PRUDENTIAL FLEXIFUND, PRES14A, 1994-03-17

PRUDENTIAL FLEXIFUND
PRES14A, 1994-03-17

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PRELIMINARY COPY

INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the registrant /X/
Filed by a party other than the registrant / /

Check the appropriate box:

/X/ Preliminary proxy statement

/ / Definitive proxy statement

/ / Definitive additional materials

/ / Soliciting material pursuant to Section240.14a-11(c) or Section240.14a-12

PRUDENTIAL FLEXIFUND

________________________________________________________________________________
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

PRUDENTIAL FLEXIFUND

________________________________________________________________________________
(NAME OF PERSON(S) FILING PROXY STATEMENT)

Payment of filing fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).

/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
<PAGE>
PRELIMINARY COPY
PRUDENTIAL FLEXIFUND
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------

To our Shareholders:

Notice is hereby given that a Special Meeting of Shareholders of the
Conservatively Managed Portfolio and the Strategy Portfolio (each a Portfolio)
of Prudential FlexiFund (the Fund), will be held at 3:00 P.M. on , 1994, at
199 Water Street, New York, N.Y. 10292, for the following purposes:

1. To elect Trustees.

2. To approve an amendment of the Fund's Declaration of Trust to permit
a conversion feature for Class B shares.

3. To approve an amended and restated Class A Distribution and Service
Plan.

4. To approve an amended and restated Class B Distribution and Service
Plan.

5. To approve the elimination of each Portfolio's investment
restrictions regarding restricted and illiquid securities.

6. To approve an amendment of each Portfolio's investment restriction
limiting the Portfolio's ability to invest in a security if the Portfolio
would hold more than 10% of any class of securities of an issuer.

7. To approve the elimination of each Portfolio's investment
restriction limiting the Portfolio's ability to invest in the securities of
any issuer in which officers and Trustees of the Fund or officers and
directors of its investment adviser own more than a specified interest.

8. To approve a modification of the Portfolios' investment restrictions
to permit each Portfolio to enter into interest rate swap transactions.

9. To ratify the selection by the Trustees of Deloitte & Touche as
independent accountants for the fiscal year ending July 31, 1994.

10. To transact such other business as may properly come before the
Meeting or any adjournment thereof.

Only shares of beneficial interest of each Portfolio of record at the close
of business on , 1994 are entitled to notice of and to vote at this
Meeting or any adjournment thereof.
S. JANE ROSE
SECRETARY

Dated: March , 1994

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
PRELIMINARY COPY
PRUDENTIAL FLEXIFUND
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292

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

PROXY STATEMENT
------------------------

This statement is furnished by the Trustees of the Conservatively Managed
Portfolio and the Strategy Portfolio (each a Portfolio) of Prudential FlexiFund
(the Fund) in connection with their solicitation of proxies for use at a Special
Meeting of Shareholders to be held at 3:00 P.M. on , 1994, at 199 Water
Street, New York, New York 10292, the Fund's principal executive office. The
purpose of the Meeting and the matters to be acted upon are set forth in the
accompanying Notice of Special Meeting.

If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted for the election of Trustees and for each of the other proposals.
A Proxy may be revoked at any time prior to the time it is voted by written
notice to the Secretary of the Fund or by attendance at the Meeting. If
sufficient votes to approve one or more of the proposed items are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy. When voting on a proposed adjournment, the persons named
as proxies will vote for the proposed adjournment all shares that they are
entitled to vote with respect to each item, unless directed to disapprove the
item, in which case such shares will be voted against the proposed adjournment.

If a Proxy that is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (that
is, a Proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power), the shares represented thereby will be considered
not to be present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business and be deemed not cast with respect to
such proposal. If no instructions are received by the broker or nominee from the

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shareholder with reference to routine matters, the shares represented thereby
may be considered for purposes of determining the existence of a quorum for the
transaction of business and will be deemed cast with respect to such proposal.
Also, a properly executed and returned proxy marked with an abstention will be
considered present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business. However, abstentions and broker
"non-votes" do not constitute a vote "for" or "against" the matter, but have the
effect of a negative vote on matters which require approval by a requisite
percentage of the outstanding shares.

