decrease) resulting from
Fund share transactions............. -- -- -- -- --
-------- -------- -------- -------- -------
Net asset value, end of period....... $ 14.49 $ 11.56 $ 13.18 $ 12.56 $ 11.65
======== ======== ======== ======== =======
TOTAL RETURN(e): .................... 30.11% (10.20)% 19.21% 7.81% 26.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $290,751 $257,059 $252,911 $123,306 $12,877
Average net assets (000)............. $265,597 $261,285 $179,456 $ 80,531 $ 1,922
Ratios to average net assets:
Expenses, including distribution
fee................................ 2.27% 2.32%(h) 2.30%(h) 2.44%(h) 3.77%(a)(g)(h)
Expenses, excluding distribution
fee................................ 1.27% 1.32%(h) 1.30%(h) 1.44%(h) 2.77%(a)(h)
Net investment income (loss)........ (1.66)% (1.39)% (1.40)% (1.56)% (3.17)%(a)
Portfolio turnover rate(d)........... 106% 110% 112% 107% 115%
Average commission rate paid per
share............................... $ .0592 N/A N/A N/A N/A
<CAPTION>
CLASS C
-----------------------------
AUGUST 1,
1994(f)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ----------------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period. $11.56 $11.62
------------ ----------------
INCOME FROM INVESTMENT
OPERATIONS(c):
Net investment income (loss)......... (0.22) (0.05)
Net realized and unrealized gain
(loss) on investment transactions... 3.67 (0.01)
------------ ----------------
Total from investment operations..... 3.45 (0.06)
------------ ----------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income. -- --
Distributions from net realized gains
from investment transactions........ (0.52) --
------------ ----------------
Total dividends and distributions.... (0.52) --
------------ ----------------
Increase (decrease) resulting from
Fund share transactions............. -- --
------------ ----------------
Net asset value, end of period....... $14.49 $11.56
============ ================
TOTAL RETURN(e): .................... 30.11% (0.52)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $4,897 $1,100
Average net assets (000)............. $2,961 $ 226
Ratios to average net assets:
Expenses, including distribution
fee................................ 2.27% 6.23%(a)(h)
Expenses, excluding distribution
fee................................ 1.27% 5.23%(a)(h)
Net investment income (loss)........ (1.63)% (3.36)%(a)
Portfolio turnover rate(d)........... 106% 110%
Average commission rate paid per
share............................... N/A N/A
</TABLE>
---------
<TABLE>
<C> <S>
(a) Annualized.
(b) Prior to June 10, 1991, the Fund was organized as a closed-end
investment company. On June 10, 1991, the Fund was re-organized as an
open-end investment company and commenced offering of Class B shares.
(c) Calculated based upon weighted average shares outstanding during the
periods due to effects of open-ending, Fund share sales and the
resulting share issuance from a stock rights offering.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) 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 return does not
consider the effects of sales loads. Total return for periods of less
than one full year are not annualized.
(f) Commencement of offering of Class C shares.
(g) Ratio of expenses, before loan interest, commitment fees and
nonrecurring expenses was 3.76% for Class B shares.
(h) Current year amounts have been restated from prior period presentation.
</TABLE>

6
<PAGE>

HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION. THE FUND SEEKS TO
ACHIEVE ITS OBJECTIVE BY INVESTING PRIMARILY IN COMMON STOCKS AND SECURITIES
CONVERTIBLE INTO OR EXERCISABLE FOR COMMON STOCKS (SUCH AS CONVERTIBLE
PREFERRED STOCKS AND CONVERTIBLE DEBENTURES), THE EARNINGS AND SECURITIES
PRICES OF WHICH THE INVESTMENT ADVISER EXPECTS TO GROW AT A RATE ABOVE THAT OF
THE S&P 500. 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.

Pursuant to the Investment Adviser's growth equity management approach, under
normal market conditions the Fund intends to invest at least 90% of its total
assets in a diversified portfolio of equity securities such as common stocks,
preferred stocks and convertible preferred stocks, which the Investment
Adviser believes have above-average earnings growth prospects based on a
company-by-company analysis (rather than on broader analyses of specific
industries or sectors of the economy).

THE INVESTMENT ADVISER SEEKS TO IDENTIFY STOCKS OF COMPANIES WHICH IT EXPECTS
TO ENTER INTO AN ACCELERATING EARNINGS PERIOD, TO ATTRACT INCREASING
INSTITUTIONAL SPONSORSHIP OR TO DEMONSTRATE STRONG PRICE APPRECIATION RELATIVE
TO THEIR INDUSTRIES AND TO BROAD MARKET AVERAGES. The companies in which the
Fund invests do not necessarily have records of past high growth. Examples of
possible investments include companies with cyclical earnings, companies with
new and innovative products or services, companies facing a changed economic,
competitive or regulatory environment, companies with a new or different
management approach and initial public offerings of companies which the
Investment Adviser believes offer above-average growth potential.

THE FUND INTENDS TO INVEST PRIMARILY IN COMPANIES HAVING MIDDLE MARKET
CAPITALIZATIONS AND ABOVE. Stock market capitalization is calculated by
multiplying the total number of a company's issued and outstanding common
shares by the per share market price of such shares. The Investment Adviser
believes that the over $500 million capitalization sector will continue for
the foreseeable future to offer a sufficient number of stocks having growth
characteristics which meet the Fund's investment criteria, so that it is
unlikely the Fund will need to consider investing in the under $500 million
capitalization sector. The Fund would only consider investments in the under
$500 million sector if sufficient attractive growth stocks were not available
in the over $500 million sector and if ample opportunity were believed to
exist in the under $500 million sector sufficient to satisfy the requirements
of all accounts the Investment Adviser manages which are primarily invested in
the under $500 million sector. Companies which have market capitalizations of
$500 million to approximately $5 billion are generally referred to as "middle
market capitalization" companies. The Investment Adviser anticipates that the
Fund's investments will continue to be primarily in companies with smaller and
medium market capitalizations compared to those of the S&P 500 as a whole.

The Investment Adviser uses an extensive network of more than 75 brokerage
firms throughout the United States to identify equity investment
opportunities. The Investment Adviser's staff then applies its own computer-
assisted fundamental analysis to such individual potential investments,
building portfolios of equity securities which the Investment Adviser believes
have above-average earnings growth prospects. Investments are closely
monitored with a view to the sale of portfolio securities when the reasons for
the initial purchases are no longer valid.

THE FUND RETAINS CASH AND EQUIVALENTS IN AMOUNTS DEEMED ADEQUATE FOR CURRENT
NEEDS, AND MAY MAKE SHORT-TERM INVESTMENTS DURING PERIODS WHEN, IN THE OPINION
OF THE INVESTMENT ADVISER, ATTRACTIVE EQUITY INVESTMENTS ARE NOT AVAILABLE.
See "Other Investments and Policies--Short-Term Investments".

7
<PAGE>

The Fund's net asset value may be subject to above-average fluctuations
compared to the net asset values of other investment companies, because
greater than average risk will be assumed in investing in companies for the
purpose of seeking to achieve higher than average capital growth. The Fund's
investment policies may result in portfolio turnover substantially greater
than the turnover of many other investment companies. See "Other Investments
and Policies--Portfolio Turnover".

OTHER INVESTMENTS AND POLICIES

CONVERTIBLE SECURITIES AND WARRANTS

The Fund may invest in securities which may be exchanged for, converted into
or exercised to acquire a predetermined number of shares of the issuer's
common stock at the option of the Fund during a specified time period (such as
convertible preferred stocks, convertible debentures and warrants). See
"Investment Objective and Policies--Investment Policies and Practices--
Convertible Securities and Warrants" in the Statement of Additional
Information.

FOREIGN SECURITIES

The Fund may invest up to 20% of its total assets in securities of foreign
issuers and in American Depository Receipts, which are receipts issued by an
American bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer. Investments in foreign securities involve certain
inherent risks, such as exchange rate fluctuations, political, social or
economic instability of the country of issue, diplomatic developments which
could affect the assets of the Fund held in foreign countries, and the
possible imposition of exchange controls, withholding taxes on dividends or
interest payments, confiscatory taxes or expropriation. There may be less
government supervision and regulation of foreign securities exchanges, brokers
and listed companies than exists in the United States, foreign brokerage
commissions and custody fees are generally higher than those in the United
States, and foreign security settlements will in some instances be subject to
delays and related administrative uncertainties. The Fund will probably have
greater difficulty in obtaining or enforcing a court judgment abroad than it
would have doing so within the United States. Less information may be publicly
available about a foreign company than about a domestic company, and foreign
companies may not be subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. In
addition, foreign securities markets have substantially less volume than the
New York Stock Exchange and securities of some foreign companies are less
liquid and more volatile than securities of comparable U.S. companies.

SHORT-TERM INVESTMENTS

The Fund may invest in short-term investments during periods when, in the
opinion of the Investment Adviser, attractive equity investments are
temporarily unavailable or other circumstances or market conditions warrant
such investments. Under normal circumstances no more than 10% of the Fund's
total assets will be retained in cash and equivalents. Such investments may
include U.S. Treasury Bills or other U.S. Government or Government agency
obligations; certificates of deposit of the 50 largest commercial banks in the
United States, measured by total assets as shown by their most recent annual
financial statements; commercial paper rated A-1 or A-2 by Standard & Poor's
Corporation or P-1 or P-2 by Moody's Investors Service or, if not rated,
issued by companies having an outstanding debt issue rated AA or better by
Standard & Poor's or Aa or better by Moody's; shares of money market mutual
funds; or repurchase agreements with respect to such securities.

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 resale price.
The instruments held as collateral are valued

8
<PAGE>

daily and, if the value of the instruments declines, the Fund will require
additional collateral. If the seller defaults and the value of the collateral
securing the repurchase agreement declines, the Fund may incur a loss.

PUT AND CALL OPTIONS

The Fund is authorized to purchase listed covered "put" and "call" options
with respect to securities which are otherwise eligible for purchase by the
Fund and with respect to the S&P 500, subject to the following restrictions:
the aggregate premiums on call options purchased by the Fund may not exceed 5%
of the market value of the total assets of the Fund as of the date the call
options are purchased, and the aggregate premiums on the put options may not
exceed 5% of the market value of the total assets of the Fund as of the date
such options are purchased. A "put" gives a holder the right to require the
writer of the put to purchase from the holder a security at a specified price,
and a "call" gives a holder the right to require the writer of the call to
sell a security to the holder at a specified price. See "Investment Objective
and Policies--Investment Policies and Practices--Put and Call Options" in the
Statement of Additional Information.

SHORT SALES

The Investment Adviser believes that its growth equity management approach,
in addition to identifying equity securities the earnings and prices of which
it expects to grow at a rate above that of the S&P 500, also identifies
securities the prices of which can be expected to decline. Therefore, the Fund
is authorized to make short sales of securities it owns or has the right to
acquire at no added cost through conversion or exchange of other securities it
owns (referred to as short sales "against the box") and to make short sales of
securities which it does not own or have the right to acquire. Short sales by
the Fund that are not made "against the box" create opportunities to increase
the Fund's return but, at the same time, involve special risk considerations
and may be considered a speculative technique. Since the Fund in effect
profits from a decline in the price of the securities sold short without the
need to invest the full purchase price of the securities on the date of the
short sale, the Fund"s asset value per share will tend to increase more when
the securities it has sold short decrease in value, and to decrease more when
the securities it has sold short increase in value, than would otherwise be
the case if it had not engaged in such short sales. Furthermore, under adverse
market conditions the Fund might have difficulty purchasing securities to meet
its short sale delivery obligations, and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations
at a time when fundamental investment considerations would not favor such
sales.

In the view of the Securities and Exchange Commission (the "Commission"), a
short sale by the Fund involves the creation of a "senior security" as such
term is defined in the Investment Company Act, unless the sale is "against the
box" and the securities sold short are placed in a segregated account (not
with the broker), or the Fund"s obligation to deliver the securities sold
short is "covered" by placing in a segregated account (not with the broker)
cash or U.S. Government securities in an amount equal to the difference
between the market value of the securities sold short at the time of the short
sale and any cash or U.S. Government securities required to be deposited as
collateral with a broker in connection with the sale (not including the
proceeds from the short sale), which difference is adjusted daily for changes
in the value of the securities sold short. The total value of the cash and
U.S.

9
<PAGE>

Government securities deposited with the broker and otherwise segregated may
not at any time be less than the market value of the securities sold short at
the time of the short sale. As a matter of policy, the Company's Board of
Directors has determined that the Fund will not make short sales of securities
or maintain a short position if to do so would create liabilities or require
collateral deposits and segregation of assets aggregating more than 25% of the
Fund's total assets, taken at market value. See "Investment Restrictions" in
the Statement of Additional Information.

In order to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
the Fund must derive less than 30% of its gross income from the sale of
securities it has held for less than three months (the "three month gain
rule"). The three month gain rule may limit the Fund's ability to sell a
portfolio security short, or to terminate its short position, at a time when
the Investment Adviser believes it would be advantageous to do so. The Fund
would not enter into a short sale or purchase and deliver new securities to
terminate its short position if such action would cause the Fund to violate
the three month gain rule. A violation of such rule might result in the
failure by the Fund to satisfy the requirements of Subchapter M of the
Internal Revenue Code and in the taxation of Fund income at the Fund level.

SECURITIES LENDING

To increase its income, the Fund may lend its portfolio securities to
financial institutions such as banks and brokers if the loan is collateralized
in accordance with applicable regulatory requirements. The Company's Board of
Directors has adopted an operating policy that limits the amount of such loans
to not more than 10% of the value of the total assets of the Fund. See
"Investment Restrictions" in the Statement of Additional Information. During
the time portfolio securities are on loan, the borrower pays the Fund an
amount equivalent to any dividends or interest paid on such securities, and
the Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower who has
delivered equivalent collateral or secured a letter of credit. Such loans
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, such securities lending will be
made only when, in the Investment Adviser's judgment, the income to be earned
from the loans justifies the attendant risks. Loans are subject to termination
at the option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. The Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote
if that were considered important with respect to the investment.

PORTFOLIO TURNOVER

The Investment Adviser's growth equity management approach results in
substantial portfolio turnover, as the Investment Adviser sells portfolio
securities when it believes the reasons for their initial purchase are no
longer valid. The Fund's portfolio turnover rates for the fiscal years ended
December 31, 1995 and December 31, 1994 were 106% and 110%, respectively.
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary greatly from year to year, the Fund
anticipates that its annual portfolio turnover rate will not exceed 200%.
Portfolio turnover rate is calculated by dividing the lesser of the Fund's
annual sales or purchases of portfolio securities by the monthly average value
of securities in the portfolio during the year, excluding portfolio securities
the maturities of which at the time of acquisition were one year or less. See
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information.

The Fund's ability to enter into certain short-term transactions will be
limited by the requirement that certain gains on securities may not exceed 30%
of its annual gross income for federal income tax purposes. However, portfolio
turnover will not otherwise be a limiting factor in making investment
decisions, and the Fund's investment policies may result in portfolio turnover
substantially greater than that of other investment companies. A high rate of
portfolio turnover involves correspondingly greater brokerage commission
expense than a lower rate, which expense must be borne by the Fund and its
shareholders. High portfolio turnover may also result in the realization of
substantial net short-term capital gains, and any distributions resulting from
such gains will be

10
<PAGE>

ordinary income for federal income tax purposes. See "'Dividends,
Distributions and Taxes" in the Statement of Additional Information.

BORROWING

The Fund is permitted to borrow money from banks in amounts of up to 30% of
its total assets (calculated when the loan is made) only for temporary,
extraordinary or emergency purposes or for the clearance of transactions. The
Board of Directors reserves the right to change this policy in the future,
without shareholder approval, if it concludes that such a change would be in
the best interests of the Fund and its shareholders.

The use of borrowing by the Fund is a speculative technique that creates an
opportunity for greater total return but, at the same time, involves special
risk considerations that may not be associated with other funds having similar
objectives and policies. Since substantially all the Fund's assets fluctuate
in value, whereas the interest obligation resulting from a borrowing will be
fixed by the terms of the Fund's agreement with its lender, the asset value
per share of the Fund will tend to increase more when its portfolio securities
increase in value and to decrease more when its portfolio assets decrease in
value than would otherwise be the case if the Fund did not borrow funds. In
addition, interest costs on borrowings may fluctuate with changing market
rates of interest and may partially offset or exceed the return earned on
borrowed funds (or on the assets that were retained rather than sold to meet
the needs for which funds were borrowed). Under adverse market conditions, the
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when fundamental investment considerations would not favor
such sales. See "Borrowing Policy" in the Statement of Additional Information.

INVESTMENT RESTRICTIONS

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

HOW THE FUND IS MANAGED

THE COMPANY HAS A BOARD OF DIRECTORS WHICH, IN ADDITION TO OVERSEEING THE
ACTIONS OF THE FUND'S MANAGER, INVESTMENT ADVISER 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
INVESTMENT ADVISER FURNISHES DAILY INVESTMENT ADVISORY SERVICES.

For the year ended December 31, 1995, the Fund's total expenses as a
percentage of average net assets for Class A, Class B and Class C shares were
1.52%, 2.27% and 2.27%, respectively. See "Financial Highlights".

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 EQUAL TO .95 OF 1% OF THE AVERAGE DAILY NET
ASSETS OF THE FUND. It was incorporated in May 1987 under the laws of the
State of Delaware. For the fiscal year ended December 31, 1995, the Fund paid
management fees to PMF of .95% of the Fund's average net assets. See "Manager"
in the Statement of Additional Information.

As of January 31, 1996 PMF served as the manager to 37 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 22 closed-end investment companies, with aggregate assets of
approximately $52 billion.

11
<PAGE>

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

INVESTMENT ADVISER

NICHOLAS-APPLEGATE CAPITAL MANAGEMENT, 600 WEST BROADWAY, 29TH FLOOR, SAN
DIEGO, CALIFORNIA 92101, HAS SERVED AS THE INVESTMENT ADVISER TO THE FUND
SINCE ITS INCEPTION. THE INVESTMENT ADVISER MANAGES THE INVESTMENT OPERATIONS
OF THE FUND AND THE COMPOSITION OF THE FUND'S PORTFOLIO, INCLUDING THE
PURCHASE, RETENTION AND DISPOSITION THEREOF. It is compensated for its
services by PMF, not the Fund, at a rate of .75 of 1% of the average daily net
assets of the Fund. PMF continues to have responsibility for all investment
advisory services in accordance with the Management Agreement and supervises
NACM's performance of such services. For the fiscal year ended December 31,
1995, PMF paid subadvisory fees to NACM of .75% of the Fund's average net
assets.

The Investment Adviser currently manages a total of approximately $29 billion
of assets for a variety of clients, including employee benefit plans of
corporations, public retirement systems and unions, university endowments,
foundations and other institutional investors and individuals. The Investment
Adviser was organized in 1984 as a California limited partnership. Its general
partner is Nicholas-Applegate Capital Management Holdings, L.P., a California
limited partnership controlled by Arthur E. Nicholas. He and fourteen other
partners manage a staff of approximately 300 employees.

The Fund is managed under the general supervision of Arthur E. Nicholas, who
has been the chief investment officer of the Investment Adviser since its
organization. In addition, since December 1995, John D. Wylie, as Chief
Investment Officer--Retail, is also responsible for general oversight of the
Fund's portfolio. Jack C. Marshall, a partner of the Investment Adviser, is
primarily responsible for the day-to-day management of the Fund's portfolio.
Mr. Marshall has managed the Fund's portfolio since 1989 and has been employed
by Nicholas-Applegate Capital Management since March 1989.