The close of business on , 1994 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting. On that date, the Fund had 38,012,426.7420 shares of beneficial
interest outstanding and entitled to vote in the Conservatively Managed
Portfolio, consisting of 2,744,890.2100 Class A shares and 35,267,536.5320 Class
B shares and 33,328,178.9720 shares of beneficial interest outstanding and
entitled to vote in the Strategy Portfolio, consisting of 2,574,976.9730 Class A
shares and 30,753,201.9990 Class B shares. Each share will be entitled to one
vote at the Meeting. It is expected that the Notice of Special Meeting, Proxy
Statement and form of Proxy will first be mailed to shareholders on or about
March , 1994.

Management does not know of any person or group who owned beneficially 5% or
more of the outstanding shares of either class of beneficial interest of either
Portfolio as of , 1994.

The expense of solicitation will be borne by the Fund and will include
reimbursement of brokerage firms and others for expenses in forwarding proxy
solicitation material to beneficial owners. The solicitation of proxies will be
largely by mail. The Trustees of the Fund have authorized management to retain
Shareholder Communications Corporation, a proxy solicitation firm, to assist in
the solicitation of proxies for this Meeting. This cost, including specified
expenses, is not expected to exceed $55,886 and will be borne by the Fund. In
addition, solicitation may include, without cost to the Fund, telephonic,
telegraphic or oral communication by regular employees of Prudential Securities
Incorporated (Prudential Securities) and its affiliates.

At a meeting held on February 8, 1994, the Trustees approved a proposal to
change the name of the Fund to Prudential Allocation Fund. The name change does
not require, and is not being submitted for, shareholder approval and will not
be implemented until it is reflected in the Fund's Prospectus. The names of the
Portfolios and their investment objectives and policies will not be affected by
this change.

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ELECTION OF TRUSTEES
(PROPOSAL NO. 1)

At the Meeting, seven Trustees will be elected to hold office for a term of
unlimited duration until their successors are elected and qualify. It is the
intention of the persons named in the accompanying form of Proxy to vote for the
election of Edward D. Beach, Donald D. Lennox, Douglas H. McCorkindale, Lawrence
C. McQuade, Thomas T. Mooney, Richard A. Redeker and Louis A. Weil, III, all of
whom are currently Trustees. Each of the nominees has consented to be named in
the Proxy Statement and to serve as a Trustee if elected. All of the Trustees,
except for Mr. Redeker, have previously been elected by shareholders. Messrs.
Beach, Lennox, McCorkindale, Mooney and Weil have served as Trustees of the Fund
since March 12, 1987, and Mr. McQuade has served as a Trustee since February 18,
1988. Mr. Redeker has served as a Trustee since November 9, 1993.

The Trustees have no reason to believe that any of the nominees named above
will become unavailable for election as a Trustee, but if that should occur
before the Meeting, proxies will be voted for such persons as the Trustees may
recommend.

As a Massachusetts business trust, the Fund is not required to hold annual
meetings of shareholders. The Fund's By-Laws provide that the Fund will not be
required to hold annual meetings of shareholders if the election of Trustees is
not required under the Investment Company Act of 1940, as amended (the
Investment Company Act). It is the present intention of the Trustees not to hold
annual meetings of shareholders unless such shareholder action is required.

INFORMATION REGARDING TRUSTEES

<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Edward D. Beach (69), President and Director of BMC Fund, Inc., a Trustee -0-
closed-end investment company; prior thereto, Vice Chairman of Broyhill
Furniture Industries, Inc.;
</TABLE>

3
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<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Certified Public Accountant; Secretary and Treasurer of Broyhill Family
Foundation, Inc.; President, Treasurer and Director of First Financial
Fund, Inc. and The High Yield Plus Fund, Inc.; President and Director
of Global Utility Fund, Inc.; Director of The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc., Prudential Adjustable Rate
Securities Fund, Inc., Prudential Equity Fund, Inc., Prudential Global
Genesis Fund, Prudential Global Natural Resources Fund, Prudential GNMA
Fund, Prudential Government Plus Fund, Prudential Multi-Sector Fund,
Inc. and Prudential Special Money Market Fund; Trustee of The Black-
Rock Government Income Trust, Command Government Fund, Command Money
Fund, Command Tax-Free Fund, Prudential California Municipal Fund,
Prudential Equity Income Fund, Prudential Flexi-
Fund, Prudential Municipal Bond Fund and Prudential Municipal Series
Fund.
Donald D. Lennox (75), Chairman (since February 1990) and Director Trustee 1,439
(since April 1989) of International Imaging Materials, Inc.; Retired
Chairman, Chief Executive Officer and Director of Schlegel Corporation
(industrial manufacturing)
</TABLE>