DISTRIBUTOR

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 SHARES OF
THE FUND. IT IS AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA (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 COMPANY
UNDER RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND A SEPARATE DISTRIBUTION
AGREEMENT (THE DISTRIBUTION AGREEMENT), PRUDENTIAL SECURITIES ( THE
DISTRIBUTOR) INCURS THE EXPENSES OF DISTRIBUTING THE FUND'S CLASS A, CLASS B
AND CLASS C SHARES. These expenses include commissions and account servicing
fees paid to, or on account of, financial advisers of Prudential Securities
and 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.

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.

12
<PAGE>

UNDER THE CLASS A PLAN, THE FUND MAY PAY PRUDENTIAL SECURITIES FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL
RATE OF UP TO .30% 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
maintenance of shareholder accounts (service fee) and (ii) total distribution
fees (including the service fee of up to .25 of 1%) may not exceed .30 of 1%
of the average daily net assets of the Class A shares. Prudential Securities
has agreed to limit its distribution-related fees 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 December 31, 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 UP TO 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 December 31, 1995, the Fund paid distribution
expenses of .25%, 1.00% and 1.00% 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. See
"Distributor" in the Statement of Additional Information.

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 Company, including a
majority of the Directors who are not "interested persons" of the Company (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of 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 distribution and service
fees 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 which
distribute shares of the Fund. Such payments may be calculated by reference to
the net asset value of shares sold by such persons or otherwise.

The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. (NASD) 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.

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

13
<PAGE>

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 charges. 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 for the Fund provided that the
commissions, fees or other remuneration it receives are fair and reasonable.
Subject to obtaining the best price and execution, brokers' sales of the
Fund's shares may be considered in selecting brokers, and brokers who provide
supplemental research, market and statistical information and other research
services and products to the Investment Adviser may receive orders for
transactions by the Fund. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.

FEE WAIVERS AND SUBSIDY

PMF may from time to time waive all or a portion of its management fee and
subsidize all or a portion of the operating expenses of the Fund. Fee waivers
and expense subsidize will increase the Fund's total return. See "Performance
Information" in the Statement of Additional Information and "Fund Expenses".

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 Company. Its mailing
address is P.O. Box 1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New Jersey
08837, serves as the Fund's 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.

14
<PAGE>

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 NET ASSET VALUE TO BE AS OF 4:15 P.M., NEW YORK TIME.

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

The Fund will compute its NAV once daily on days that the New 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, President's 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 COMPANY MAY ADVERTISE THE FUND'S "TOTAL RETURN"
(INCLUDING "AVERAGE ANNUAL" TOTAL RETURN AND "AGGREGATE" TOTAL RETURN) IN
ADVERTISEMENTS AND SALES LITERATURE. TOTAL RETURN IS 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. 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 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
though 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 Counsel--Shareholder Services--
Reports to Shareholders."

15
<PAGE>

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 TAX ON ITS NET INVESTMENT INCOME
AND CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. See
"Dividends, Distributions and Taxes" in the Statement of Additional
Information.

TAXATION OF SHAREHOLDERS

Any dividends out of net taxable investment income, together with any
distributions of short-term gains (i.e., the excess of net short-term capital
gains over net long-term capital losses) distributed to shareholders, will be
taxable as ordinary income to the shareholders whether or not reinvested. Any
net 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
long-term capital gains 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.

The Fund has obtained opinions of counsel to the effect that neither the
conversion of Class B shares into Class A shares nor 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.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Company is required to withhold and
remit to the U.S. Treasury 31% of dividends, capital gain income 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). For
shareholders who are otherwise subject to backup withholding under federal
income tax law, only dividends and capital gains distributions are subject to
withholding. Dividends of net investment income and short-term capital gains
paid 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, 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 expenses, 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. Shareholders who acquired shares prior to the
conversion of the Company from a closed-end company to an open-end company,
and who did not elect to participate in the Fund's dividend reinvestment plan,
will continue to receive dividends and distributions in cash unless further
elections are made to the Fund. 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

16
<PAGE>

basis. If you hold shares through Prudential Securities, you should contact
your financial adviser to elect to receive dividends and distributions in
cash.

WHEN THE FUND GOES "EX-DIVIDEND", ITS NAV FOR 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 MAY BE RETURNED TO
YOU AS A TAXABLE DISTRIBUTION. YOU SHOULD, THEREFORE, CONSIDER THE TIMING OF
DIVIDENDS AND DISTRIBUTIONS WHEN MAKING YOUR PURCHASES.

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.

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

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

THE COMPANY WAS INCORPORATED IN MARYLAND ON JANUARY 30, 1987 UNDER THE NAME
"NICHOLAS-APPLEGATE GROWTH EQUITY FUND, INC." AS A CLOSED-END, DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY. THE FUND OPERATED AS A CLOSED-END FUND UNTIL
JUNE 10, 1991. AS A CLOSED-END INVESTMENT COMPANY DURING THE 1990 CALENDAR
YEAR, THE FUND'S SHARES TRADED AT AN AVERAGE DISCOUNT FROM NET ASSET VALUE OF
7.52%. BECAUSE OF THIS DISCOUNTED VALUATION OF ITS SHARES, THE COMPANY
CONVERTED TO AN OPEN-END INVESTMENT COMPANY IN ACCORDANCE WITH ITS CHARTER AND
CHANGED ITS NAME TO "NICHOLAS-APPLEGATE FUND, INC." ON JUNE 10, 1991. ALL
OUTSTANDING SHARES OF THE COMPANY AT THE TIME OF THE CONVERSION TO AN OPEN-END
INVESTMENT COMPANY WERE CONVERTED INTO CLASS A SHARES OF THE FUND. THE COMPANY
IS AUTHORIZED TO ISSUE 33,333,333 SHARES OF CLASS A COMMON STOCK, 33,333,333
SHARES OF CLASS B COMMON STOCK AND 33,333,334 SHARES OF CLASS C COMMON STOCK
OF THE NICHOLAS-APPLEGATE GROWTH EQUITY FUND SERIES, $.01 PAR VALUE PER SHARE.
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 Company's Charter, the Board of Directors may authorize
the creation of additional series of common stock, and classes within 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 of the Fund are also redeemable at the option of the
Company 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 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.

17
<PAGE>

THE COMPANY DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS OF THE
FUND UNLESS OTHERWISE REQUIRED BY LAW. THE COMPANY 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.

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 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, Prusec or
certain selected dealers (Class A only). 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 the Fund's Custodian, State Street Bank and
Trust Company, Boston, Massachusetts, Custody

18
<PAGE>

and Shareholder Services Division, Attention: Nicholas-Applegate Growth Equity
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 the
calculation of NAV (4:15 P.M., New York time), on a business day, you may
purchase shares of the Fund as of that day. See "Net Asset Value" in the
Statement of Additional Information.

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

ALTERNATIVE PURCHASE PLAN

THE FUND OFFERS THREE CLASSES OF SHARES (CLASS A, CLASS B AND CLASS C
SHARES), WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES CHARGE STRUCTURE
FOR YOUR INDIVIDUAL CIRCUMSTANCES GIVEN THE 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% Initial sales charge
of 5% of the public offering (Currently being waived or reduced for
price charged at a rate certain purchases
of 0.25 of 1%)
Class B Maximum contingent deferred 1% Shares convert to Class
sales charge or CDSC of 5% A shares approximately
of the lesser of the amount seven years after
invested or the redemption purchase
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 another class
invested 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 difference classes of shares (see "How
to Exchange Your Shares" below) and (5) the fact

19
<PAGE>

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.

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 or Class C shares for the higher
cumulative annual distribution-related fee on those shares to exceed the
initial sales charge plus cumulative annual distribution-related fee on Class
A shares. This does not take into account the time value of money, which
further reduces the impact of the higher Class B or Class C distribution-
related fee on the investment, fluctuations in net asset value, the effect of
the return on the investment over this period of time or redemptions when the
CDSC is applicable.

ALL PURCHASES OF $1 MILLION OR MORE EITHER AS PART OF A SINGLE INVESTMENT,
EXCEPT IN THE CASE OF CERTAIN RETIREMENT PLANS, 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
OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
AMOUNT OF PURCHASE --------------- --------------- -----------------
<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

20
<PAGE>

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 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.

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 of 1986, as amended, (the Code), including pension, profit-
sharing, stock-bonus or other employee benefit plans under Section 401 of the
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 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)
officers and current and former Directors/Trustees of the Prudential Mutual
Funds (including the Fund), (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 180 days of the commencement of the financial
adviser's employment at Prudential Securities, or within one year in the case
of benefit plans, (ii) the purchase is made with proceeds of a redemption of
shares of any open-end fund sponsored by the financial adviser's previous
employer (other than a money market fund or other no-load fund which imposes a
distribution or service fee of .25 of 1% or less) and (iii) the financial
adviser served as the client's broker on the previous purchases.

You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec that you are entitled to the reduction or waiver of the
sales charge. The reduction or waiver will be granted subject to confirmation
of your entitlement. No initial sales charges are imposed upon Class A shares
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.

21
<PAGE>

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."

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 08900-5010.

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

PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR
WRITTEN REQUEST EXCEPT AS INDICATED BELOW. 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; applicable
rules and regulations of the SEC will govern as to whether the conditions
prescribed in (b), (c) or (d) exist.

Shareholders who hold their shares through Prudential Securities or through a
dealer which has entered into a selected dealer agreement with the Distributor
must redeem their shares by contacting their financial adviser.

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 CHECKS.

22
<PAGE>

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.

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 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 contingent deferred sales charge 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 cash 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. No sales charge will apply to such
repurchases. You will receive pro rata credit for any contingent deferred
sales charge paid in connection with the redemption of Class B or Class C
shares. You must notify the Fund's Transfer Agent, either directly or through
Prudential Securities or Prusec, at the time the repurchase privilege is
exercised that you are entitled to credit for the contingent deferred sales
charge previously paid. Exercise of the repurchase privilege will generally
not affect federal income tax treatment of any gain realized upon redemption.
If the redemption resulted in a loss, some or all of the loss, depending on
the amount reinvested, will not be allowed for federal income tax purposes.

CONTINGENT DEFERRED SALES CHARGES

Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within one year of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid
to you. The CDSC will be imposed on any redemption by you which reduces the
current value of your Class B or Class C shares to an amount which is lower
than the amount of all payments by you for shares during the preceding six
years, in the case of Class B shares, and one year, in the case of Class C
shares. A CDSC will be applied on the lesser of the original purchase price or
the current value of the shares being redeemed. Increases in the value of your
shares or shares 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 Class B 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."

23
<PAGE>

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
------------------- -------------------------
<S> <C>
First....................................... 5.0%
Second...................................... 4.0%
Third....................................... 3.0%
Fourth...................................... 2.0%
Fifth....................................... 1.0%
Sixth....................................... 1.0%
Seventh and thereafter...................... 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
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), or a trust, at the time of death or
initial determination of disability provided that the shares were purchased
prior to death or disability.

The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions 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

24
<PAGE>

will also be waived upon the redemption of shares purchased with amounts used
to repay loans made from the account to the participant and from which a CDSC
was previously deducted.

In addition, the CDSC will be waived on redemptions of shares held by
Directors of the Company.

You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec, at the time of redemption, that you are entitled to
waiver of the CDSC 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.

CONVERSION FEATURE--CLASS B SHARES

Class B shares automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase. It is currently anticipated that
conversions will occur during the months of February, May, August and
November. 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 then in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or
amounts representing Class B shares purchased and then held 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 or purchase 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.

25
<PAGE>

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 (THE EXCHANGE PRIVILEGE) AND ANY SERIES OF THE
COMPANY THAT MAY BE ESTABLISHED FROM TIME TO TIME, AND ONE OR MORE SPECIFIC
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 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. (The Fund or its agents
could be subject to liability if they fail to employ reasonable 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 will be 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 BELOW.

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 held in such a shareholder's account and which are not subject
to a CDSC will be automatically exchanged for Class A shares on a quarterly
basis, unless the shareholder elects otherwise. It is currently anticipated
that this exchange will occur quarterly in February, May, August and November.
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

26
<PAGE>

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.
Shareholders who acquired shares prior to the conversion of the Company from a
closed-end company to an open-end company and who did not elect to participate
in the Fund's dividend reinvestment plan will continue to receive dividends
and distributions in cash unless further election is made to the Fund. If you
hold shares through Prudential Securities, you should contact your financial
adviser.

. 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 Company 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.

27
<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 Global Utility Fund, Inc.

Prudential Diversified Bond The Global Government Plus Fund,
Fund, Inc. Inc.
Prudential Government Income
Fund, Inc. The Global Total Return Fund,
Prudential Government Securities Inc.
Trust
Short-Intermediate Term Series EQUITY FUNDS

Prudential High Yield Fund, Inc. Prudential Allocation Fund

Prudential Mortgage Income Fund, Balanced Portfolio
Inc. Strategy Portfolio
Prudential Structured Maturity Prudential Equity Fund, Inc.
Fund, Inc. Prudential Equity Income Fund
Income Portfolio Prudential Growth Opportunity
The BlackRock Government Income Fund, Inc.
Trust
Prudential Jennison Fund, Inc.
TAX-EXEMPT BOND FUNDS
Prudential Multi-Sector Fund,
Prudential California Municipal Inc.
Fund Prudential Utility Fund, Inc.
California Series Nicholas-Applegate Fund, Inc.
California Income Series Nicholas-Applegate Growth
Prudential Municipal Bond Fund Equity Fund
High Yield Series
Insured Series MONEY MARKET FUNDS

Intermediate Series . Taxable Money Market Funds
Prudential Municipal Series Fund Prudential Government Securities
Florida Series Trust
Hawaii Income Series Money Market Series
Maryland Series U.S. Treasury Money Market
Massachusetts Series Series
Michigan Series
New Jersey Series Prudential Special Money Market
New York Series Fund, Inc.
North Carolina Series Money Market Series
Ohio Series
Pennsylvania Series Prudential MoneyMart Assets,
Prudential National Municipals Inc.
Fund, Inc. . Tax-Free Money Market Funds

GLOBAL FUNDS Prudential Tax-Free Money Fund,
Inc.
Prudential Europe Growth Fund, Prudential California Municipal
Inc. Fund
Prudential Global Fund, Inc. California Money Market Series
Prudential Global Genesis Fund, Prudential Municipal Series Fund
Inc. Connecticut Money Market Series
Massachusetts Money Market
Prudential Global Limited Series
Maturity Fund, Inc. New Jersey Money Market Series
New York Money Market Series
Limited Maturity Portfolio . Command Funds
Prudential Global Natural Command Money Fund
Resources Fund, Inc. Command Government Securities
Prudential Intermediate Global Fund
Income Fund, Inc. Command Tax-Free Fund
. Institutional Money Market
Prudential Pacific Growth Fund, Funds
Inc. Prudential Institutional
Liquidity Portfolio, Inc.
Institutional Money Market
Series

28
<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
EXPENSES................................................................... 4
FINANCIAL HIGHLIGHTS....................................................... 5
HOW THE FUND INVESTS....................................................... 7
Investment Objective and Policies......................................... 7
Other Investments and Policies............................................ 8
Investment Restrictions................................................... 11
HOW THE FUND IS MANAGED.................................................... 11
Manager................................................................... 11
Investment Adviser........................................................ 12
Distributor............................................................... 12
Portfolio Transactions.................................................... 14
Custodian and Transfer and Dividend Disbursing Agent...................... 14
HOW THE FUND VALUES ITS SHARES............................................. 15
HOW THE FUND CALCULATES PERFORMANCE........................................ 15
TAXES, DIVIDENDS AND DISTRIBUTIONS......................................... 16
GENERAL INFORMATION........................................................ 17
Description of Common Stock............................................... 17
Additional Information.................................................... 18
SHAREHOLDER GUIDE.......................................................... 18
How to Buy Shares of the Fund............................................. 18
Alternative Purchase Plan................................................. 19
How to Sell Your Shares................................................... 22
Conversion Feature--Class B Shares........................................ 25
How to Exchange Your Shares............................................... 26
Shareholder Services...................................................... 27
THE PRUDENTIAL MUTUAL FUND FAMILY.......................................... 28
</TABLE>

- --------------------------------------------------------------------------------
MF 151A 444369Q

CUSIP Nos.:
Class A: 653698-20-9
Class B: 653698-30-8
Class C: 653698-40-7
(ART)

1996

(LOGO)
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND

Statement of Additional Information

dated March 4, 1996

Nicholas-Applegate Growth Equity Fund (the "Fund") is a series of Nicholas-
Applegate Fund, Inc. (the "Company"), an open-end, diversified management
investment company incorporated under the laws of Maryland. The Fund's
investment objective is long-term capital appreciation. The Fund seeks to
achieve its objective by investing principally in a diversified portfolio of
common stocks and securities convertible into or exercisable for common
stocks, the earnings and securities prices of which its Investment Adviser
expects to grow at a rate above the rate of the Standard & Poor's 500 Stock
Price Index (the "S&P 500"). The Fund intends to invest primarily in companies
having middle market capitalizations and above. Companies which have market
capitalizations of $500 million to approximately $5 billion are generally
referred to as "middle market" Capitalization companies. No assurance can be
given 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. The Statement of Additional Information is
not a prospectus and should be read in conjunction with the Fund's Prospectus
dated March 4, 1996, a copy of which may be obtained from the Fund upon
request.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
---- ---------------
<S> <C> <C>
General Information....................................... B-2 17
Investment Objective and Policies......................... B-2 7
Investment Restrictions................................... B-5 11
Directors and Principal Officers.......................... B-7 11
Manager................................................... B-9 11
Investment Adviser........................................ B-11 12
Distributor............................................... B-12 12
Portfolio Transactions and Brokerage...................... B-15 14
Purchase and Redemption of Fund Shares.................... B-16 18
Shareholder Investment Account............................ B-19 18
Net Asset Value........................................... B-22 15
Dividends, Distributions and Taxes........................ B-23 16
Performance Information................................... B-24 15
Custodian, Transfer and Dividend Disbursing Agent and In-
dependent Accountants.................................... B-25 14
Financial Statements...................................... B-26 --
Report of Independent Accountants......................... B-36 --
</TABLE>

- -------------------------------------------------------------------------------
MF151B
<PAGE>

GENERAL INFORMATION

The Company began business as a closed-end diversified management investment
company in April 1987 under the name "Nicholas-Applegate Growth Equity Fund,
Inc." Pursuant to its Charter, the Fund converted to an open-end investment
company (commonly referred to as a "mutual fund") on June 10, 1991, at which
time the name of the Company was changed to "Nicholas-Applegate Fund, Inc."

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The Fund's investment objective is capital appreciation. It seeks to achieve
this objective by investing primarily in common stocks and in securities
convertible into or exercisable for common stocks (such as convertible
preferred stocks, convertible debentures and warrants), the earnings and
securities prices of which Nicholas-Applegate Capital Management, the Fund's
investment adviser ("Nicholas-Applegate" or the "Investment Adviser"), expects
to grow at a rate above that of the S&P 500. The Fund's investment objective
and certain other policies described under "Investment Restrictions" are
fundamental policies that may not be changed without the vote of a majority of
the outstanding shares of the Fund, as defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act"). There can be no assurance
that the Fund's investment objective will be achieved. For a further
description of the Fund's investment objective, see "Description of the Fund--
Investment Objective" in the Prospectus.

INVESTMENT POLICIES AND PRACTICES

For a description of the Fund's investment policies and practices, and
certain of the risks associated therewith, see "How the Fund Invests--
Investment Policies and Practices" in the Prospectus.

CONVERTIBLE SECURITIES AND WARRANTS. The Fund may invest in securities which
may be exchanged for, converted into or exercised to acquire a predetermined
number of shares of the issuer's common stock at the option of the Fund during
a specified time period (such as convertible preferred stocks, convertible
debentures and warrants). A convertible security is a fixed-income security (a
bond or preferred stock) which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the
same or a different issuer. Convertible securities are senior to common stocks
in a corporation's capital structure, but are usually subordinated to similar
nonconvertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from common stock but lower than
that afforded by a similar nonconvertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance
in the convertible security's underlying common stock.