4
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<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
(March 1987-February 1989); Director of Gleason Corporation, Navistar
International Corporation, Personal Sound Technologies, Inc.,
Prudential Global Genesis Fund, Prudential Global Natural Resources
Fund, Prudential Institutional Liquidity Portfolio, Inc., Prudential
Multi-Sector Fund, Inc., The Global Government Plus Fund, Inc. and The
High Yield Income Fund, Inc.; Trustee of Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Municipal Bond Fund and The Target
Portfolio Trust.
Douglas H. McCorkindale (54), Vice Chairman, Gannett Co., Inc. (pub- Trustee -0-
lishing and media) (since March 1984); Director of Rochester Telephone
Corporation, Prudential Global Genesis Fund, Prudential Global Natural
Resources Fund, Prudential Multi-Sector Fund, Inc. and The Global
Government Plus Fund, Inc.; Trustee of Prudential Equity Income Fund,
Prudential FlexiFund and Prudential Municipal Bond Fund.
*Lawrence C. McQuade (66), Vice Chairman of Prudential Mutual Fund President and -0-
Management, Inc. (PMF) (since 1988); Managing Director, Investment Trustee
Banking, Prudential Securities (1988-1991); Director of
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Quixote Corporation (since February 1992) and BUNZL, PLC (since June
1991); formerly Director of Crazy Eddie Inc. (1987-1990) and Kaiser
Tech, Ltd. and Kaiser Aluminum and Chemical Corp. (March 1987-November
1988); formerly Executive Vice President and Director of W.R. Grace &
Company; President and Director of Prudential Adjustable Rate
Securities Fund, Inc., Prudential Equity Fund, Inc., Prudential Global
Fund, Inc., Prudential Global Genesis Fund, Prudential Global Natural
Resources Fund, Prudential GNMA Fund, Prudential Government Plus Fund,
Prudential Growth Fund, Inc., Prudential Growth Opportunity Fund,
Prudential High Yield Fund, Prudential IncomeVertible-R- Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential Interme-
diate Global Income Fund, Inc., Prudential MoneyMart Assets, Pru-
dential Multi-Sector Fund, Inc., Prudential National Municipals Fund,
Prudential Pacific Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Special Money Market Fund, Prudential
Structured Maturity Fund, Prudential Tax-Free Money Fund, Prudential
Utility Fund, The Global Government Plus Fund, Inc., The Global Yield
Fund, Inc., and The High Yield Income Fund,
</TABLE>

6
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Inc.; President and Trustee of The BlackRock Government Income Trust,
Command Government Fund, Command Money Fund, Command Tax-Free Fund,
Prudential California Municipal Fund, Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Government Securities Trust, Pru-
dential Municipal Bond Fund, Prudential Municipal Series Fund, Pru-
dential U.S. Government Fund and The Target Portfolio Trust.
Thomas T. Mooney (52), President of the Greater Rochester Metro Chamber Trustee 382
of Commerce; Rochester City Manager; Trustee of Center for Governmental
Research, Inc.; Director of Blue Cross of Rochester, Monroe County
Water Authority, Rochester Jobs, Inc., Industrial Management Council,
Inc., Executive Service Corps of Rochester, Monroe County Industrial
Development Corporation, Global Utility Fund, Inc., Prudential
Adjustable Rate Securities Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Global Genesis Fund, Prudential Global Natural Resources
Fund, Prudential GNMA Fund, Prudential Government Plus Fund, Prudential
Multi-Sector Fund, Inc., First Financial Fund, Inc., The Global
Government Plus Fund, Inc., The Global Yield Fund, Inc. and The High
Yield Plus Fund,
</TABLE>

7
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Inc.; Trustee of Prudential California Municipal Fund, Prudential Eq-
uity Income Fund, Prudential FlexiFund, Prudential Municipal Bond Fund
and Prudential Municipal Series Fund.
*Richard A. Redeker (50), President, Chief Executive Officer and Trustee -0-
Director (since October 1993), PMF; Executive Vice President, Director
and Member of Operating Committee (since October 1993), Prudential
Securities; Director of Prudential Securities Group, Inc. (PSG) (since
October 1993); formerly Senior Executive Vice President and Director of
Kemper Financial Services, Inc. (September 1978 - September 1993);
Director of Global Utility Fund, Inc., Prudential Adjustable Rate
Securities Fund, Inc., Prudential Equity Fund, Inc., Prudential Global
Fund, Inc., Prudential Global Genesis Fund, Prudential Global Natural
Resources Fund, Prudential GNMA Fund, Prudential Government Plus Fund,
Prudential Growth Fund, Inc., Prudential IncomeVertible-R- Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential MoneyMart Assets,
Prudential Multi-Sector Fund, Inc., Prudential Pacific Growth Fund,
Inc., Prudential Short-Term Global
</TABLE>

8
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Income Fund, Inc., Prudential Special Money Market Fund, Prudential
Structured Maturity Fund, Prudential Utility Fund, The Global Yield
Fund, Inc., The Global Government Plus Fund, Inc., and The High Yield
Income Fund, Inc.; Trustee of The BlackRock Government Income Trust,
Command Government Fund, Command Money Fund, Command Tax-Free Fund,
Prudential California Municipal Fund, Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential U.S. Government Fund and The Target
Portfolio Trust.
Louis A. Weil, III (52), Publisher and Chief Executive Officer, Phoenix Trustee 795
Newspapers, Inc. (since August 1991); Director of Central Newspapers,
Inc. (since September 1991); prior thereto, Publisher of Time Magazine
(May 1989-March 1991); formerly President, Publisher and CEO of The
Detroit News (February 1986-August 1989); formerly member of the Ad-
visory Board, Chase Manhattan Bank-Westchester; Trustee of Prudential
Equity Income Fund, Prudential FlexiFund, Prudential Government
Securities Trust and Prudential Municipal Bond Fund; Director of
Prudential Global Genesis Fund, Prudential Global Natural
</TABLE>

9
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND , 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Resources Fund, Prudential Growth Opportunity Fund, Prudential High
Yield Fund, Prudential Multi-Sector Fund, Inc., Prudential National
Municipals Fund, Prudential Tax-Free Money Fund and The Global
Government Plus Fund, Inc.
<FN>
- ------------------------
* Indicates "interested" Trustee, as defined in the Investment Company Act,
by reason of his affiliation with PMF or Prudential Securities.
</TABLE>

The Trustees and officers of the Fund as a group owned beneficially 412
shares of the Conservatively Managed Portfolio and 2204 shares of the Strategy
Portfolio of the Fund at , 1994, representing less than 1% of the
outstanding shares of each Portfolio of the Fund.

The Fund pays annual compensation of $8,500, plus travel and incidental
expenses, to each of the five Trustees not affiliated with PMF or Prudential
Securities. The Trustees have the option to receive the Trustee's fee pursuant
to a deferred fee agreement with the Fund. Under the terms of the agreement, the
Fund accrues daily the amount of such Trustee's fee which accrues interest at a
rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury Bills
at the beginning of each calendar quarter or, pursuant to an exemptive order of
the Securities and Exchange Commission (SEC), at the rate of return of the Fund.
Payment of the interest so accrued is also deferred and accruals become payable
at the option of the Trustee. The Fund's obligation to make payments of deferred
Trustees' fees, together with interest thereon, is a general obligation of the
Fund. During the fiscal year ended July 31, 1993, the Fund paid Trustees' fees
of approximately $51,000, and travel and incidental expenses of approximately
$2,774.