In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security)
or its "conversion value" (i.e., its value upon conversion into its underlying
common stock). As a fixed-income security, a convertible security tends to
increase in market value when interest rates decline and tends to decrease in
value when interest rates rise. However, the price of a convertible security
is also influenced by the market value of the security's underlying common
stock. The price of a convertible security tends to increase as the market
value of the underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. While no securities investment
is without some risk, investments in convertible securities generally entail
less risk than investments in the common stock of the same issuer.

Investments in warrants involve certain risks, including the possible lack
of a liquid market for resale of the warrants, potential price fluctuations as
a result of speculation or other factors, and failure of the price of the
underlying security to reach or have reasonable prospects of reaching a level
at which the warrant can be prudently exercised (in which event the warrant
may expire without being exercised, resulting in a loss of the Fund's entire
investment therein). The Fund does not contemplate investing more than 5% of
its total assets in fixed income convertible securities and warrants in the
coming year.

SHORT-TERM INVESTMENTS. To the extent that the Fund is or becomes a
shareholder in a money market mutual fund, the Fund will bear its ratable
share of such fund's expenses, including management fees, and will remain
subject to payment of the management fee to the Manager with respect to the
Fund's assets so invested.

PUT AND CALL OPTIONS. The Fund is authorized to purchase listed covered
"put" and "call" options with respect to securities which are otherwise
eligible for purchase by the Fund and with respect to the S&P 500, subject to
certain restrictions. The Fund does not presently intend to purchase options
that are not traded on a national securities exchange. See "Description of the
Fund--Investment Policies and Practices--Put and Call Options" in the
Prospectus.

B-2
<PAGE>

If the Fund purchases a listed put option, it acquires the right to sell the
underlying security at a specified price at any time during the term of the
option. Purchasing put options may be used as a portfolio investment strategy
when the Investment Adviser perceives significant short-term risk but
substantial long-term appreciation for the underlying security. The put option
acts as an insurance policy, as it protects against significant downward price
movement while it allows full participation in any upward movement. If the
Fund is holding a stock which it feels has strong fundamentals, but for some
reason may be weak in the near term, it may purchase a listed put on such
security, thereby giving itself the right to sell such security at a certain
strike price throughout the term of the option. Consequently, the Fund will
exercise the put only if the price of such security falls below the strike
price of the put. The difference between the put's strike price and the market
price of the underlying security on the date the Fund exercises the put, less
transaction costs, will be the amount by which the Fund will be able to hedge
against a decline in the underlying security. If during the period of the
option the market price for the underlying security remains at or above the
put's strike price, the put will expire worthless, representing a loss of the
price the Fund paid for the put, plus transaction costs. If the price of the
underlying security increases, the profit the Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any
amount for which the put may be sold.

If the Fund purchases a listed call option, it acquires the right to
purchase the underlying security at a specified price at any time during the
term of the option. The purchase of a call option can be either a speculative
practice to realize gains if the market price of the underlying security
increases above the strike price during the term of the option and the option
is sold at that time, or as a type of insurance policy to hedge against losses
that could occur if the Fund has a short position in the underlying security
and the security thereafter increases in price. The Fund will exercise a call
option only if the price of the underlying security is above the strike price
at the time of exercise. If during the option period the market price for the
underlying security remains at or below the strike price of the call option,
the option will expire worthless, representing a loss of the price paid for
the option, plus transaction costs. If the call option has been purchased to
hedge a short position of the Fund in the underlying security and the price of
the underlying security thereafter falls, the profit the Fund realizes on the
cover of the short position in the security will be reduced by the premium
paid for the call option less any amount for which such option may be sold.

The Fund may also purchase "put" and "call" options with respect to the S&P
500. Such options may be purchased as a speculative technique, 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 or
sell, or when they are economically appropriate for the reduction of risks
inherent in the ongoing management of the Fund. The distinctive
characteristics of options on stock indices create certain risks that are not
present with stock options generally. 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 rather than movements in the price of a
particular stock. Accordingly, successful use by the Fund of options on the
S&P 500 would be subject to the Investment Adviser's ability to predict
correctly movements in the direction of the stock market generally. This
requires different skills and techniques than predicting changes in the price
of individual stocks. The Investment Adviser currently uses such techniques in
conjunction with the management of other accounts.

Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading of 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, and if restrictions on exercise
were imposed, the Fund might 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 put or call options only with respect to the S&P 500, which index it
believes includes a sufficient number of stocks to minimize the likelihood of
a trading halt in the index.

The use of options as an investment technique of the Fund is restricted by
the Company's election to be subject to Subchapter M of the Internal Revenue
Code. See "Dividends, Distributions and Taxes".

SHORT SALES. The Investment Adviser's growth equity management approach is
aimed principally at identifying equity securities the earnings and prices of
which it expects to grow at a rate above that of the S&P 500. However, the
Investment Adviser believes that its approach also identifies securities the
prices of which can be expected to decline. Therefore, the Fund is authorized
to make short sales of securities it owns or has the right to acquire at no
added cost through conversion or exchange of other securities it owns
(referred to as short sales "against the box") and to make short sales of
securities which it does not own or have the right to acquire.

In a short sale that is not "against the box", the Fund sells a security
which it does not own, in anticipation of a decline in the market value of the
security. To complete the sale, the Fund must borrow the security (generally
from the broker through which the short sale is made) in order to make
delivery to the buyer. The Fund is then obligated to replace the security
borrowed by purchasing

B-3
<PAGE>

it at the market price at the time of replacement. The Fund is said to have a
"short position" in the securities sold until it delivers them to the broker.
The period during which the Fund has a short position can range from one day
to more than a year. Until the security is replaced, the proceeds of the short
sale are retained by the broker, and the Fund is required to pay to the broker
a negotiated portion of any dividends or interest which accrue during the
period of the loan. To meet current margin requirements, the Fund is also
required to deposit with the broker additional cash or securities so that the
total deposit with the broker is maintained daily at 150% of the current
market value of the securities sold short (100% of the current market value if
a security is held in the account that is convertible or exchangeable into the
security sold short within 90 days without restriction other than the payment
of money). Short sales by the Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
special risk considerations and may be considered a speculative technique.
Since the Fund in effect profits from a decline in the price of the securities
sold short without the need to invest the full purchase price of the
securities on the date of the short sale, the Fund's asset value per share
will tend to increase more when the securities it has sold short decrease in
value, and to decrease more when the securities it has sold short increase in
value, than would otherwise be the case if it had not engaged in such short
sales. The amount of any gain will be decreased, and the amount of any loss
increased, by the amount of any premium, dividends or interest the Fund may be
required to pay in connection with the short sale. Furthermore, under adverse
market conditions the Fund might have difficulty purchasing securities to meet
its short sale delivery obligations, and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations
at a time when fundamental investment considerations would not favor such
sales.

If the Fund makes a short sale "against the box", the Fund would not
immediately deliver the securities sold and would not receive the proceeds
from the sale. The seller is said to have a short position in the securities
sold until it delivers the securities sold, at which time it receives the
proceeds of the sale. To secure its obligation to deliver securities sold
short, the Fund would deposit in escrow in a separate account with its
custodian an equal amount of the securities sold short or securities
convertible into or exchangeable for such securities. The Fund could close out
its short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by
the Fund, because the Fund might want to continue to receive interest and
dividend payments on securities in its portfolio that are convertible into the
securities sold short. The Fund's decision to make a short sale "against the
box" may be a technique to hedge against market risks when the Investment
Adviser believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund or a security convertible into or
exchangeable for such security. In such case, any future losses in the Fund's
long position would be reduced by a gain in the short position. The extent to
which such gains or losses in the long position are reduced will depend upon
the amount of the securities sold short relative to the amount of the
securities the Fund owns, either directly or indirectly, and, in the case
where the Fund owns convertible securities, changes in the investment values
or conversion premiums of such securities. The Investment Adviser has had
experience in using short sales under similar circumstances for its separate
accounts since 1985.

ILLIQUID SECURITIES

The Fund may not invest more than 10% of its total 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 securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which
the unregistered security can be readily resold or on an issuer's ability to
honor a demand for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain institutions may
not be indicative of the liquidity of such investments.

Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to
the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for

B-4
<PAGE>

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, among other things, 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.

BORROWING POLICY. Although the Fund is authorized to borrow money from time
to time in amounts of up to 30% of the value of its total assets at the time
of such borrowings, the Board of Directors has adopted a policy that the Fund
may borrow an amount equal to no more than 30% of the value of its total
assets (calculated when the loan is made) only for temporary, extraordinary or
emergency purposes or for the clearance of transactions. See "Investment
Restrictions". This Board policy is not a fundamental policy of the Fund and
the Board of Directors may change its current policy in the future, without
shareholder approval, if it concludes that such a change would be in the best
interests of the Fund and its shareholders.

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. All percentage limitations set forth below
apply immediately after a purchase or initial investment, and any subsequent
change in any applicable percentage resulting from market fluctuations will
not require elimination of any security from the Fund's portfolio.

1. The Fund may not invest in securities of any one issuer if more than 5%
of the market value of its total assets would be invested in the securities of
such issuer. However, up to 25% of the Fund's total assets may be invested
without regard to this limitation. In addition, this restriction does not
apply to investments in securities of the U.S. Government and its agencies.

2. The Fund may not purchase more than 10% of the outstanding voting
securities, or of any class of securities, of any one issuer, or purchase the
securities of any issuer for the purpose of exercising control.

3. The Fund may not invest 25% or more of the market value of its total
assets in the securities of issuers in any one particular industry. This
restriction does not apply to investments in securities of the U.S. Government
or its agencies.

4. The Fund may not purchase or sell real estate. However, the Fund may
invest in securities secured by, or issued by companies that invest in, real
estate or interests in real estate.

5. The Fund may not write put or call options or purchase any securities on
margin, except that the Fund may obtain short-term credit necessary for the
clearance of purchases and sales of portfolio securities.

6. The Fund may not make loans of money, except that the Fund may purchase
publicly distributed debt instruments and certificates of deposit and enter
into repurchase agreements. The Fund reserves the authority to make loans of
its portfolio securities in an aggregate amount not exceeding 25% of the value
of its total assets. Any such loans will be made only upon approval of, and
subject to any conditions imposed by, the Company's Board of Directors.

7. The Fund may borrow money on a secured or unsecured basis for any purpose
(including short-term credit referred to in restriction 5 above) in amounts
not exceeding 30% of the value of its total assets at the time of the
borrowing, provided that, pursuant to the Investment Company Act, borrowings
will only be made from banks and will be made only to the extent that the
value of the Fund's total assets, less its liabilities other than borrowings,
is equal to at least 300% of all borrowings (including the proposed

B-5
<PAGE>

borrowing). If such asset coverage of 300% is not maintained, the Fund will
take prompt action to reduce its borrowings as required by applicable law.

8. The Fund may not pledge or in any way transfer as security for
indebtedness any securities owned or held by it, except to secure indebtedness
permitted by restriction 7 above.

9. The Fund may not underwrite securities of other issuers, except insofar
as it may be deemed an underwriter under the Securities Act in selling
portfolio securities.

10. The Fund may not invest more than 10% of the value of its total assets
in securities that at the time of purchase have legal or contractual
restrictions on resale, or more than 20% of the value of its total assets in
securities of foreign issuers and American Depository Receipts.

11. The Fund may not purchase or sell commodities or commodity contracts,
including options contracts and options on futures contracts. For purposes of
this investment restriction, futures contracts are deemed to be commodity
contracts.

12. The Fund may not issue any securities senior to its Common Stock, except
that the Fund may borrow money as permitted by restriction 7 above.

As a matter of policy, the Board of Directors has determined that the Fund's
Investment Adviser will not be authorized to (i) make loans of its portfolio
securities in excess of 10% of the value of its total assets, (ii) make short
sales or maintain a short position if to do so would create liabilities or
require collateral deposits and segregation of assets arising in connection
with short sales aggregating more than 25% of the Fund's total assets, taken
at market value, (iii) invest in listed covered call options in excess of 5%
of the market value of the Fund's assets as of the date of investment, or
invest in listed covered put options in excess of 5% of the market value of
the Fund's assets as of the date of investment or (iv) borrow money for any
purpose. These are not fundamental policies of the Fund and the Company's
Board of Directors reserves the right to change any such determination in the
future, without shareholder approval, if it concludes that such a change would
be in the best interests of the Fund and its shareholders.

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

1. Invest in interests in oil, gas or other mineral exploration or
development programs or leases, or real estate limited partnerships, although
it may invest in the securities of companies which invest in or sponsor such
programs.

2. Purchase any security if as a result the Fund would then have more than
5% of its total assets (taken at current value) invested in securities of
companies (including predecessors) less than three years old or in equity
securities for which market quotations are not readily available.

3. Purchase securities of any issuer if, to the knowledge of the Fund, any
officer or Director of the Fund, or of the Manager or the Investment Adviser,
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers or Directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.

4. Lend any securities from its portfolio unless the value of the collateral
received therefor is continuously maintained in an amount not less than 100%
of the value of the loaned securities by marking to market daily.

5. Invest in warrants, valued at the lower of cost or market, in excess of
5% of the market value of the Fund's assets, or in excess of 2% of the market
value of the Fund's assets if such warrants are not listed on the New York
Stock Exchange or American Stock Exchange, as of the date of investment.

6. Invest an aggregate of more than 10% of its assets (taken at current
value) in the securities of unseasoned companies referred to in Item 2 and
securities that at the time of purchase have legal or contractual restrictions
on resale.

7. Make short sales (except short sales against-the box) if the value of the
securities of any one issuer in which the Fund is short exceeds the lesser of
2% of the value of the Fund's net assets or 2% of the securities of any class
of any issuer.

B-6
<PAGE>

DIRECTORS AND PRINCIPAL OFFICERS

The names and addresses of the Directors and principal officers of the
Company are set forth below, together with their positions and their principal
occupations during the past five years and, in the case of the Directors,
their positions with certain other organizations and companies.

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND AND OTHER AFFILIATIONS
---------------- ------------- ----------------------
<C> <C> <S>
*Arthur E. Nicholas (49) Director and Managing Partner and Chief
600 West Broadway Chairman Investment Officer, Nicholas-
29th Floor Applegate Capital Management
San Diego, California (since August 1984), Trustee and
Chairman of the Board of Trustees,
Nicholas-Applegate Investment
Trust (since 1993).
Fred C. Applegate (50) Director President, Hightower Management Co.
885 La Jolla Corona Court (since January 1992); President,
La Jolla, California Nicholas-Applegate Capital
Management (August 1984-December
1991), Trustee and Chairman of the
Board of Trustees, Nicholas-
Applegate Mutual Funds (since
1993).
Dann V. Angeloff (60) Director President, The Angeloff Company
727 West Seventh Street (corporate financial advisers)
Los Angeles, California (since 1976); University
Counselor, University of Southern
California (since 1987); Director,
Storage Equities, Inc. (since
1980) and Storage Properties
(since 1989) (real estate
investment trusts); Datametrics
Corporation (since 1993) (computer
peripherals and communication
products); SEDA Specialty
Packaging, Inc. (since 1993);
Trustee, Nicholas-Applegate
Investment Trust (since 1993).
Theodore J. Coburn (42) Director Partner, Brown Coburn & Co.
17 Cotswold Road (investment banking firm) (since
Brookline, Massachusetts 1991); student at Harvard Graduate
School of Education (since
September 1991); formerly Managing
Director of Global Equity
Transactions Group and Member of
Board of Directors, Prudential
Securities (September 1986-June
1991); Trustee, Nicholas-Applegate
Investment Trust (since 1993).
Director, Emerging Germany Fund
(since 1995); Premiere Radio
Networks, Inc. (since 1991); Sage
Analytics International (since
1991); Tonights Feature Ltd.
(since 1995).
*Robert F. Gunia (49) Director and Chief Administrative Officer (since
One Seaport Plaza Vice President July 1990) and Executive Vice
New York, New York President, Treasurer and Chief
Financial Officer (since June
1987) of PMF; Senior Vice
President (since March 1987), of
Prudential Securities; Executive
Vice President, Treasurer,
Comptroller and Director (since
March 1991) of Prudential Mutual
Fund Distributors, Inc. (PMFD);
Director (since June 1987) of
Prudential Mutual Fund Services,
Inc. (PMFS); Vice President and
Director, The Asia-Pacific Fund
(since May 1989).
*+Arthur B. Laffer (55) Director Chairman, A.B. Laffer, V.A. Canto &
4275 Executive Square Associates (economic consulting)
#330 (since 1979); Chairman, Laffer
La Jolla, California Advisors Incorporated (economic
consulting) (since 1981); Director
U.S. Filter Corporation (since
March 1991) and MasTec, Inc.
(construction) (since 1994);
Chairman, Calport Asset
Management, Inc. (since 1992);
formerly Distinguished University
Professor and Director, Pepperdine
University (September 1985-May
1988); Trustee, Nicholas-Applegate
Mutual Funds (since 1993).
Charles E. Young (64) Director Chancellor, UCLA (since September
2147 Murphy Hall 1968); Director of Intel Corp.
Los Angeles, California (since April 1974), Academy of
Television Arts and Sciences
Foundation, (since October 1988),
Los Angeles World Affairs Council
(since October 1977) and Town Hall
of California (since 1982);
Trustee, Nicholas-Applegate Mutual
Funds (since 1993).
Jack C. Marshall (38) President Partner (since 1992), Portfolio
600 West Broadway Manager (since 1989), Nicholas-
29th Floor Applegate Capital Management
San Diego, California (since 1989).
</TABLE>

B-7
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND AND OTHER AFFILIATIONS
---------------- ------------- ----------------------
<C> <C> <S>
Grace Torres (36) Treasurer and First Vice President (since
One Seaport Plaza Chief Accounting March, 1994), Prudential Mutual
New York, New York Officer Fund Management, Inc.; First
Vice President of Prudential
Securities (since March, 1994);
Prior thereto, Vice President,
Bankers Trust Corporation.
S. Jane Rose (50) Secretary Senior Vice President (since
One Seaport Plaza January 1991), First Vice
New York, New York President (June 1987-December
1990), Senior Counsel and
Assistant Secretary (since June
1987), PMF; Senior Vice
President and Senior Counsel
(since July 1992), Prudential
Securities, formerly Vice
President and Associate General
Counsel of Prudential
Securities.
Robert E. Carlson (65) Assistant Secretary Partner, Paul, Hastings,
555 South Flower Street Janofsky & Walker (law firm)
22nd Floor since August 1988; formerly
Los Angeles, California Partner (through his
Professional Corporation),
Hufstedler, Miller, Carlson &
Beardsley (law firm) (1967-
1988).
Deborah A. Docs (38) Assistant Secretary Vice President and Associate
One Seaport Plaza General Counsel (since January
New York, New York 1993), of PMF; Vice President
and Associate General Counsel
(since January 1993) of
Prudential Securities;
previously Associate Vice
President (January 1990-
December 1992), Assistant Vice
President (January 1989-
December 1989) and Assistant
General Counsel (November 1991-
December 1992) of PMF.
</TABLE>
- ---------
* An "interested" Director of the Company as defined in the Investment Company
Act.

+ A.B. Laffer, V.A. Canto & Associates (formerly A.B. Laffer Associates), of
which Mr. Laffer is the Chairman, received $0 in 1995, $100,000 in 1994,
$25,000 in 1993 and $25,000 in 1992 from the Investment Adviser as
compensation for consulting services provided from time to time to the
Investment Adviser.

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 Incorporated 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 $10,000 and $1,000 per Board meeting attended, in
addition to certain out-of-pocket expenses. The Chairman of the Audit
Committee receives an additional $1,500 and each member of the Audit Committee
receives an additional $1,000 per meeting attended.