There were three regular meetings and three special meetings of the Fund's
Trustees held during the fiscal year ended July 31, 1993. The Trustees presently
have an Audit Committee, the members of which are Messrs. Beach, Lennox,
McCorkindale, Mooney and Weil, the Fund's non-interested Trustees. The Audit
Committee met twice during the fiscal year ended July 31, 1993. The Audit
Committee makes recommendations to the Trustees with respect to the engagement
of independent accountants and reviews with the independent

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accountants the plan and results of the audit engagement and matters having a
material effect upon the Fund's financial operations. The Trustees also have a
Nominating Committee, comprised of the Fund's non-interested Trustees, which
selects and proposes candidates for election as Trustees. The Nominating
Committee met once during the fiscal year ended July 31, 1993. The Nominating
Committee does not consider nominees recommended by shareholders to fill Trustee
vacancies.

During the fiscal year ended July 31, 1993, no Trustee attended fewer than
75% of the aggregate of the total number of meetings of the Trustees and any
committees thereof of which such Trustee was a member.

The executive officers of the Fund, other than as shown above, are: S. Jane
Rose, Secretary, having held office since March 12, 1987; Robert F. Gunia, Vice
President, and Susan C. Cote, Treasurer and Principal Financial and Accounting
Officer, both having held office since October 7, 1987; and Marguerite E.H.
Morrison, Assistant Secretary, having held office since May 15, 1991. Mr. Gunia
is 47 years old and is currently Chief Administrative Officer (since July 1990),
Director, Executive Vice President, Treasurer and Chief Financial Officer (since
June 1987) of PMF and Senior Vice President (since March 1987) of Prudential
Securities. He is also Vice President and Director (since May 1989) of The Asia
Pacific Fund, Inc. Ms. Cote is 39 years old and is Senior Vice President (since
January 1989) of PMF and a Senior Vice President of Prudential Securities (since
January 1992). Prior thereto, she was Vice President (January 1986-December
1991) of Prudential Securities. Ms. Rose is 48 years old and is Senior Vice
President (since January 1991) and Senior Counsel (since June 1987) of PMF and a
Senior Vice President and Senior Counsel of Prudential Securities (since July
1992). Prior thereto, she was First Vice President (June 1987-December 1990) of
PMF and Vice President and Associate General Counsel of Prudential Securities.
Ms. Morrison is 37 years old and is a Vice President and Associate General
Counsel (since July 1991) of PMF and Vice President and Associate General
Counsel (since September 1987) of Prudential Securities. The executive officers
of the Fund are elected annually by the Trustees.

REQUIRED VOTE

Trustees must be elected by a vote of a plurality of the shares present at
the Meeting in person or by proxy and entitled to vote thereupon, provided that
a quorum is present.

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<PAGE>
MANAGEMENT OF THE FUND

THE MANAGER

Prudential Mutual Fund Management, Inc. (PMF or the Manager), One Seaport
Plaza, New York, New York 10292, serves as the Fund's Manager under a management
agreement dated as of March 1, 1988 (the Management Agreement).

The Management Agreement was last approved by the Trustees of the Fund,
including a majority of the Trustees who are not parties to such contract or
interested persons of such parties (as defined in the Investment Company Act) on
May 4, 1993 and was approved by shareholders on February 19, 1988.

TERMS OF THE MANAGEMENT AGREEMENT

Pursuant to the Management Agreement, PMF, subject to the supervision of the
Fund's Trustees and in conformity with the stated policies of the Fund, is
responsible for managing or providing for the management of the investment of
the Fund's assets. In this regard, PMF provides supervision of the Fund's
investments, furnishes a continuous investment program for the Fund's portfolios
and places purchase and sale orders for portfolio securities of the Fund and
other investments. The Prudential Investment Company (PIC), a wholly-owned
subsidiary of The Prudential Insurance Company of America (Prudential), provides
such services pursuant to a subadvisory agreement (the Subadvisory Agreement)
with PMF. PMF also administers the Fund's business affairs, subject to the
supervision of the Fund's Trustees, and, in connection therewith, furnishes the
Fund with office facilities, together with those ordinary clerical and
bookkeeping services which are not being furnished by the Fund's Transfer and
Dividend Disbursing Agent and Custodian.