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

Pursuant to the terms of the Management Agreement with the Trust, the
Manager of Subadviser, as appropriate, 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.

B-8
<PAGE>

The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended December 31, 1995 to the Directors who are not
affiliated with the Manager or Subadviser 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, 1995.

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND EXPENSES RETIREMENT TO DIRECTORS
----------------- ------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Fred C. Applegate, $14,000 None N/A $14,000(1)*
Director
Dann V. Angeloff, 17,000 None N/A 17,000(1)*
Director
Theodore J. Coburn, 14,000 None N/A 14,000(1)*
Director
Arthur B. Laffer, 16,000 None N/A 16,000(1)*
Director
Charles E. Young, 16,000 None N/A 16,000(1)*
Director
</TABLE>
- ---------
* Indicates number of funds in Fund Complex (including the Fund) to which
aggregate compensation relates.

As of February 9, 1996 the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.

As of February 9, 1996, the only beneficial owners, directly or indirectly,
of more than 5% of the outstanding shares of any class of common stock of the
Fund were The Foundation for Jewish Philanthropy, James Stovroff Annuity Tr,
787 Delaware Ave., Buffalo, NY 14209-2096, which held 19,953 Class C shares of
the Fund (5.7%); and The Foundation for Jewish Philanthropy, Haskell Stovroff
Annuity Tr, 787 Delaware Ave., Buffalo, NY 14209-2096, which held 19,953 Class
C shares of the Fund (5.7%).

As of February 9, 1996, Prudential Securities was the record holder for
other beneficial owners of 4,097,857 Class A shares (or 52% of the outstanding
Class A shares), 15,150,267 Class B shares (or 77% of the outstanding Class B
shares) and 294,781 Class C shares (or 85% 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 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 investment companies that, together with the Fund,
comprise the "Prudential Mutual Funds." See "How the Fund is Managed--Manager"
in the Prospectus. As of January 31, 1996, PMF managed and/or administered
open-end and closed-end management investment companies with assets of
approximately $52 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.

Pursuant to the Management Agreement with the Company (the "Management
Agreement"), and subject to the supervision of the Company's Board of
Directors and in conformity with the stated policies of the Fund, PMF is
responsible for managing the investment operations of the Fund and the
composition of the Fund's portfolio, including the purchase, retention and
disposition of portfolio securities. In this regard, PMF provides supervision
of the Fund's investments, furnishes a continuous investment program for the
Fund's portfolio and places purchase and sale orders for portfolio securities
of the Fund and other investments. The Investment Adviser provides the
foregoing services to PMF pursuant to the terms of the Subadvisory Agreement
among PMF, the Investment Adviser and the Company (the "Subadvisory
Agreement"). Under the Management Agreement, PMF administers the Fund's
corporate affairs, subject to the supervision of the Company's Board of
Directors and, in connection therewith, furnishes the Fund with office
facilities and ordinary clerical and bookkeeping services which are not
furnished by the Fund's transfer and dividend disbursing agent and custodian.
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 equal to .95 of 1% of the average daily net assets of the
Fund. PMF pays the fees of the Investment Adviser (.75 of 1%) from this
management fee.

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 Company's personnel except the fees and expenses of Directors who are not
affiliated persons of PMF

B-9
<PAGE>

or the Fund's Investment Adviser; (b) all expenses incurred by PMF or by the
Fund in connection with managing the ordinary course of the Fund's business,
other than those assumed by the Fund, as described below; and (c) the costs
and expenses payable to the Investment Adviser pursuant to its Subadvisory
Agreement.

Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses: (a) the fees and expenses incurred by the
Fund in connection with the management of the investment and reinvestment of
the Fund's assets, (b) the fees and expenses of Directors who are not
affiliated with PMF or the Investment Adviser, (c) out-of-pocket travel
expenses for all Directors and other expenses of Directors' meetings, (d) the
fees and certain expenses of the Fund's custodian, (e) the fees and expenses
of the Fund's transfer and dividend disbursing agent that relate to the
maintenance of each shareholder account, (f) the charges and expenses of the
Fund's legal counsel and independent accountants, (g) brokerage commissions
and any issue or transfer taxes chargeable to the Fund in connection with its
securities transactions, (h) all taxes and corporate fees payable by the Fund
to federal, state and other governmental agencies, (i) the fees of any trade
association of which the Fund may be a member, (j) the cost of stock
certificates representing, and non-negotiable share deposit receipts
evidencing, shares of the Fund, (k) the cost of fidelity and liability
insurance, (l) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Commission and registering
the Fund and qualifying its shares under state securities laws, including the
preparation and printing of the Fund's registration statement, prospectus and
statement of additional information for such purposes, (m) allocable
communication expenses with respect to investor services and all expenses of
shareholders' and Board of Directors' meetings and of preparing, printing and
mailing prospectuses and reports to shareholders, (n) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (o) expenses assumed by the Fund
pursuant to the Plans of Distribution adopted in conformity with Rule 12b-1
under the Investment Company Act.

Under California law, certain annual expenses, including advisory and
management fees, of an investment company are limited to, in the aggregate,
2.5% of the first $30 million of the average net assets, 2% of the next $70
million of the average net assets and 1.5% of the remaining average net assets
of the investment company. To the extent that such expenses exceed these
limits, California law requires that the company's investment adviser or
manager reduce its fee. In the event of such excess expenses with respect to
the Fund, or in the event certain expenses of the Fund exceed any other state
expense limitations that are established or enforced, PMF is required to
reduce its management fee by all of any such excess, and the Investment
Adviser is required to reduce its fee by 60% of such excess.

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
its duties. The Management Agreement provides that it will terminate
automatically if assigned, and that it may be terminated without penalty by
either PMF or the Company (by the Board of Directors or vote of a majority of
the outstanding voting securities of the Fund, as defined in the Investment
Company Act) 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 Company, 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 12, 1995 and by the shareholders of the
Fund on April 22, 1991 effective as of June 10, 1991.

For the fiscal years ended December 31, 1995, December 31, 1994 and December
31, 1993, PMF received net management and administrative fees of $754,705,
$708,486 and $539,577.

Prudential Mutual Fund Management, Inc., the Manager of the Fund, is a
subsidiary of Prudential Securities Incorporated (PSI) 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
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.

Prudential 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
benefits 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 world-wide,
and maintains a sales force of approximately 19,000 agents, 3,400 insurance
brokers and 6,000 financial advisers. It insures or provides other financial
services to more than 50 million people worldwide--to more than one of every
five people in the United States. 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. As of
December 31, 1994, Prudential through its subsidiaries provided 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

B-10
<PAGE>

940,000 customers in 50 states providing credit card services and loans
totaling more than $1.2 billion. Assets held by 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 period from January 1, 1995 to September 30, 1995 for
the Prudential Mutual Funds, on an average day, there are approximately $80
million in common stock transactions, over $150 million in bond transactions
and over $3.1 billion in money market transactions. In 1994, the Prudential
Mutual Funds effected more than 40,000 trades in money market securities and
held on average $20 billion of money market securities. Based on complex-wide
data for the period from January 1, 1995 to September 30, 1995, on an average
day, over 7,000 shareholders telephoned PMFS, 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
answered.

From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Investment
Adviser 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.

INVESTMENT ADVISER

The Fund's Investment Adviser is Nicholas-Applegate Capital Management, a
California limited partnership, with offices at 600 West Broadway, 29th Floor,
San Diego, California 92101. The Investment Adviser was organized in August
1984 to manage discretionary accounts investing primarily in publicly traded
equity securities and securities convertible into or exercisable for publicly
traded equity securities, with the goal of capital appreciation. Its general
partner is Nicholas-Applegate Capital Management Holdings, L.P., a California
limited partnership of which the general partner is Nicholas-Applegate Capital
Management Holdings, Inc. (a California corporation owned by Mr. Nicholas).

The Investment Adviser currently has fifteen partners (including Mr.
Nicholas) who manage a staff of approximately 300 employees including 28
portfolio managers.

The Investment Adviser acted as investment adviser to the Fund pursuant to
an Investment Advisory Agreement with the Fund (the "Original Advisory
Agreement") from the commencement of the Fund's operations (as a closed-end
investment company) in April 1987 until its conversion to an open-end company
in June 1991. The Original Advisory Agreement was initially approved by Arthur
E. Nicholas and Fred C. Applegate as the Fund's original shareholders and was
approved by the Fund's public shareholders at the annual meetings of
shareholders held in May 1988, May 1989 and April 1990. The Original Advisory
Agreement was last approved by the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Investment
Adviser or the Fund, as defined in the Investment Company Act, in February
1991.

Pursuant to the conversion of the Fund to an open-end mutual fund, the
Original Advisory Agreement was terminated and the Management Agreement and
the Subadvisory Agreement were entered into effective June 10, 1991. The
Subadvisory Agreement was approved by the shareholders of the Fund on April
22, 1991, effective as of June 10, 1991. The Subadvisory Agreement was last
approved by the Board of Directors, including a majority of the Board of
Directors who are not parties to the contract or interested persons of any
such party as defined in the Investment Company Act, on May 12, 1995. Under
the Subadvisory Agreement, the Manager retains the Investment Adviser to
manage the Fund's investment portfolio, subject to the direction of the
Company's Board of Directors and the Manager. The Investment Adviser is
authorized to determine which securities are to be bought or sold by the Fund
and in what amounts. In addition to providing management and investment
advisory services, the Investment Adviser compensates all Directors and
officers of the Fund who are "interested persons" of the Investment Adviser,
as such term is defined in the Investment Company Act.

The Subadvisory Agreement provides that the Investment Adviser will not be
liable for any error of judgment or for any loss suffered by the Fund or the
Manager in connection with the matters to which the Subadvisory Agreement
relates, except for liability resulting from willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its reckless
disregard of its duties and obligations or a breach of its fiduciary duty
under the Subadvisory Agreement. The Fund has agreed to indemnify the
Investment Adviser against liabilities, costs and expenses that the Investment
Adviser may incur in connection with any action, suit, investigation or other
proceeding arising out of or otherwise based on any action actually or
allegedly taken or omitted to be taken by the Investment Adviser in connection
with the performance of its duties or obligations under the Subadvisory
Agreement or otherwise as an investment adviser of the Fund. The Investment
Adviser is not entitled to indemnification with respect to any liability to
the Fund or its shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or of its reckless
disregard of its duties and obligations or of a breach of its fiduciary duty
under the Subadvisory Agreement.

The Subadvisory Agreement further provides that the Fund may use "Nicholas-
Applegate" as part of its name so long as the Subadvisory Agreement is in
effect. Because the name "Nicholas-Applegate" is a property right of the
Investment Adviser, the

B-11
<PAGE>

Investment Adviser, as well as Mr. Nicholas and Mr. Applegate, may, upon the
termination of the Subadvisory Agreement, require the Fund to refrain from
using the name "Nicholas-Applegate" in any form.

The Manager pays to the Investment Adviser, as compensation for the services
provided by the Investment Adviser under the Subadvisory Agreement, a fee at
an annual rate equal to .75 of 1% of the average daily net assets of the Fund.
The fee (as a percentage of net assets) payable to the Investment Adviser is
higher than the fee paid by most other investment companies.

Under California law, certain annual expenses, including advisory and
management fees, of an investment company are limited and may not exceed
certain fixed percentage amounts of the average net assets of the investment
company. See "Manager." In the event the expenses of the Fund exceed the
limitation amounts provided for under California law or under any other
applicable state expense limitations, the fee the Investment Adviser will be
paid by PMF will be reduced by 60% of the amount of such excess.

Under the Original Advisory Agreement, the Investment Adviser's fee for its
services as investment adviser to the Fund was a fee comprised of a basic fee
(the "Basic Fee") and an adjustment to the Basic Fee based on the investment
performance per share of the Fund in relation to the investment record of the
S&P 500 for certain performance periods. The Basic Fee was a monthly fee equal
to 1/12 of .75% (.75% on an annualized basis) of the average of the daily net
assets of the Fund at the end of each month included in the applicable
performance period. The Basic Fee for each such month was subject to increase
or decrease depending on the extent, if any, by which the investment
performance per share of the Fund exceeded or was exceeded by the percentage
change in the investment record of the S&P 500 for such performance period.
The Basic Fee was increased by 1/12 of .25% (to a total of 1/12 of 1.00%) if
the investment performance per share of the Fund exceeded the percentage
change in the S&P 500 for such performance period by nine or more percentage
points, and was decreased by 1/12 of .25% (to a total of 1/12 of .50%) if the
investment performance per share of the Fund was exceeded by the percentage
change in the S&P 500 for such performance period by nine or more percentage
points. If the investment performance per share of the Fund did not exceed, or
was not exceeded by, the percentage change in the S&P 500 for a performance
period by nine or more percentage points, the maximum percentage increase or
decrease in the Basic Fee ( 1/12 of either +.25% or -.25%, respectively) was
prorated for such performance period in the same proportion as the excess of
the investment performance per share of the Fund over the percentage change in
the investment record of the S&P 500, or as the excess of the percentage
change in the investment record of the S&P 500 over the investment performance
per share of the Fund, as the case may be, for such performance period bore to
nine percentage points.

Under the Original Advisory Agreement and for the Fund's fiscal year ended
December 31, 1990, the Fund paid the Investment Adviser aggregate advisory
fees in the amount of $629,831 (the Basic Fee was .75% and the annualized
effective advisory fee as adjusted was approximately .54%). During the years
ended December 31, 1992, 1993 and 1994, the Fund and the Manager paid the
Investment Adviser aggregate advisory fees of $1,159,456, $2,023,414 and
$2,665,258, respectively, pursuant to the terms of the Original Advisory
Agreement and the Subadvisory Agreement.

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 Company (by the Board of Directors or vote of a majority of
the outstanding voting securities of the Fund, as defined in the Investment
Company Act), PMF or the Investment Adviser upon not more than 60 days' nor
less than 30 days' written notice, without payment of any penalty. 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 conformity with the Investment
Company Act.

DISTRIBUTOR

Prudential Securities Incorporated, One Seaport Plaza, New York, New York
10292 ("Prudential Securities"), acts as the distributor of the shares of the
Fund. Prior to January 2, 1996, Prudential Mutual Fund Distributors, Inc.
(PMFD), One Seaport Plaza, New York, New York 10292, acted as Distributor of
the Class A 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 pursuant
to 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. The Class A and Class B Distribution Plans
were adopted by the Board of Directors, including a majority of the Directors
who have no direct or indirect financial interest in the operation of the
Plans or in any agreement related to either Plan (the "Rule 12b-1 Directors"),
on February 1, 1991, effective as of June 10, 1991. The holders of a majority
of the Fund's outstanding Class A shares approved the Class A Plan on April
22, 1991. PMF, the sole shareholder of the Fund's Class B shares, approved the
Class B Plan on June 10, 1991. The Class B Plan was approved by Class B
shareholders of the Fund on May 18, 1992. On May 17, 1993, the Directors,
including a majority of the Rule 12b-1 Directors, at a meeting called for the
purpose of voting on each Plan, approved the continuance of the Plans and
Distribution Agreements and approved modifications of the Fund's Class A and
Class B Plans and Distribution Agreements to conform them with

B-12
<PAGE>

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/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%. 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) may be used as reimbursement
for distribution-related expenses with respect to the Class B shares (asset-
based sales charge). On May 17, 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 Directors, on May 12, 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 year ended December 31, 1995, PMFD received payments
of $189,732, under the Class A Plan. This amount was primarily expended for
payments of account servicing fees to financial advisers and other persons who
sell Class A shares.

In addition, for the year ended December 31, 1995, PMFD received
approximately $301,000 in initial sales charges.

CLASS B PLAN. For the year ended December 31, 1995, Prudential Securities
received $2,655,967 from the Fund under the Class B Plan and spent
approximately $1,413,000 in distributing the Fund's Class B shares. It is
estimated that of the latter amount, approximately 1.1% ($15,000) was spent on
printing and mailing of prospectuses and sales material to other than current
shareholders; 14.1% ($199,000) was spent 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 Class B shares; and 84.8% ($1,199,000) was spent on the
aggregate of (i) commission credits to Prudential Securities branch offices
for payments of commissions and account servicing fees to financial adviser
[46.1% ($652,000)] and (ii) an allocation on account of overhead and other
branch office distribution-related expenses [38.7% ($547,000)]. The term
"overhead and other branch office distribution-related expenses" represents
(a) the expenses of operating the branch offices of Prudential Securities and
Prusec 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) travel expenses of mutual fund
sales coordinators to promote the sale of Fund shares and (d) other incidental
expenses relating to branch promotion of Fund sales.

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 December 31, 1995
Prudential Securities received approximately $979,000 in contingent deferred
sales charges attributable to Class B shares.

CLASS C PLAN. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class C
shares. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the Prospectus.

For the year ended December 31, 1995, Prudential Securities received $29,607
from the Fund under the Class C Plan and spent approximately $33,900 in
distributing the Fund's Class C Shares. It is estimated that of the latter
amount, approximately 7.4% ($2,500) was spent on printing and mailing of
prospectuses to other than current shareholders; 2.9% ($1,000) on compensation
to Prusec for commissions to its representatives and other expenses, including
an allocation of overhead and other branch office distribution-related
expenses, incurred by it for distribution of Fund shares; and 89.7% ($30,400)
on the aggregate of (i) payments of commissions and account servicing fees to
financial advisers (37.2% or $12,600) and (ii) an allocation of overhead and
other branch office distribution-related expenses for payments of related
expenses (52.5% or $17,800). 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 December 31, 1995, Prudential Securities received approximately
$200 in contingent deferred sales charges attributable to Class C shares.

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 Class A, Class B and Class C Plans may each be terminated at
any time,

B-13
<PAGE>

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 the Class A Plan, Class B Plan or
Class C Plan if such Plan 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 the Class
A, Class B and Class C 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 Directors who are not interested persons of the
Company will be committed to the Directors who are not interested persons of
the Company.

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 1993, as amended. Each
Distribution Agreement was last approved by the Directors, including a
majority of the Rule 12b-1 Directors, on May 12, 1995. On November 3, 1995,
the Directors approved the transfer of the Distribution Agreement for Class A
shares with PMFD to Prudential Securities.

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
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.

B-14
<PAGE>

NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD Inc., 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 all classes would be suspended.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Company's Board of Directors and the
oversight and review of the Manager, the Investment Adviser is primarily
responsible for the execution of the Fund's portfolio transactions and the
allocation of its brokerage business. In executing such transactions, the
Investment Adviser will seek to obtain the best price and execution for the
Fund, taking into account such factors as price, size of order, difficulty and
risk of execution and operational facilities of the firm involved. Securities
in which the Fund invests may be traded in the over-the-counter markets, and
the Fund deals directly with the dealers who make markets in such securities
except in those circumstances where better prices and execution are available
elsewhere. Commission rates are established pursuant to negotiation with
brokers or dealers based on the quality or quantity of services provided in
light of generally prevailing rates, and while the Investment Adviser
generally seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest commissions available. The allocation of orders
among brokers and the commission rates paid are reviewed quarterly by the
Board of Directors of the Company.

The Fund has no obligation to deal with any broker or group of brokers in
executing transactions in portfolio securities. Subject to obtaining the best
price and execution, brokers who sell shares of the Fund or provide
supplemental research, market and statistical information and other research
services and products to the Investment Adviser may receive orders for
transactions by the Fund. Such information, services and products are those
which brokerage houses customarily provide to institutional investors, and
include items such as statistical and economic data, research reports on
particular companies and industries, and computer software used for research
with respect to investment decisions. Information, services and products so
received are in addition to and not in lieu of the services required to be
performed by the Investment Adviser under the Subadvisory Agreement and the
expenses of the Investment Adviser are not necessarily reduced as a result of
the receipt of such supplemental information, services and products. Such
information, services and products may be useful to the Investment Adviser in
providing services to clients other than the Fund, and not all such
information, services and products are used by the Investment Adviser in
connection with the Fund. Similarly, such information, services and products
provided to the Investment Adviser by brokers and dealers through whom other
clients of the Investment Adviser effect securities transactions may be useful
to the Investment Adviser in providing services to the Fund. The Investment
Adviser is authorized to pay higher commissions on brokerage transactions for
the Fund to brokers in order to secure information, services and products
described above, subject to review by the Company's Board of Directors from
time to time as to the extent and continuation of this practice. During the
fiscal year ended December 31, 1993, substantially all of the Fund's brokerage
commissions were paid to firms which provided research services to the Fund's
Investment Adviser.

Although investment decisions for the Fund are made independently from those
of the other accounts managed by the Investment Adviser, investments of the
kind made by the Fund may often also be made by such other accounts. When a
purchase or sale of the same security is made at substantially the same time
on behalf of the Fund and one or more other accounts managed by the Investment
Adviser, available investments are allocated in the discretion of the
Investment Adviser by such means as, in its judgment, result in fair
treatment. The Investment Adviser aggregates orders for purchases and sales of
securities of the same issuer on the same day among the Fund and its other
managed accounts, and the price paid to or received by the Fund and those
accounts is the average obtained in those orders. In some cases, such
aggregation and allocation procedures may affect adversely the price paid or
received by the Fund or the size of the position purchased or sold by the
Fund.

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 and agency securities may be purchased directly from
the issuer, in which case no commissions or discounts are paid. The Fund will
not deal with Prudential Securities 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 marker, 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.

B-15
<PAGE>

Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities (or any affiliate), during the
existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the Commission.
This limitation, in the opinion of the Fund, will not significantly affect the
Fund's ability to pursue its present investment objective. However, in the
future in other circumstances, the Fund may be at a disadvantage because of
this limitation in comparison to other funds with similar objectives but not
subject to such limitation.

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

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 December 31, 1995.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993 1992
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
Total brokerage commissions paid by
the Fund............................ $884,934 $1,113,173 $814,146 $606,668
Total brokerage commissions paid to
Prudential Securities............... $ 0 $ 0 14,946 $ 3,900
Percentage of total brokerage
commissions paid to Prudential
Securities.......................... 0% 0% 1.8% 0.6%
</TABLE>

Of the total brokerage commissions paid during the year ended December 31,
1995 $722,472 or (87%) were paid to firms which provided research, statistical
or other services to the Manager. PMF has not separately identified a portion
of such brokerage commissions as applicable to the provision of such research,
statistical or other services.

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 the purchase (Class A
shares) or 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 Securities and Exchange Commission in
connection with the offering of a conversion feature on Class B shares to
submit any amendment of the Class A distribution and service plan to both
Class A and Class B shareholders) and (iii) only Class B shares have a
conversion feature. See "Distributor." Each class also has separate exchange
privileges. See "Shareholder Investment Account--Exchange Privilege."

B-16
<PAGE>

SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5.00% and
Class B and Class C* shares are sold at net asset value. Using the Fund's net
asset value at December 31, 1995, the maximum offering price of the Fund's
shares is as follows:

<TABLE>
<S> <C>
CLASS A
Net asset value.................................................. $15.18
Maximum sales charge (5.00% of offering price)................... .80
------
Offering price to public......................................... $15.98
======
CLASS B
Net asset value, offering price and redemption price per Class B
share*.......................................................... $14.49
======
CLASS C
Net asset value, offering price and redemption price per Class C
share*.......................................................... $14.49
======
</TABLE>
---------
*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.

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 company will be
deemed to control the company, and a partnership will be deemed to be
controlled by each of its general partners);

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

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

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

In addition, an eligible group of related Fund investors may include 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 he
held either directly with the Transfer Agent or through Prudential Securities.
The value of

B-17
<PAGE>

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.

LETTER OF INTENT. Reduced sales charges are 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 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 charge will
be granted subject to confirmation of the investor's holdings. Letters of
Intent are not available to individual participants in 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 shares totaling 5% of the dollar amount of the Letter of
Intent will be held by the Transfer Agent in the name of the purchaser, except
in the case of retirement and group plans where the employer or plan sponsor
will be responsible for paying any applicable sales charge. The effective date
of 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, or 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. If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the thirteen-month period. Investors electing to
purchase 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 considered
disabled if he or she is unable to engage in any A copy of the Social Security Administration
substantial gainful activity by reason of any award letter or a letter from a physician on
medically determinable physical or mental the physician's letterhead stating that the
impairment which can be expected to result in shareholder (or, in the case of a trust, the
death or to be of long-continued and indefinite grantor) is permanently disabled. The letter
duration. must also indicate the date of disability.
Distribution from an IRA or 403(b) A Copy of the distribution form from the
Custodial Account custodial 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.
</TABLE>

B-18
<PAGE>

<TABLE>
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
<S> <C>
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 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>

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 at net
asset value per share. An investor may direct the Transfer Agent in writing
not less than five full business days prior to the record date to have
subsequent dividends 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
(without a sales charge) by returning the check or the proceeds to the
Transfer Agent within 30 days after the payment date. Such investment will be
made at the net asset value per share next determined after receipt of the
check or proceeds by the Transfer Agent.

EXCHANGE PRIVILEGE

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

It is contemplated that the Exchange Privilege may be applicable to new
mutual funds (including new series of the Company) the shares of which may be
distributed by the Distributor.

B-19
<PAGE>

CLASS A. Shareholders of the Fund may exchange their Class A shares for
Class A shares of certain 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.

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 and U.S.
Treasury Money Market Series); Prudential Municipal Series Fund (Connecticut
Money Market Series, Massachusetts Money Market Series, New York Money Market
Series and New Jersey Money Market Series); Prudential MoneyMart Assets; and
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 Class B and
Class C shares, respectively, of an eligible money market fund without
imposition of any CDSC at the time of exchange. Upon subsequent redemption
from such money market fund or after re-exchange into the Fund, such shares
will be subject to the CDSC calculated 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 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 without being subject to any CDSC.

Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on 60 days' notice, and any fund (including the Fund),
or the Distributor, has the right to reject any exchange application relating
to such fund's shares.

DOLLAR COST AVERAGING

Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. A 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 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 home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $6,000 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class beginning in 2011, the cost of four years at
a private college could reach $210,000 and over $90,000 at a public
university./1/

B-20
<PAGE>

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

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

See "Automatic Savings Accumulation Plan."
- ---------

/1/Source information concerning the costs of education at public and private
universities is available from The College Board Annual Survey of Colleges,
1993. Information about the costs of private colleges is from the Digest of
Education Statistics, 1992; The National Center for Educational Statistics;
and the U.S. Department of Education. Average costs for private institutions
include tuition, fees and room and board for the 1993-1994 academic year.

/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 investment will fluctuate so that
an investor's shares when redeemed may be worth more or less than their
original cost.

AUTOMATIC SAVINGS ACCUMULATION PLAN ("ASAP")

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

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

SYSTEMATIC WITHDRAWAL PLAN

A systematic withdrawal plan is available to shareholders through Prudential
Securities or the Transfer Agent. Such withdrawal plan provides for monthly or
quarterly checks in any amount, except as provided below, up to the value of
the shares in the shareholder's account. Withdrawals of Class B or Class C
shares 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 be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares
are inadvisable because of the sales charges applicable to (i) the purchase of
Class A shares and (ii) the withdrawal of Class B and Class C shares. Each
shareholder should consult his or her own tax adviser with regard to the tax
consequences of the plan, particularly if used in connection with a retirement
plan.

B-21
<PAGE>

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, their administration, custodial fees and other
details are 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 such plan.

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, and 8% rate of return and a 39.6% federal income
tax bracket and shows how much more retirement income can accumulate within an
IRA as opposed to a taxable individual savings account.

TAX-DEFERRED COMPOUNDING/1/

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

NET ASSET VALUE

The net asset value of a share of the Fund is calculated by dividing (i) the
value of the securities held by the Fund, plus any cash or other assets, minus
all liabilities (including accrued estimated expenses on an annual basis), by
(ii) the total number of shares outstanding. Net asset value is calculated
separately for each class. The value of the investments and assets of the Fund
is determined each business day. Portfolio securities that are traded on a
stock exchange or on the NASDAQ National Market System are valued at the last
sale price as of the close of business on the New York Stock Exchange
(currently 4:00 p.m. New York time) on the day the securities are being
valued, or lacking any sales, at the mean between the closing bid and asked
prices. Other over-the-counter securities are valued at the mean between the
closing bid and asked prices. Debt securities with maturities of 60 days or
less are valued at amortized cost if their term to maturity from date of
purchase is less than 60 days, or by amortizing, from the sixty-first day
prior to maturity, their value on the sixty-first day prior to maturity if
their term to maturity from date of purchase by the Fund is more than 60 days,
unless this is determined by the Board of Directors not to represent fair
value. Repurchase agreements are valued at cost plus accrued interest.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors.

In the event that the New York Stock Exchange or the national securities
exchange on which stock or stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors of the
Company will reconsider the time at which net asset value is computed. In
addition, the asset value of the Fund may be computed as of any time permitted
pursuant to any exemption, order or statement of the Commission or its staff.

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.

B-22
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDEND AND DISTRIBUTION POLICY. The Fund's present policy, which may be
changed by the Company's Board of Directors, is to make distributions of any
net investment income and capital gains, if any, to shareholders annually.

REGULATED INVESTMENT COMPANY. The Fund has elected to qualify and intends to
remain qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code. As a regulated investment company, the Fund will not be
liable for federal income tax on its income and gains provided it distributes
all of its income and gains currently. Qualification as a regulated investment
company under the Internal Revenue Code requires, among other things, that the
Fund (a) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including,
but not limited to, gains from options, futures or forward contracts) derived
with respect to its business of investing in such securities or currencies;
(b) derive less than 30% of its gross income from the sale or other
disposition of securities held less than three months; and (c) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the Fund's assets is represented by cash, U.S. Government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation generally limited, in respect of
any one issuer, to an amount not greater than 5% of the market value of the
Fund's assets and 10% of the outstanding voting securities of such issuer) and
(ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or two or more issuers
which the Company controls and which are determined to be engaged in the same
or similar trades or businesses. The Fund generally will be subject to a
nondeductible excise tax of 4% to the extent that it does not meet certain
minimum distribution requirements as of the end of each calendar year. The
Fund intends to make timely distributions of its income in compliance with
these requirements and anticipates that it will not be subject to the excise
tax.

Dividends paid by the Fund from ordinary income, and distributions of the
Fund's net realized short-term capital gains, are taxable to its shareholders
as ordinary income. Distributions to corporate shareholders will be eligible
for the 70% dividends received deduction to the extent that the income of the
Fund is derived from dividends on common or preferred stock. Dividend income
earned by the Fund will be eligible for the dividends received deduction only
if the Fund has satisfied a 46-day holding period requirement with respect to
the underlying portfolio security (91 days in the case of dividends derived
from preferred stock). In addition, a corporate shareholder must have held its
shares in the Fund for not less than 46 days (91 days in the case of dividends
derived from preferred stock) in order to claim the dividend received
deduction. Not later than 60 days after the end of its taxable year, the Fund
will send to its shareholders a written notice designating the amount of any
distributions made during such year which may be taken into account by its
shareholders for purposes of such deduction provisions of the Internal Revenue
Code. Net capital gain distributions are not eligible for the dividends
received deduction.

Under the Internal Revenue Code, any distributions designated as being made
from the Fund's net capital gains are taxable to its shareholders as long-term
capital gains, regardless of the holding period of such shareholders. Such
distributions of net capital gains will be designated by the Fund as a capital
gains distribution in a written notice to its shareholders which accompanies
the distribution payment. Any loss on the sale of shares held for less than
six months will be treated as a long-term capital loss for federal tax
purposes to the extent a shareholder receives net capital gain distributions
on such shares. The maximum federal income tax rate applicable to long-term
capital gains is currently 28% for individual and corporate shareholders.
Dividends and distributions are taxable as described whether received in cash
or reinvested in additional shares of 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 will constitute a
replacement of shares.

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

The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A shares as a result of the higher distribution-
related fee applicable to the Class B and Class C shares. The per share
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."

OTHER TAX INFORMATION. The Company may also be subject to state or local
taxes in certain other states where it is deemed to be doing business.
Further, in those states which have income tax laws, the tax treatment of the
Company and of shareholders of the Fund with respect to distributions by the
Fund may differ from federal tax treatment. Distributions to shareholders may
be subject to additional state and local taxes. Shareholders should consult
their own tax advisers regarding specific questions as to federal, state or
local taxes.

B-23
<PAGE>

PERFORMANCE INFORMATION

AVERAGE ANNUAL TOTAL RETURN. The Company may from time to time advertise the
Fund's average annual total return. Average annual total return is determined
separately for Class A and Class B 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 nth power = ERV

Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
period (or fractional portion thereof).

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, five and
eight-and two-thirds year periods ended on December 31, 1995 was 24.6%, 18.1%
and 11.7%, respectively. The average annual total return for Class B shares
for the one and four-and-one-half year periods ended December 31, 1995 was
25.1% and 15.1%, respectively. The average annual total return for Class C
shares for the one and one-and-one half year periods ended December 31, 1995
was 29.1% and 20.1%, respectively.

AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A and Class
B 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
T = -------
P

Where: P = a hypothetical initial payment of $1000.
T = aggregate total return.
ERV = ending redeemable value of a hypothetical $1000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or
10 year periods (or fractional portion thereof).

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, five and eight-
and-two-third year periods ended on December 31, 1995 was 31.2%, 141.7% and
176.2%, respectively. The aggregate total return for Class B shares for the
one and four-and-one-half year periods ended on December 31, 1995 was 30.1%
and 90.4%, respectively. The aggregate total return for Class C shares for the
one and one-and-one half year periods ended December 31, 1995 was 30.1% and
29.4%, respectively.

B-24
<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/

(ART)

/1/Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1993
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 & 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.

CUSTODIAN, TRANSFER AND DIVIDENDDISBURSING AGENT AND INDEPENDENT ACCOUNTANTS

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

Prudential Mutual Fund Services, Inc. ("PMFS"), Raritan Plaza One, Edison,
New Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the
Fund. PMFS is a wholly-owned subsidiary of PMF. PMFS provides customary
transfer agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, the 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 of $.20 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 year ended December 31, 1995,
the Fund incurred fees of approximately $538,000 for the services of PMFS.

Ernst & Young LLP serves as the Company's independent accountants and in
that capacity examines the Company's annual financial statements with respect
to the Fund.

B-25
<PAGE>

NICHOLAS-APPLEGATE FUND, INC. PORTFOLIO OF INVESTMENTS
NICHOLAS-APPLEGATE GROWTH EQUITY FUND DECEMBER 31, 1995

<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
------ ----------- --------
<C> <S> <C>
COMMON STOCKS--96.7%
CAPITAL GOODS--26.0%
Chemicals--1.5%
158,400 IMC Fertilizer Group,
Inc...................... $ 6,474,600
------------
Computers-Local Networks--6.5%
109,500 3 Com Corp.*............... 5,105,437
61,500 Cabletron Systems, Inc.*... 4,981,500
91,400 Cisco Systems Inc.*........ 6,820,725
90,000 Compaq Computer Corp.*..... 4,320,000
138,700 Solectron Corp.*........... 6,120,137
------------
27,347,799
------------
Retail Specialty Chain--2.1%
62,700 Tandy Corp................. 2,602,050
254,600 Staples Inc.*.............. 6,205,875
------------
8,807,925
------------
Computers-Services--2.7%
159,900 Ceridian Corp.*............ 6,595,875
69,400 Computer Sciences Corp.*... 4,875,350
------------
11,471,225
------------
Electronic Components--3.5%
94,300 Analog Devices, Inc.*...... 3,335,863
68,100 Glenayre Technologies*..... 4,239,225
100,000 Intel Corp................. 5,675,000
40,000 Maxim Integrated Products,
Inc.*.................... 1,540,000
------------
14,790,088
------------
Telecommunication--9.7%
147,000 ADC Telecommunications,
Inc.*.................... 5,365,500
320,000 LCI International, Inc.*... 6,560,000
41,400 MFS Communications Inc.*... 2,204,550
132,400 Mobile Telecommunication
Technologies Corp.*...... 2,830,050
102,500 Tele Communications, Inc.
Liberty Media Group*..... 2,754,688
258,900 Tele Communications, Inc.
TCI Group Ser. A*........ $ 5,145,638
175,000 Tele Communications
International, Inc.*..... 3,981,250
234,500 Paging Network, Inc.*...... 5,715,938
172,500 WorldCom Inc.*............. 6,080,625
------------
40,638,239
------------
CONSUMER NON-DURABLES--29.4%
Casinos--1.1%
129,200 Mirage Resorts, Inc.*...... 4,457,400
------------
Drugs & Healthcare--12.5%
135,600 AMGEN Inc.*................ 8,051,250
131,700 Biochem Pharmaceuticals
Inc.*.................... 5,284,462
72,300 Biogen, Inc.*.............. 4,446,450
115,000 Columbia Healthcare
Corp..................... 5,836,250
35,500 Cordis Corp.*.............. 3,567,750
41,600 Genzyme Corp.*............. 2,594,800
160,000 Healthsource Inc.*......... 5,760,000
110,000 Idexx Laboratories,
Inc.*.................... 5,170,000
70,000 Nellcor Inc.*.............. 4,081,490
101,000 United Healthcare Corp.*... 6,615,500
26,100 Watson Pharmaceuticals
Inc.*.................... 1,278,900
------------
52,686,852
------------
Leisure And Recreation--4.2%
151,800 Infinity Broadcasting
Corp.*................... 5,654,550
112,100 Viacom, Inc.*.............. 5,310,737
------------
10,965,287
------------
Retail-Services--2.9%
224,400 CUC International Inc.*.... 7,657,650
85,300 Kohl's Corp.*.............. 4,478,250
------------
12,135,900
------------
Toys/Games/Hobbies--2.0%
270,175 Mattel, Inc................ 8,307,881
------------
</TABLE>

See Notes to Financial Statements.

B-26
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND

<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
------ ----------- --------
<C> <S> <C>
Medical-Health Maintenance--3.1%
140,900 Boston Scientific Corp.*... $ 6,904,100
67,500 Medtronic, Inc............. 3,771,562
74,300 Vencor Inc.*............... 2,414,750
------------
13,090,412
------------
Hotels & Restaurants--4.2%
95,300 Hfs Incorporated*.......... 7,790,775
283,300 Host Marriott Corp.*....... 3,753,725
159,900 Lone Star Steakhouse &
Saloon, Inc.*............ 6,136,163
------------
17,680,663
------------
Paper--1.0%
91,800 Alco Standard Corp......... 4,188,375
------------
ENERGY--4.8%
Oil & Gas-Production/Pipeline--3.6%
170,000 Enron Oil & Gas Co......... 4,080,000
180,000 Pogo Producing Co.......... 5,085,000
101,300 Triton Energy Corp......... 5,812,088
------------
14,977,088
------------
Oil Services--1.2%
100,000 Western Atlas, Inc......... 5,050,000
------------
ENVIRONMENTAL SECTOR--0.8%
Pollution Control Equipment &
Service--0.8%
106,400 Sanifill Inc.*............. 3,551,100
------------
FINANCIAL SERVICES--10.7%
Financial/Business Services--8.1%
150,000 Allstate Corp.............. 6,168,750
159,900 Danka Business Systems PLC
(ADR).................... 5,916,300
150,000 Donaldson Lufkin & Jenrette
Inc.*.................... 4,687,500
260,000 Equifax, Inc............... 5,557,500
75,171 First Data Corp............ 5,027,061
71,300 Green Tree Financial
Corp..................... 1,880,537
86,200 MGIC Investment Corp....... 4,676,350
------------
33,913,998
------------
Insurance--2.6%
95,900 Berkley (W.R.) Corp........ $ 5,154,625
119,700 SunAmerica, Inc............ 5,685,750
------------
10,840,375
------------
GENERAL BUSINESS--11.5%
Business Services--2.5%
150,600 America Online Inc.*....... 5,647,500
100,000 Gartner Group, Inc.*....... 4,787,500
------------
10,435,000
------------
Apparel & Textiles--9.0%
87,800 Baby Superstore Inc.*...... 5,004,600
200,000 Gucci Group NV*............ 7,775,000
128,500 Jones Apparel Group,
Inc.*.................... 5,059,688
120,000 Nautica Enterprises,
Inc.*.................... 5,250,000
119,200 NIKE, Inc.................. 8,299,300
149,300 Tommy Hilfiger Corp.*...... 6,326,587
------------
37,715,175
------------
HOUSING--1.1%
Homebuilders--1.1%
139,000 Pulte Corp................. 4,673,875
------------
TECHNOLOGY SECTOR--12.4%
Computer Hardware--1.8%
72,397 Silicon Graphics Inc.*..... 1,990,917
120,000 Sun Microsystems, Inc.*.... 5,475,000
------------
7,465,917
------------
</TABLE>

See Notes to Financial Statements.

B-27
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND

<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
------ ----------- --------
<C> <S> <C>
Computers-Software--10.6%
75,000 Adobe Systems, Inc......... $ 4,650,000
180,000 Cadence Design Systems,
Inc.*.................... 7,560,000
239,900 Mentor Graphics Corp.*..... 4,378,175
112,999 Oracle Systems Corp.*...... 4,788,333
90,700 Parametric Technology
Corp.*................... 6,031,550
90,000 Sterling Software, Inc.*... 5,613,750
213,100 Symantec Corp.*............ 4,954,575
170,700 Synopsys, Inc.*............ 6,486,600
------------
44,462,983
------------
Total common stocks
(cost $313,012,274)...... 406,128,157
------------

<CAPTION>
Principal
Amount
(000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS--6.1%
Commercial Paper--6.1%
Philip Morris Capital Corp.
$ 21,086 5.80%, 1/2/96.............. 21,082,603
UBS Finance Delaware, Inc.
4,415 5.80%, 1/2/96.............. 4,414,288
------------
25,496,891
------------
Other
Seven Seas Money Market
Fund
65 5.38%...................... 65,241
------------
Total short-term
investments
(cost $25,562,132; Note
4)....................... 25,562,132
------------
Total Investments--102.8%
(cost $338,574,406)...... 431,690,289
Liabilities in excess of
other
assets--(2.8%)........... (11,702,005)
------------
Net Assets--100%........... $419,988,284
------------
------------
</TABLE>

- ---------------
* Non-income producing security.
ADR--American Depository Receipt.

See Notes to Financial Statements.

B-28
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
Statement of Assets and Liabilities

<TABLE>
<CAPTION>
Assets December 31, 1995
-----------------
<S> <C>
Investments, at value (cost $338,574,406)............................................. $ 431,690,289
Cash.................................................................................. 33,356
Receivable for investments sold....................................................... 1,213,090
Receivable for Fund shares sold....................................................... 915,008
Dividends and interest receivable..................................................... 100,061
Deferred expenses and other assets.................................................... 3,693
-----------------
Total assets...................................................................... 433,955,497
-----------------
Liabilities
Payable for investments purchased..................................................... 11,921,117
Payable for Fund shares reacquired.................................................... 1,117,930
Accrued expenses and other liabilities................................................ 312,604
Due to Manager........................................................................ 329,358
Due to Distributor.................................................................... 262,706
Directors fees' payable............................................................... 23,498
-----------------
Total liabilities................................................................. 13,967,213
-----------------
Net Assets............................................................................ $ 419,988,284
-----------------
-----------------
Net assets were comprised of:
Common stock, at par................................................................ $ 285,885
Paid-in capital in excess of par.................................................... 313,327,241
-----------------
313,613,126
Accumulated net investment loss (comprised of equalization debits of $25,587)....... (25,587)
Accumulated net realized gain on investments........................................ 13,284,862
Net unrealized appreciation on investments.......................................... 93,115,883
-----------------
Net assets, December 31, 1995....................................................... $ 419,988,284
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($124,339,879 / 8,191,064 shares of common stock issued and outstanding).......... $15.18
Maximum sales charge (5% of offering price)......................................... .80
-----------------
Maximum offering price to public.................................................... $15.98
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($290,751,349 / 20,059,552 shares of common stock issued and outstanding)......... $14.49
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($4,897,056 / 337,868 shares of common stock issued and outstanding).............. $14.49
-----------------
-----------------
</TABLE>

See Notes to Financial Statements.

B-29
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
Statement of Operations

<TABLE>
<CAPTION>
Year Ended
December 31,
Net Investment Loss 1995
------------
<S> <C>
Income
Dividends (net of foreign
withholding taxes
of $26,671)....................... $ 1,033,010
Interest............................ 1,275,674
------------
Total investment income........... 2,308,684
------------
Expenses
Management fees..................... 3,593,831
Distribution fee--Class A........... 189,732
Distribution fee--Class B........... 2,655,967
Distribution fee--Class C........... 29,607
Transfer agent's fees and
expenses............................ 667,000
Custodian's fees and expenses....... 139,000
Reports to shareholders............. 119,000
Registration fees................... 97,000
Directors' fees and expenses........ 80,000
Audit fees and expenses............. 32,000
Legal fees and expenses............. 25,000
Miscellaneous....................... 35,056
------------
Total expenses.................... 7,663,193
------------
Net investment loss................... (5,354,509 )
------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions........................ 37,652,628
Net increase in unrealized
appreciation of
investments......................... 68,899,944
------------
Net gain on investments............... 106,552,572
------------
Net Increase in Net Assets
Resulting from Operations............. $101,198,063
------------
------------
</TABLE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
Statement of Changes in Net Assets

<TABLE>
<CAPTION>
Year Ended,
December 31,
Increase (Decrease) ------------------------------
in Net Assets 1995 1994
------------- -------------
<S> <C> <C>
Operations
Net investment loss... $ (5,354,509) $ (4,194,662)
Net realized gain
(loss) on
investment
transactions........ 37,652,628 (10,112,242)
Net change in
unrealized
appreciation/depreciation
on investments...... 68,899,944 (23,327,641)
------------- -------------
Net increase
(decrease) in
net assets resulting
from operations..... 101,198,063 (37,634,545)
------------- -------------
Net equalization
debits................ (25,587) --
------------- -------------
Distributions to
shareholders from net
realized gains on
investments
Class A............. (3,870,372) (2,241,607)
Class B............. (9,969,062) (6,139,536)
Class C............. (145,786) --
------------- -------------
(13,985,220) (8,381,143)
------------- -------------
Fund share transactions
(Note 5)
(Net of share
conversions)
Net proceeds from
shares subscribed... 497,447,785 272,635,593
Net asset value of
shares
issued to
shareholders in
reinvestment of
distributions....... 12,582,750 7,514,870
Cost of shares
reacquired.......... (523,457,280) (238,413,707)
------------- -------------
Net increase
(decrease) in net
assets from Fund
share
transactions........ (13,426,745) 41,736,756
------------- -------------
Total increase
(decrease)............ 73,760,511 (4,278,932)
Net Assets
Beginning of year....... 346,227,773 350,506,705
------------- -------------
End of year............. $ 419,988,284 $ 346,227,773
------------- -------------
------------- -------------
</TABLE>

See Notes to Financial Statements.

B-30
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
Notes to Financial Statements

Nicholas-Applegate Growth Equity Fund (the ``Fund'') is currently the only
series of Nicholas-Applegate Fund, Inc. The Fund commenced operations as a
closed-end, diversified management investment company on April 9, 1987. On June
7, 1991, the Fund ceased operations as a closed-end investment company.
Effective June 10, 1991, trading in the Fund's shares was discontinued on the
New York Stock Exchange and the Fund commenced operations as an open-end,
diversified management investment company.

Note 1. Accounting The following is a summary
Policies of significant accounting
policies followed by the
Fund in
the preparation of its financial statements.

Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued at the last reported sales
price. If there are no sales on the date of valuation, then investments are
valued at the mean between the most recently quoted bid and asked prices
provided by principal market makers. Securities for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Directors. Short-term securities are
valued at amortized cost.

In connection with transactions in repurchase agreements, 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.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses from
security transactions are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management.

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

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 to undistributed
net investment income or loss. As a result, undistributed net investment income
per share is unaffected by sales or reacquisitions of the Fund's shares.

Dividends and Distributions: Dividends from net investment income and
distributions of net capital gains in excess of capital loss carryforwards, if
any, are declared and paid annually. 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.

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 income to shareholders.
Therefore, no 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.

Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountant's Statement of Position 93-2: Determination,
--------------
Disclosure, and Financial Statement Presentation of Income Capital Gain, and
- ----------------------------------------------------------------------------
Return of Capital Distributions by Investment Companies. For the year ended
- --------------------------------------------------------
December 31, 1995 the fund decreased accumulated net investment loss by
$5,354,509, and decreased paid-in capital $5,354,509 due to the Fund
experiencing a net investment loss during the year. Net realized gains and net
assets were not affected by this change.

B-31
<PAGE>

Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to the management 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
Nicholas-Applegate Capital Management (``NACM''); NACM furnishes investment
advisory services in connection with the management of the Fund. PMF pays for
the services of the subadviser, the compensation of officers of the Fund who are
employees of PMF, 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 .95% of the average daily net assets of the Fund. PMF pays NACM,
as compensation for its services pursuant to the subadvisory agreement, a fee at
the rate of .75% of the average daily net assets of the Fund. During the year
ended December 31, 1995 PMF earned $3,593,831, in management fees of which it
paid $2,839,126 to NACM under the foregoing agreements.

The Fund had a distribution agreement with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acted as the distributor of the Class A
shares of the Fund through January 1, 1996. Prudential Securities Incorporated
(``PSI'') is distributor of the Class B shares and Class C shares of the Fund.
The Fund compensated PMFD and PSI 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''), regardless of expenses actually incurred by them.
The distribution fees are accrued daily and payable monthly. Effective January
2, 1996, PSI became the distributor of the Class A shares of the Fund and is
serving the Fund under the same terms and conditions as under the arrangement
with PMFD.

Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD
for the year ended December 31, 1995 with respect to Class A shares, 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 Class A, B and C Plans were .17 of 1% of average daily
net assets of Class A shares and 1% of the average daily net assets of both the
Class B and Class C shares, respectively, for the year ended December 31, 1995.

PMFD has advised the Fund that it has received approximately $301,000 in
front-end sales charges resulting from sales of Class A shares for the year
ended December 31, 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 advised the Fund that for the year ended December 31, 1995, it received
approximately $979,200 in contingent deferred sales charges imposed upon certain
redemptions by Class B and C shareholders.

PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and (``Prusec'') are
(indirect) wholly-owned subsidiaries of The Prudential Insurance Company of
America. (``Prudential'')

Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the year ended December 31, 1995, the Fund incurred fees of approximately
$538,000 for the services of PMFS, of which approximately $46,000 was owed as of
December 31, 1995. Transfer agent fees and expenses in the Statement of
Operations also include certain out of pocket expenses paid to non-affiliates.

Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the year ended
December 31, 1995 aggregated $382,497,020 and $418,766,840 respectively.

The Federal income tax basis of the Fund's investments at December 31, 1995
was substantially the same as the basis for financial reporting, and,
accordingly, net unrealized appreciation for federal income tax purposes was
$93,115,883 (gross unrealized appreciation--$96,387,729; gross unrealized
depreciation--$3,271,846).

The Fund utilized its capital loss carryforward of approximately $6,662,100
to offset the Fund's net taxable gains realized and recognized in the fiscal
year ended December 31, 1995.

Note 5. Capital The Fund offers Class A,
Class B and Class C shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending upon
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. Class B shares
will automatically convert to Class A shares on a quarterly basis appproximately
seven years after purchase. A special exchange privilege is also available for
shareholders who qualified to purchase Class A shares at net asset value.

B-32
<PAGE>

The Fund has authorized 100 million shares of common stock at $.01 par value
per share equally divided into three classes, designated Class A, Class B and
Class C shares.

Transactions in shares of common stock were as follows:

Class A Shares Amount
- ------- ----------- -------------
<S> <C> <C>
Year ended
December 31, 1995:
Shares sold................... 24,651,915 $ 348,256,276
Shares issued in reinvestment
of distributions............ 215,625 3,115,781
Shares reacquired............. (25,323,931) (359,037,322)
----------- -------------
Net decrease in shares
outstanding before
conversion.................. (456,391) (7,665,265)
Shares issued upon conversion
from Class B................ 1,302,983 16,471,726
----------- -------------
Net increase in shares
outstanding................. 846,592 $ 8,806,461
----------- -------------
----------- -------------
Year ended December 31, 1994:
Shares sold................... 9,749,098 $ 119,625,967
Shares issued in reinvestment
of distributions............ 123,315 1,648,716
Shares reacquired............. (9,727,612) (119,377,898)
----------- -------------
Net increase in shares
outstanding................. 144,801 $ 1,896,785
----------- -------------
----------- -------------
<CAPTION>

Class B
- -------
<S> <C> <C>
Year ended
December 31, 1995:
Shares sold................... 10,704,150 $ 145,320,817
Shares issued in reinvestment
of distributions............ 675,282 9,325,642
Shares reacquired............. (12,198,113) (163,546,779)
----------- -------------
Net decrease in shares
outstanding before
conversion.................. (818,681) (8,900,320)
Shares reacquired upon
conversion into Class A..... (1,354,574) (16,471,726)
----------- -------------
Net decrease in shares
outstanding................. (2,173,255) $ (25,372,046)
----------- -------------
----------- -------------
Year ended December 31, 1994:
Shares sold................... 12,516,034 $ 151,864,589
Shares issued in reinvestment
of distributions............ 451,938 5,866,154
Shares reacquired............. (9,919,867) (119,007,485)
----------- -------------
Net increase in shares
outstanding................. 3,048,105 $ 38,723,258
----------- -------------
----------- -------------
<CAPTION>

Class C Shares Amount
- ------- ----------- -------------
<S> <C> <C>
Year ended
December 31, 1995:
Shares sold................... 297,211 $ 3,870,692
Shares issued in reinvestment
of distributions............ 10,241 141,327
Shares reacquired............. (64,764) (873,179)
----------- -------------
Net increase in shares
outstanding................. 242,688 $ 3,138,840
----------- -------------
----------- -------------
August 1, 1994* through
December 31, 1994:
Shares sold................... 97,636 $ 1,145,037
Shares reacquired............. (2,456) (28,324)
----------- -------------
Net increase in shares
outstanding................. 95,180 $ 1,116,713
----------- -------------
----------- -------------
</TABLE>

- ---------------
* Commencement of offering of Class C shares.

B-33
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
Financial Highlights

Class A(a)
---------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 11.99 $ 13.56 $ 12.77 $ 11.73 $ 10.19
-------- ------- ------- ------- --------
Income from investment
operations(b):
Net investment loss................ (0.11) (0.07) (0.07) (0.07) (0.10)
Net realized and unrealized gain
(loss) on investment
transactions..................... 3.82 (1.19) 2.63 1.11 5.50
-------- ------- ------- ------- --------
Total from investment
operations....................... 3.71 (1.26) 2.56 1.04 5.40
-------- ------- ------- ------- --------
Less distributions:
Distributions from net realized
gains from investment
transactions..................... (0.52) (0.31) (1.77) -- (3.86)
-------- ------- ------- ------- --------
Total distributions.............. (0.52) (0.31) (1.77) -- (3.86)
-------- ------- ------- ------- --------
Net asset value, end of period..... $ 15.18 $ 11.99 $ 13.56 $ 12.77 $ 11.73
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
TOTAL RETURN(d):................... 31.20% (9.53)% 20.26% 8.87% 55.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).... $124,340 $88,069 $97,596 $84,169 $ 63,028
Average net assets (000)........... $109,740 $93,620 $90,332 $74,005 $104,819
Ratios to average net assets:
Expenses, including distribution
fee............................ 1.44% 1.49%(f) 1.42%(f) 1.54%(f) 1.94%(e)(f)
Expenses, excluding distribution
fee.............................. 1.27% 1.32%(f) 1.30%(f) 1.44%(f) 1.90%(f)
Net investment loss.............. (0.83)% (0.59)% (0.53)% (0.63)% (0.83)%
For Class A, B and C shares:
Portfolio turnover rate(c)......... 106% 110% 112% 107% 115%
Average commission rate paid per
share $.0592 N/A N/A N/A N/A
</TABLE>

- ---------------
(a) Prior to June 10, 1991, the Fund was organized as a closed-end fund. On
June 10, 1991, the Fund was re-organized as an open-end Fund and
commenced offering of Class A and B shares.
(b) Calculated based upon weighted average shares outstanding during the
periods due to effects of open-ending, Fund share sales and the resulting
share issuance from the stock rights offering.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Total return includes reinvestment of dividends and does not consider
the effects of sales loads.
(e) Ratios of expenses, before loan interest, commitment fees and
nonrecurring expenses were 1.71% and 3.46% for Class A and
Class B shares, repectively.
(f) Current year amounts have been restated from prior periods presentation.

See Notes to Financial Statements.

B-34
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
Financial Highlights

<TABLE>
<CAPTION>
Class B(b) Class C
---------------------------------------------------------------- -----------------------------
June 10, August 1,
1991 1994(d)
Year Ended December 31, Through Year Ended Through
----------------------------------------------- December 31, December 31, December 31,
1995 1994 1993 1992 1991 1995 1994
-------- -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period..................... $ 11.56 $ 13.18 $ 12.56 $ 11.65 $ 12.43 $ 11.56 $ 11.62
-------- -------- -------- -------- ------------ ------------ ------------
Income from investment
operations(c):
Net investment loss.......... (0.22) (0.17) (0.18) (0.16) (0.08) (0.22) (0.05)
Net realized and unrealized
gain (loss) on investment
transactions............... 3.67 (1.14) 2.57 1.07 3.16 3.67 (0.01)
-------- -------- -------- -------- ------------ ------------ ------------
Total from investment
operations................. 3.45 (1.31) 2.39 0.91 3.08 3.45 (0.06)
-------- -------- -------- -------- ------------ ------------ ------------
Less distributions:
Distributions from net
realized gains from
investment transactions.... (0.52) (0.31) (1.77) -- (3.86) (0.52) --
-------- -------- -------- -------- ------------ ------------ ------------
Total distributions........ (0.52) (0.31) (1.77) -- (3.86) (0.52) --
-------- -------- -------- -------- ------------ ------------ ------------
Net asset value, end of
period..................... $ 14.49 $ 11.56 $ 13.18 $ 12.56 $ 11.65 $ 14.49 $ 11.56
-------- -------- -------- -------- ------------ ------------ ------------
-------- -------- -------- -------- ------------ ------------ ------------
TOTAL RETURN(e):............. 30.11% (10.20)% 19.21% 7.81% 26.82% 30.11% (0.52)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $290,751 $257,059 $252,911 $123,306 $ 12,877 $ 4,897 $ 1,100
Average net assets (000)..... $265,597 $261,285 $179,456 $ 80,531 $ 1,922 $ 2,961 $ 225
Ratios to average net assets:
Expenses, including
distribution fee......... 2.27% 2.32%(g) 2.30%(g) 2.44%(g) 3.77%(a)(f)(g) 2.27% 6.23%(a)(g)

Expenses, excluding
distribution fee........... 1.27% 1.32%(g) 1.30%(g) 1.44%(g) 2.77%(a)(g) 1.27% 5.23%(a)(g)

Net investment loss........ (1.66)% (1.39)% (1.40)% (1.56)% (3.17)%(a) (1.63)% (3.36)%(a)
</TABLE>

- ---------------
(a) Annualized.
(b) Prior to June 10, 1991, the Fund was organized as a closed-end fund.
On June 10, 1991, the Fund was re-organized as an open-end Fund and
commenced offering of Class A and B shares.
(c) Calculated based upon weighted average shares outstanding during the
periods due to effects of open-ending, Fund share sales and the
resulting share issuance from the stock rights offering except 1994
for Class C shares.
(d) Commencement of offering Class C shares.
(e) Total return includes reinvestment of dividends and does not consider
the effects of sales loads. Total returns for periods of less than
one year are not annualized.
(f) Ratios of expenses, before loan interest, commitment fees and
nonrecurring expenses were 1.71% and 3.46% for Class A and Class
B shares, respectively.
(g) Current year amounts have been restated from prior periods presentation.

See Notes to Financial Statements.

B-35
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Nicholas-Applegate Fund, Inc.

We have audited the accompanying statement of assets and liabilities of
Nicholas-Applegate Growth Equity Fund, the only series of Nicholas-Applegate
Fund, Inc., including the portfolio of investments, as of December 31, 1995, and
the related statement of operations, the statements of changes in net assets and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
of Nicholas-Applegate Growth Equity Fund for the year ended December 31, 1994,
and the financial highlights for each of the four years in the period then ended
for Class A shares, and for each of the three years in the period then ended and
for the period from June 10, 1991 (commencement of investment operations) to
December 31, 1991 for Class B shares, and for the period from August 1, 1994
(commencement of investment operations) to December 31, 1994 for Class C shares,
were audited by other auditors whose report dated February 8, 1995 expressed an
unqualified opinion on those financial statements and financial highlights.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Nicholas-Applegate Growth Equity Fund as of December 31, 1995, the results of
its operations the changes in its net assets and the financial highlights for
the year then ended, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Los Angeles, California
February 5, 1996

B-36
<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS:

(1) Financial Statements included in the Prospectus constituting Part A
of this Registration Statement:

Selected Per Share Data and Ratios.

(2) (a) Financial statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:

Statement of Assets and Liabilities as of December 31, 1995

Statement of Operations for the Year Ended December 31, 1995

Statement of Changes in Net Assets for the Years Ended December 31,
1995 and 1994

Notes to Financial Statements

Financial Highlights

Auditors Report of (of Ernst & Young LLP) dated February , 1996 with
respect to the fiscal year ended December 31, 1995

(b) EXHIBITS:

1. (a) Articles of Amendment and Restatement of Charter of Registrant.
(Incorporated by reference to Exhibit 1.1 to Registration Statement
on Form N-2, File No. 33-11709 filed on February 3, 1987.)

(b) Articles of Amendment of Charter of Registrant. (Incorporated by
reference to Exhibit 1.2 to Registration Statement on Form N-2, File
No. 33-11709, filed on April 29, 1988.)

(c) Certificate of Correction. (Incorporated by reference to Exhibit
1.3 to Registration Statement on Form N-2, No. 33-11709, filed on
April 29, 1988.)

(d) Articles of Amendment of Charter (Incorporated by reference to
Exhibit 1.4 to Amendment No. 1, Registration Statement on Form N-2,
File No. 33-11709, filed on April 12, 1990.)

(e) Articles of Amendment of Charter of the Registrant. (Incorporated
by reference to Exhibit 1(e) to Post-Effective Amendment No. 1, to the
Registration Statement on Form N-1A, File No. 33-38461, filed on
December 11, 1991.)

(f) Articles of Amendment of Charter of the Registrant. (Incorporated
by reference to Exhibit 1(f) to Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A, File No. 33-38461, filed on March
6, 1995.)

2. (a) Amended and Restated By-Laws of the Registrant. (Incorporated by
reference to Exhibit 2.1 to Registration Statement on Form N-2, File
No. 33-11709, filed on February 3, 1987.)

(b) Amended By-Laws of Registrant. (Incorporated by reference to
Exhibit 2(b) of Pre-effective Amendment No. 1 to Registration
Statement on Form N-1A, File No. 33-38461, filed on May 6, 1991.)

3. Not Applicable.

4. (a) Specimen stock certificates for Class A shares. (Incorporated by
reference to Exhibit 4(a) of Pre-effective Amendment No. 1 to
Registration Statement on Form N-1A, File No. 33-38461, filed on May
6, 1991.)

(b) Specimen stock certificates for Class B shares. (Incorporated by
reference to Exhibit 4(b) of Pre-effective Amendment No. 1 to
Registration Statement on Form N-1A, File No. 33-38461, filed on May
6, 1991.)

5. (a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc. (Incorporated by reference to Exhibit 5(a) to
Post-Effective Amendment No. 1, to Registration Statement on Form N-
1A, File No. 33-38461, filed on December 11, 1991.)

(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation. (Incorporated by
reference to Exhibit 5(b) to Post-Effective Amendment No. 1, to
Registration Statement on Form N-1A, File No. 33-38461, filed on
December 11, 1991.)

C-1
<PAGE>

6. (a) Distribution Agreement for Class A Shares between the Registrant
and Prudential Mutual Fund Distributors, Inc. (Incorporated by
reference to Exhibit 6(e) to Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A, File No. 33-38461, filed on
March 6, 1995.)

(b) Distribution Agreement for Class B Shares between the Registrant
and Prudential Securities Incorporated. (Incorporated by reference to
Exhibit 6(f) to Post-Effective Amendment No. 8 to Registration
Statement on Form N-1A, File No. 33-38461, filed on March 6, 1995.)

(c) Distribution Agreement for Class C Shares between the Registrant
and Prudential Securities Incorporated. (Incorporated by reference to
Exhibit 6(g) to Post-Effective Amendment No. 8 to Registration
Statement on Form N-1A, File No. 33-38461, filed on March 6, 1995.)

(d) Amendment to Distribution Agreements.*

7. Not Applicable.

8. (a) Custodian Contract between the Registrant and State Street Bank
and Trust Company. (Incorporated by reference to Exhibit 9.1 to
Registration Statement on Form N-2, File No. 33-11709, filed on
February 3, 1987.)

(b) Addendum to Custodian Contract between the Registrant and State
Street Bank and Trust Company. (Incorporated by reference to Exhibit
8(b) to Registration Statement on Form N-1A, File No. 33-38461, filed
on May 6, 1991.)

9. (a) Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc. (Incorporated by reference to
Exhibit 9(a) to Post-Effective Amendment No. 1, to Registration
Statement on Form N-1A, File No. 33-38461, filed on December 11,
1991.)

10. Opinion and consent of Piper & Marbury, Maryland counsel to the
Registrant. (Incorporated by reference to Exhibit 10 to Pre-effective
Amendment No. 1 to Registration Statement on Form N-1A, File No. 33-
38461, filed on May 6, 1991.)

11. (a) Consent of Coopers & Lybrand LLP.* (b) Consent of Ernst & Young
LLP.*

12. Not Applicable.

13. Subscription Agreement between the Registrant and Arthur E. Nicholas
and Fred C. Applegate (Incorporated by reference to Exhibit 4 to Pre-
effective Amendment No. 4 on Form N-2, File No. 33-11709, filed on
April 13, 1987.)

14. Not Applicable.

15. (a) Distribution and Service Plan for Class A Shares. (Incorporated
by reference to Exhibit 15(e) to Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A, File No. 33-38461, filed on
March 6, 1995.)

(b) Distribution and Service Plan for Class B Shares. (Incorporated by
reference to Exhibit 15(f) to Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A, File No. 33-38461, filed on March
6, 1995.)

(c) Distribution and Service Plan for Class C Shares. (Incorporated by
reference to Exhibit 15(g) to Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A, File No. 33-38461, filed on March
6, 1995.)

16. (a) Schedule of Computation of Performance Quotations. (Incorporated
by reference to Exhibit 16(a) to Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A, File No. 33-38461, filed on
March 3, 1993).

(b) Schedule of Calculation of Aggregate Total Return for Class A and
Class B shares. (Incorporated by reference to Exhibit 16(b) to Post-
Effective Amendment No. 4 to Registration Statement on Form N-1A, File
No. 33-38461, filed on March 3, 1993).

17. Financial Data Schedules.*
- ---------
*Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Fred C. Applegate, Arthur B. Laffer and Charles E. Young, members of the
Board of Directors of Registrant, also comprise all of the members of the
Board of Trustees of Nicholas-Applegate Mutual Funds, a registered investment
company. Accordingly, Registrant and Nicholas-Applegate Mutual Funds may be
deemed to be under common control.

Arthur E. Nicholas, Dann V. Angeloff, and Theodore J. Coburn, members of the
Board of Directors of Registrant, are also members of the Board of Trustees of
Nicholas-Applegate Investment Trust, a registered investment company. As they
constitute 50% of the members of such Board of Trustees, and all of the assets
of Nicholas-Applegate Mutual Funds are invested in Nicholas-Applegate
Investment Trust, Registrant and Nicholas-Applegate Investment Trust may be
deemed to be under common control.

C-2
<PAGE>

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of February 9, 1996 there were 15,491, 38,101 and 480 record holders of
Class A, Class B and Class C common stock, $.01 par value per share, of the
Registrant, respectively.

ITEM 27. INDEMNIFICATION.

Section 9 of the Management Agreement filed herewith as Exhibit 5A generally
provides that the Manager will not be liable for any error of judgment or for
any loss suffered by the Registrant in connection with the matters to which
the Management Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or for
willfull misfeasance, bad faith, gross negligence or reckless disregard of
duty. See "Manager" in the Statement of Additional Information.

Under Section 5 of the Subadvisory Agreement filed herewith as Exhibit 5B
the Investment Adviser is provided with indemnification by the Registrant
against liabilities, costs and expenses that the Investment Adviser may incur
in connection with any action, suit, investigation or other proceeding arising
out of or otherwise based on any action actually or allegedly taken or omitted
to be taken by the Investment Adviser in connection with the performance of
its duties or obligations under the Subadvisory Agreement or otherwise as an
Investment Adviser of the Registrant; provided, however, that no
indemnification shall be provided by the Registrant with respect to any
liability of the Investment Adviser to the Registrant or its shareholders by
reason of the willful misfeasance, bad faith or gross negligence in the
performance of the Investment Adviser's duties, by reason of its reckless
disregard of its duties and obligations or by reason of its breach of
fiduciary duty under the Subadvisory Agreement. See "Investment Adviser" in
the Statement of Additional Information.

Indemnification of PMFD and Prudential Securities (the "Distributors"), the
Distributors of the Class A and Class B Common Stock, respectively, of the
Fund, is provided in Section 10 of the Distribution Agreements filed herewith
as Exhibits 6A and 6B, respectively, which provision provides that the Fund
will indemnify the named Distributor and its officers, directors, and control
persons for any and all claims, demands, liabilities and expenses which any of
them may incur for untrue statements of fact, or omissions to state a material
fact, in the Registrant's Registration Statement or Prospectus. such
indemnification is only afforded such Distributor or its officers, directors
and control persons if a determination is made that the person to be
indemnified was not liable by reason of willful misfeasance, bad faith or
gross negligence in the performance of such person's duties or by reason of
its reckless disregard of such person's obligations under the Distributor's
Distribution Agreement with the Fund.

Liability of the Registrant's custodian, State Street Bank and Trust
Company, is limited under Section 3.10 of the Custodian Agreement filed
herewith as Exhibit 8A.

Indemnification of the Registrant's transfer agent, Prudential Mutual Fund
Services, Inc. ("PMFS"), is provided in Article 5 of the Transfer Agent
Agreement filed herewith as Exhibit 9. In Section 5.01 of Article 5 of the
Transfer Agent Agreement, the Fund has agreed to indemnify PMFS for, and hold
it harmless from, any losses, damages, costs, expenses and liability arising
out of or attributable to: (i) the actions of PMFS or its agents and
subcontractors taken pursuant to the Transfer Agent Agreement (provided that
such actions are taken in good faith and without negligence or willful
misconduct); (ii) the Fund's failure to perform its obligations under the
Transfer Agent Agreement; (iii) the reliance by PMFS or its agents on
information, records or documents received by PMFS from or on behalf of the
Fund; (iv) the reliance by PMFS on any instructions or requests of the Fund;
or (v) the offer or sale of shares of the Fund in violation of any
registration requirements imposed under Federal or applicable state securities
laws.

The Registrant, its officers and directors, and the Investment Adviser are
insured under an errors and omissions liability insurance policy which,
generally, covers claims by the Registrant's shareholders based on negligent
acts by the insureds, negligent failure to discover dishonest acts and the
costs and expenses of defending those claims. Such insurance does not protect
nor purport to protect the insured parties from liability to the Registrant or
its shareholders to which such person would otherwise be subject by reason of
such person's commission of fraud, dishonesty or malicious acts or omissions
or any willful breach of duty, neglect, misstatement, misleading statement or
other act done or wrongfully attempted in the performance of such person's
duties.

Section 2-418 of the General Corporation Law of the State of Maryland
provides that a corporation may indemnify any director who is made a party to
any proceeding by reason of his or her service as a director, except in
circumstances where the director acted in bad faith or with active and
deliberate dishonesty, or the director received an improper personal benefit,
or in the case of any criminal proceeding, the director had reasonable cause
to believe that the act or omission was unlawful. The indemnification afforded
a director may be made with respect to judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director in
connection with the proceeding. However, if the proceeding was won by or in
the right of the corporation, indemnification may not be made in respect to
any proceeding in which the director shall have been adjudicated to be liable
to the corporation. The indemnification and advancement of expenses provided
or authorized by Section 2-418 of the Maryland General

C-3
<PAGE>

Corporation Law are not exclusive of any other rights, by indemnification or
otherwise, to which a director may be entitled under the charter, bylaws, a
resolution of shareholders or directors, an agreement or otherwise, both as to
action in an official capacity and as to action in another capacity while
holding such office. A corporation, in addition, may indemnify and advance
expenses to an officer, employee or agent who is not a director to the same
extent that it may indemnify directors under Section 2-418 of the Maryland
General Corporation Law. Section 10 of Article Eighth of the Registrant's
Charter filed herewith as Exhibit 1A provides the Directors and officers of
the Registrant with affirmative indemnification rights to the fullest extent
provided by Maryland law or of any other applicable jurisdiction consistent
with applicable law.

In addition, Section 2-405.2 of the Maryland General Corporation Law
provides that the charter of a corporation may include any provision expanding
or limiting the liability of the corporation's directors and officers to the
corporation or its shareholders for money damages except (i) to the extent
that it is proved that the person actually received an improper benefit or
profit in money, property or services, for the amount of the benefit or profit
in money, property or services actually received or (ii) to the extent that a
judgment or other financial adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. Section 12 of
Article Eighth of the Registrant's Charter filed herewith as Exhibit 1A limits
the personal liability of the Directors and officers of the Registrant for
money damages to the fullest extent permitted by Maryland law, but does not
protect any director or officer against any liability which such person would
otherwise be subject by reason of such person's willful misfeasance, bad
faith, gross negligence or reckless disregard of such person's duties.

Notwithstanding the provisions of the Registrant's Charter which provide or
purport to provide affirmative indemnification rights to the officers and
directors of the Registrant, consistent with the applicability of Section
17(h) of the Investment Company Act of 1940, as amended, to the Registrant and
its activities, such Charter provisions will not be construed to protect the
officers and directors of the Registrant against any liability that any such
person may otherwise be subject to by reason of such person's willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.

Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking:

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit of proceeding) is
asserted by such director, officer, or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

C-4
<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.

See "How the Fund Is Managed--Manager" in the Prospectus constituting Part A
of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.

The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed on March 30, 1995).

The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
---------------- ----------------- ---------------------
<C> <C> <S>
Brendan D. Boyle Executive Vice Executive Vice President,
President, Director of Marketing and
Director of Marketing Director, PMF; Senior Vice
and Director President, Prudential
Securities Incorporated
(Prudential Securities);
Chairman and Director of
Prudential Mutual Fund
Distributors, Inc. (PMFD).
Stephen P. Fisher Senior Vice President Senior Vice President, PMF;
Senior Vice President,
Prudential Securities; Vice
President, PMFD
Frank W. Giordano Executive Vice President, Executive Vice President,
General Counsel, General Counsel, Secretary and
Secretary and Director Director, PMF and PMFD; Senior
Vice President, Prudential
Securities; Director,
Prudential Mutual Fund
Services, Inc. (PMFS)
Robert F. Gunia Executive Vice President, Executive Vice President, Chief
Chief Financial and Financial and Administrative
Administrative Officer, Officer, Treasurer and
Treasurer and Director Director, PMF; Senior Vice
President, Prudential
Securities; Executive Vice
President, Chief Financial
Officer, Treasurer and
Director, PMFD; Director, PMFS
Theresa A. Hamacher Director Director, PMF; Vice President,
Prudential Plaza The Prudential Insurance
Newark, NJ 07102 Company of America
(Prudential); Vice President,
The Prudential Investment
Corporation (PIC)
Timothy J. O'Brien Director President, Chief Executive
Raritan Plaza One Officer, Chief Operating
Edison, NJ 08837 Officer and Director, PMFD;
Chief Executive Officer and
Director, PMFS; Director, PMF
Richard A. Redeker President, President, Chief Executive
Chief Executive Officer Officer and Director, PMF;
and Director Executive Vice President,
Director and Member of
Operating Committee,
Prudential Securities;
Director, PSG; Executive Vice
President, PIC; Director,
PMFD; Director, PMFS
S. Jane Rose Senior Vice President, Senior Vice President, Senior
Senior Counsel and Counsel and Assistant
Assistant Secretary Secretary, PMF; Senior Vice
President and Senior Counsel,
Prudential Securities
</TABLE>

Nicholas-Applegate Capital Management, the Investment Adviser of the
Registrant, is a registered investment adviser primarily engaged in the
investment advisory business. Its general partner is Nicholas-Applegate
Capital Management Holdings, L.P., a California limited partnership, which is
engaged only in the business of acting as such general partner and as general
partner of certain investment limited partnerships.

C-5
<PAGE>

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Prudential Securities Incorporated

Prudential Securities Incorporated is distributor for Command Government
Fund, Command Money Fund, Command Tax-Free Fund, Prudential Institutional
Liquidity Portfolio, Inc., Prudential MoneyMart Assets, Inc., Prudential
Special Money Market Fund, Inc., Prudential Tax-Free Money Fund, Inc.,
Prudential Government Securities Trust, Prudential Jennison Fund, Inc., The
Target Portfolio Trust, Prudential Allocation Fund, Prudential California
Municipal Fund, Prudential Diversified Bond Fund, Inc., Prudential Equity
Fund, Inc., Prudential Equity Income Fund, Prudential Europe Growth Fund,
Inc., Prudential Global Fund, Inc., Prudential Global Genesis Fund Inc.,
Prudential Global Limited Maturity Fund, Inc., Prudential Global Natural
Resources Fund, Inc., Prudential Government Income Fund, Inc., Prudential
Growth Opportunity Fund, Inc., Prudential High Yield Fund, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential Mortgage Income Fund, Inc.,
Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential National Municipals Fund, Inc., Prudential
Pacific Growth Fund, Inc., Prudential Structured Maturity Fund, Inc.,
Prudential Utility Fund, Inc., Global Utility Fund, Inc., Nicholas-Applegate
Fund, Inc., (Nicholas-Applegate Growth Equity Fund) and The BlackRock
Government Income Trust. Prudential Securities is also a depositor for the
following unit investment trusts:

Corporate Investment Trust Fund
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust

(b) Prudential Securities Incorporated

<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME(/1/) UNDERWRITER REGISTRANT
- --------- ------------- ----------------
<S> <C> <C>
Robert C. Golden........ Executive Vice President and Director None
One New York Plaza
New York, NY 10292
Alan D. Hogan........... Executive Vice President, Chief Administrative None
Officer and Director
Martin Pfinsgraff....... Executive Vice President, Chief Financial None
Officer and Director
George A. Murray........ Executive Vice President and Director None
Leland B. Paton......... Executive Vice President and Director None
One New York Plaza
New York, NY 10292
Vincent T. Pica, II..... Director, Member of Operating Committee and None
One New York Plaza Executive Vice President
New York, NY 10292
Richard A. Redeker...... Executive Vice President and Director None
Hardwick Simmons........ Chief Executive Officer, President and Director None
Lee B. Spencer Jr. ..... General Counsel, Executive Vice President and None
Director
</TABLE>

- ---------
(/1/)The address of each person named is One Seaport Plaza, New York, NY 10292
unless otherwise indicated.

C-6
<PAGE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices
of State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts, 02171 The Prudential Investment Corporation, Prudential Plaza,
745 Broad Street, Newark, New Jersey 07102, the Registrant, One Seaport Plaza,
New York, New York 10292, and Prudential Mutual Fund Services, Inc., Raritan
Plaza One, Edison, New Jersey 08837. Documents required by Rules 31a-1(b)(5),
(6), (7), (9), (10) and (11) and 31a-1(f) will be kept at Three Gateway
Center, documents required by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One
Seaport Plaza and the remaining accounts, books and other documents required
by such other pertinent provisions of Section 31(a) and the Rules promulgated
thereunder will be kept by State Street Bank and Trust Company and Prudential
Mutual Fund Services, Inc.

ITEM 31. MANAGEMENT SERVICES

Other than as set forth under the captions "How the Fund is Managed--
Manager" and "How the Fund is Managed-Distributor" in the Prospectus and the
captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service
contract.

ITEM 32. UNDERTAKINGS

The Registrant hereby undertakes to furnish each person to whom a Prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.

C-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York, on the 1st day of March, 1996.

NICHOLAS-APPLEGATE FUND, INC.

By: /s/ Jack C. Marshall
----------------------------------
JACK C. MARSHALL, PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Arthur E. Nicholas Chairman and Director March 1, 1996
- -----------------
ARTHUR E. NICHOLAS

/s/ Dann V. Angeloff Director March 1, 1996
- -----------------
DANN V. ANGELOFF

/s/ Fred C. Applegate Director March 1, 1996
- -----------------
FRED C. APPLEGATE

/s/ Theodore J. Coburn Director March 1, 1996
- -----------------
THEODORE J. COBURN

/s/ Robert F. Gunia Director March 1, 1996
- -----------------
ROBERT F. GUNIA

/s/ Arthur B. Laffer Director March 1, 1996
- -----------------
ARTHUR B. LAFFER

/s/ Charles S. Young Director March 1, 1996
- -----------------
CHARLES S. YOUNG

/s/ Grace Torres Treasurer and Principal Financial March 1, 1996
- ----------------- and Accounting Officer
GRACE TORRES
</TABLE>

C-8
<PAGE>

The Fund's Prospectus and Statement of Additional Information are
incorporated herein by reference in their entirety from Post-Effective
Amendment No.6 to Registrant's Registration Statement (File No. 33-38461)
filed on May 17, 1994.
<PAGE>

NICHOLAS-APPLEGATE FUND, INC.

POST-EFFECTIVE AMENDMENT NO. 9

EXHIBIT INDEX

EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------

1(a) Articles of Amendment and Restatement of Charter of Registrant.
(Incorporated by reference to Exhibit 1.1 to Registration
Statement on Form N-2, File No. 33-11709 filed on February 3,
1987.)

(b) Articles of Amendment of Charter of Registrant. (Incorporated by
reference to Exhibit 1.2 to Registration Statement on Form N-2,
File No. 33-11709, filed on April 29, 1988.)

(c) Certificate of Correction. (Incorporated by reference to Exhibit
1.3 to Registration Statement on Form N-2, No. 33-11709, filed on
April 29, 1988.)

(d) Articles of Amendment of Charter (Incorporated by reference to
Exhibit 1.4 to Amendment No. 1, Registration Statement on Form N-
2, File No. 33-11709, filed on April 12, 1990.)

(e) Articles of Amendment of Charter of the Registrant. (Incorporated
by reference to Exhibit 1(e) to Post-Effective Amendment No. 1, to
the Registration Statement on Form N-1A, File No. 33-38461, filed
on December 11, 1991.)

2(a) Amended and Restated By-Laws of the Registrant. (Incorporated by
reference to Exhibit 2.1 to Registration Statement on Form N-2,
File No. 33-11709, filed on February 3, 1987.)

(b) Amended By-Laws of Registrant. (Incorporated by reference to
Exhibit 2(b) of Pre-effective Amendment No. 1 to Registration
Statement on Form N-1A, File No. 33-38461, filed on May 6, 1991.)

3 Not Applicable.

4(a) Specimen stock certificates for Class A shares. (Incorporated by
reference to Exhibit 4(a) of Pre-effective Amendment No. 1 to
Registration Statement on Form N-1A, File No. 33-38461, filed on
May 6, 1991.)

5(a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc. (Incorporated by reference to Exhibit 5(a)
to Post-Effective Amendment No. 1, to Registration Statement on
Form N-1A, File No. 33-38461, filed on December 11, 1991.)

6(a) Distribution Agreement for Class A Shares between the Registrant
and Prudential Mutual Fund Distributors, Inc. (Incorporated by
reference to Exhibit 6(e) to Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A, File No. 33-38461, filed on
March 6, 1995.)

(b) Distribution Agreement for Class B Shares between the Registrant
and Prudential Securities Incorporated. (Incorporated by reference
to Exhibit 6(f) to Post-Effective Amendment No. 8 to Registration
Statement on Form N-1A, File No. 33-38461, filed on March 6,
1995.)

(c) Distribution Agreement for Class C Shares between the Registrant
and Prudential Securities Incorporated. (Incorporated by reference
to Exhibit 6(g) to Post-Effective Amendment No. 8 to Registration
Statement on Form N-1A, File No. 33-38461, filed on March 6,
1995.)

(d) Amendment to Distribution Agreements.*

7 Not Applicable.

8(a) Custodian Contract between the Registrant and State Street Bank
and Trust Company. (Incorporated by reference to Exhibit 9.1 to
Registration Statement on Form N-2, File No. 33-11709, filed on
February 3, 1987.)

(b) Addendum to Custodian Contract between the Registrant and State
Street Bank and Trust Company. (Incorporated by reference to
Exhibit 8(b) to Registration Statement on Form N-1A, File No. 33-
38461, filed on May 6, 1991.)
<PAGE>

EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------

9(a) Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc. (Incorporated by reference
to Exhibit 9(a) to Post-Effective Amendment No. 1, to
Registration Statement on Form N-1A, File No. 33-38461, filed on
December 11, 1991.)

10 Opinion and consent of Piper & Marbury, Maryland counsel to the
Registrant. (Incorporated by reference to Exhibit 10 to Pre-
effective Amendment No. 1 to Registration Statement on Form N-
1A, File No. 33-38461, filed on May 6, 1991.)

11(a) Consent of Coopers & Lybrand LLP.*

(b) Consent of Ernst & Young LLP.*

12 Not Applicable.

13 Subscription Agreement between the Registrant and Arthur E.
Nicholas and Fred C. Applegate (Incorporated by reference to
Exhibit 4 to Pre-effective Amendment No. 4 on Form N-2, File No.
33-11709, filed on April 13, 1987.)

14 Not Applicable.

15(a) Distribution and Service Plan for Class A Shares. (Incorporated
by reference to Exhibit 15(e) to Post-Effective Amendment No. 8
to Registration Statement on Form N-1A, File No. 33-38461, filed
on March 6, 1995.)

16(a) Schedule of Computation of Performance Quotations. (Incorporated
by reference to Exhibit 16(a) to Post-Effective Amendment No. 4
to Registration Statement on Form N-1A, File No. 33-38461, filed
on March 3, 1993).

(b) Schedule of Calculation of Aggregate Total Return for Class A and
Class B shares. (Incorporated by reference to Exhibit 16(b) to
Post-Effective Amendment No. 4 to Registration Statement on Form
N-1A, File No. 33-38461, filed on March 3, 1993).

17 Financial Data Schedules.*
- ---------

* Filed herewith.

<PAGE>

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> NICHOLAS-APPLEGATE GROWTH EQUITY FUND (CLASS A)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 338,574,406
<INVESTMENTS-AT-VALUE> 431,690,289
<RECEIVABLES> 2,228,159
<ASSETS-OTHER> 37,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 433,955,497
<PAYABLE-FOR-SECURITIES> 13,039,047
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 928,166
<TOTAL-LIABILITIES> 13,967,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 313,613,126
<SHARES-COMMON-STOCK> 28,588,484
<SHARES-COMMON-PRIOR> 29,672,459
<ACCUMULATED-NII-CURRENT> (25,587)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,284,862
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,115,883
<NET-ASSETS> 419,988,284
<DIVIDEND-INCOME> 1,033,010
<INTEREST-INCOME> 1,275,674
<OTHER-INCOME> 0
<EXPENSES-NET> 7,663,193
<NET-INVESTMENT-INCOME> (5,354,509)
<REALIZED-GAINS-CURRENT> 37,652,628
<APPREC-INCREASE-CURRENT> 68,899,944
<NET-CHANGE-FROM-OPS> 101,198,063
<EQUALIZATION> (25,587)
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (13,985,220)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 497,447,785
<NUMBER-OF-SHARES-REDEEMED> (523,457,280)
<SHARES-REINVESTED> 12,582,750
<NET-CHANGE-IN-ASSETS> 73,760,511
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10,382,546)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,593,831
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,663,193
<AVERAGE-NET-ASSETS> 109,740,000
<PER-SHARE-NAV-BEGIN> 11.99
<PER-SHARE-NII> (0.11)
<PER-SHARE-GAIN-APPREC> 3.82
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.52)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.18
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<PAGE>

<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> NICHOLAS-APPLEGATE GROWTH EQUITY FUND (CLASS B)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 338,574,406
<INVESTMENTS-AT-VALUE> 431,690,289
<RECEIVABLES> 2,228,159
<ASSETS-OTHER> 37,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 433,955,497
<PAYABLE-FOR-SECURITIES> 13,039,047
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 928,166
<TOTAL-LIABILITIES> 13,967,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 313,613,126
<SHARES-COMMON-STOCK> 28,588,484
<SHARES-COMMON-PRIOR> 29,672,459
<ACCUMULATED-NII-CURRENT> (25,587)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,284,862
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,115,883
<NET-ASSETS> 419,988,284
<DIVIDEND-INCOME> 1,033,010
<INTEREST-INCOME> 1,275,674
<OTHER-INCOME> 0
<EXPENSES-NET> 7,663,193
<NET-INVESTMENT-INCOME> (5,354,509)
<REALIZED-GAINS-CURRENT> 37,652,628
<APPREC-INCREASE-CURRENT> 68,899,944
<NET-CHANGE-FROM-OPS> 101,198,063
<EQUALIZATION> (25,587)
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (13,985,220)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 497,447,785
<NUMBER-OF-SHARES-REDEEMED> (523,457,280)
<SHARES-REINVESTED> 12,582,750
<NET-CHANGE-IN-ASSETS> 73,760,511
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10,382,546)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,593,831
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,663,193
<AVERAGE-NET-ASSETS> 265,597,000
<PER-SHARE-NAV-BEGIN> 11.56
<PER-SHARE-NII> (0.22)
<PER-SHARE-GAIN-APPREC> 3.67
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.52)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.49
<EXPENSE-RATIO> 2.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<PAGE>

<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> NICHOLAS-APPLEGATE GROWTH EQUITY FUND (CLASS C)

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 338,574,406
<INVESTMENTS-AT-VALUE> 431,690,289
<RECEIVABLES> 2,228,159
<ASSETS-OTHER> 37,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 433,955,497
<PAYABLE-FOR-SECURITIES> 13,039,047
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 928,166
<TOTAL-LIABILITIES> 13,967,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 313,613,126
<SHARES-COMMON-STOCK> 28,588,484
<SHARES-COMMON-PRIOR> 29,672,459
<ACCUMULATED-NII-CURRENT> (25,587)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,284,862
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,115,883
<NET-ASSETS> 419,988,284
<DIVIDEND-INCOME> 1,033,010
<INTEREST-INCOME> 1,275,674
<OTHER-INCOME> 0
<EXPENSES-NET> 7,663,193
<NET-INVESTMENT-INCOME> (5,354,509)
<REALIZED-GAINS-CURRENT> 37,652,628
<APPREC-INCREASE-CURRENT> 68,899,944
<NET-CHANGE-FROM-OPS> 101,198,063
<EQUALIZATION> (25,587)
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (13,985,220)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 497,447,785
<NUMBER-OF-SHARES-REDEEMED> (523,457,280)
<SHARES-REINVESTED> 12,582,750
<NET-CHANGE-IN-ASSETS> 73,760,511
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10,382,546)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,593,831
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,663,193
<AVERAGE-NET-ASSETS> 2,961,000
<PER-SHARE-NAV-BEGIN> 11.56
<PER-SHARE-NII> (0.22)
<PER-SHARE-GAIN-APPREC> 3.67
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.52)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.49
<EXPENSE-RATIO> 2.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<PAGE>

EXHIBIT 99.6(d)

Amendment to Distribution Agreements
------------------------------------

The Distribution Agreements between Prudential Mutual Fund Distributors,
Inc. and each of the Funds listed below are hereby transferred to Prudential
Securities Incorporated effective January 1, 1996.

Name of Fund Date of Agreement
- ------------ -----------------

The BlackRock Government Income Trust August 30, 1991 and amended
(Class A) and restated on April 12, 1995

Command Government Fund September 15, 1988 and
amended and restated on
April 12, 1995

Command Money Fund September 15, 1988 and
amended and restated on
April 12, 1995

Command Tax-Free Money Fund September 15, 1988 and
amended and restated on
April 12, 1995

Global Utility Fund, Inc. February 4, 1991 and
(Class A) amended and restated on
July 1, 1993, August 1, 1994
and May 4, 1995

Nicholas-Applegate Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 12, 1995

Nicholas-Applegate Growth Equity
Fund

Prudential Allocation Fund January 22, 1990 and
(Class A) amended and restated on
August 1, 1994 and
Strategy Portfolio May 3, 1995
Balanced Portfolio

1
<PAGE>

Prudential California Municipal Fund August 1, 1994 and amended
(Class A) and restated on May 5, 1995

California Income Series
California Series

Prudential California Municipal Fund February 10, 1989 and
amended and restated on
California Money Market Series July 1, 1993 and May 5, 1995

Prudential Diversified Bond Fund, Inc. January 3, 1995 and amended
(Class A) and restated on June 13, 1995

Prudential Equity Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 5, 1995

Prudential Equity Income Fund August 1, 1994 and amended
(Class A) and restated on May 3, 1995

Prudential Europe Growth Fund, Inc. July 11, 1994 and amended
(Class A) and restated on June 13, 1995

Prudential Global Fund, Inc. August 1, 1994 and amended
(Class A) and restated on June 5, 1995

Prudential Global Genesis Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 3, 1995

Prudential Global Natural Resources
Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 3, 1995

Prudential Government Income Fund,
Inc. January 22, 1990 and
(Class A) amended and restated on
April 13, 1995

Prudential Government Securities Trust November 20, 1990 and
Money Market Series amended and restated on
U.S. Treasury Money Market Series July 1, 1993, May 2, 1995
and August 1, 1995

Prudential Growth Opportunity Fund,
Inc. January 22, 1990 and
(Class A) amended and restated on
July 1, 1993, August 1, 1994
and May 2, 1995

2
<PAGE>

Prudential High Yield Fund, Inc. January 22, 1990 and
(Class A) amended and restated on
July 1, 1993, August 1, 1994
and May 2, 1995

Prudential Institutional Liquidity
Portfolio, Inc. November 20, 1987 and
amended and restated on
Prudential Institutional Money July 1, 1993 and
Market Series April 11, 1995

Prudential Intermediate Global
Income Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 10, 1995

Prudential MoneyMart Assets May 1, 1988 and amended
and restated on July 1, 1993
and May 10, 1995

Prudential Mortgage Income Fund,
Inc. August 1, 1994 and amended
(Class A) and restated on May 5, 1995

Prudential Multi-Sector Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 3, 1995

Prudential Municipal Bond Fund August 1, 1994 and amended
(Class A) and restated on May 3, 1995

Insured Series
High Yield Series
Intermediate Series

Prudential Municipal Series Fund August 1, 1994 and amended
(Class A) and restated on May 5, 1995

Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series

3
<PAGE>

Prudential Municipal Series Fund

Connecticut Money Market Series February 10, 1989 and
Massachusetts Money Market Series amended and restated on
New Jersey Money Market Series July 1, 1993 and May 5, 1995
New York Money Market Series

Prudential National Municipals Fund, Inc. January 22, 1990 and
(Class A) amended and restated on
July 1, 1993, August 1, 1994
and May 2, 1995

Prudential Pacific Growth Fund, Inc. August 1, 1994 and amended
(Class A) and restated on June 5, 1995

Prudential Global Limited Maturity Fund,
Inc. August 1, 1994 and amended
(formerly Prudential Short-Term and restated on June 5, 1995
Global Income Fund Inc.)
(Class A)

Global Assets Portfolio
Limited Maturity Portfolio

Prudential Special Money Market Fund January 12, 1990 and
Money Market Series amended and restated on
April 12, 1995

Prudential Structured Maturity Fund, Inc. August 1, 1994 and amended
(Class A) and restated on June 14, 1995

Income Portfolio

Prudential Tax-Free Money Fund, Inc. May 2, 1988 and
amended and restated on
July 1, 1993, May 2, 1995 and
August 1, 1995

Prudential U.S. Government Fund August 1, 1994 and amended
(Class A) and restated on June 5, 1995

Prudential Utility Fund, Inc. August 1, 1994 and amended
(Class A) and restated on June 14, 1995

4
<PAGE>

EACH OF THE FUNDS LISTED ABOVE

/s/ Robert F. Gunia
----------------------------------------
Robert F. Gunia
Vice President

PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC.

/s/ Stephen P. Fisher
----------------------------------------
Stephen P. Fisher
Vice President

AGREED TO AND ACCEPTED BY:

PRUDENTIAL SECURITIES INCORPORATED

/s/ Brendan Boyle
-----------------------------------
Brendan Boyle
Senior Vice President

<PAGE>

EXHIBIT 99.11(a)

[LETTERHEAD COOPERS & LYBRAND]

CONSENT OF INDEPENDENT ACCO
---------------------------

To the Board of Trustees and Shareholders
of Nicholas-Applegate Fund, Inc:

We consent to the incorporation by reference in Post-Effective Amendment #9 to
the Registration Statement on Form N-1A of the Nicholas-Applegate Fund, Inc.
(File No. 33-38461) of our report dated February 8, 1995 on our audit of the
financial statements and financial highlights of the Nicholas-Applegate Fund,
Inc., which report is included in the Annual Report to Shareholders for the year
ended December 31, 1994 which is incorporated by reference in the Registration
Statement. We also consent to the reference to our Firm under the heading
"Financial Highlights".

/s/ Coopers & Lybrand L.L.P.

COOPERS & LYBRAND L.L.P.

Los Angeles California
February 28, 1996

<PAGE>

EXHIBIT 99.11(b)

CONSENT OF INDEPENDENT AUDITORS
-------------------------------

We consent to the use of our report dated February 5, 1996 for the financial
statements of Nicholas-Applegate Growth Equity Fund, and to the reference to our
firm under the captions "Financial Highlights" and "Independent Accountants" in
this Post-Effective Amendment No. 9 (File No. 33-38461) under the Securities Act
of 1933.

/s/ Ernest & Young LLP

Los Angeles, California
February 20, 1996