PMF has authorized any of its directors, officers and employees who have
been elected as Trustees or officers of the Fund to serve in the capacities in
which they have been elected. All services furnished by PMF under the Management
Agreement may be furnished by any such directors, officers or employees of PMF.
In connection with its administration of the corporate affairs of the Fund, PMF
bears the following expenses:

(a) the salaries and expenses of all personnel of the Fund and PMF, except
the fees and expenses of Trustees not affiliated with PMF or the Fund's
investment adviser;

12
<PAGE>
(b) all expenses incurred by PMF or by the Fund in connection with
administering the ordinary course of the Fund's business, other than
those assumed by the Fund, as described below; and

The Fund pays PMF for the services performed and the facilities furnished by
it a fee at an annual rate of .65 of 1% of the average net assets of each
Portfolio. The fee is computed daily and paid monthly. For the fiscal year ended
July 31, 1993, PMF received management fees of $1,837,757 and $2,362,366 on
behalf of the Conservatively Managed Portfolio and the Strategy Portfolio,
respectively.

The Management Agreement provides that, if the expenses of the Fund
(including the fees of PMF, but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business) for any fiscal year exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statutes or regulations of
any jurisdiction in which shares of the Fund are then qualified for offer and
sale, the compensation due PMF will be reduced by the amount of such excess, or
if such reduction exceeds the compensation payable to PMF, PMF will pay the Fund
the amount of such reduction which exceeds the amount of such compensation. Any
such reductions or payments are subject to readjustment during the year. No such
reductions or payments were required during the fiscal year ended July 31, 1993.
The Fund believes the most restrictive of such annual limitations is 2 1/2% of a
fund's average daily net assets up to $30 million, 2% of the next $70 million of
such assets and 1 1/2% of such assets in excess of $100 million.

Except as indicated above, the Fund is responsible under the Management
Agreement for the payment of its expenses, including (a) the fees payable to
PMF, (b) the fees and expenses of Trustees who are not affiliated with PMF or
the investment adviser, (c) the fees and certain expenses of the Fund's
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records of the Fund and of pricing Fund shares, (d) the charges and
expenses of the Fund's legal counsel and independent accountants, (e) brokerage
commissions and any issue or transfer taxes chargeable to the Fund in connection
with its securities transactions, (f) all taxes and corporate fees payable by
the Fund to governmental agencies, (g) the fees of any trade association of
which the Fund may be a member, (h) the cost of any stock certificates
representing shares of the Fund, (i) the cost of fidelity and liability
insurance, (j) certain

13
<PAGE>
organization expenses of the Fund and the fees and expenses involved in
registering and maintaining registration of the Fund and of its shares with the
SEC and registering the Fund as a broker or dealer and qualifying its shares
under state securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
reports, proxy statements and prospectuses to shareholders in the amount
necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (m) distribution fees.

The Management Agreement provides that PMF will not be liable to the Fund
for any error of judgment by PMF or for any loss suffered by the Fund 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 willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. The Management Agreement also provides that it will
terminate automatically if assigned and that it may be terminated without
penalty by the Trustees of the Fund, by vote of a majority of the Fund's
outstanding voting securities (as defined in the Investment Company Act) or by
the Manager, upon not more than 60 days' nor less than 30 days' written notice.

INFORMATION ABOUT PMF

PMF, a subsidiary of Prudential Securities and an indirect, wholly-owned
subsidiary of Prudential, was organized in May 1987 under the laws of the State
of Delaware. Prudential's address is Prudential Plaza, Newark, New Jersey 07102.
PMF acts as manager for the following investment companies:

Open-End Management Investment Companies: Command Government Fund,
Command Money Fund, Command Tax-Free Fund, Prudential Adjustable Rate
Securities Fund, Inc., Prudential California Municipal Fund, Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Global Fund, Inc., Prudential-Bache Global Genesis Fund, Inc.
(d/b/a Prudential Global Genesis Fund), Prudential-Bache Global Natural
Resources Fund, Inc. (d/b/a Prudential Global Natural Resources Fund),
Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund),
Prudential-Bache Government Plus Fund, Inc.
(d/b/a Prudential Government Plus Fund), Prudential Government Securities
Trust, Prudential Growth Fund, Inc., Prudential-Bache Growth Opportunity
Fund, Inc. (d/b/a Prudential Growth Opportunity Fund), Prudential-

14
<PAGE>
Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund), Prudential
IncomeVertible-R- Fund, Inc., Prudential-Bache MoneyMart Assets Fund, Inc.
(d/b/a Prudential MoneyMart Assets), Prudential Multi-Sector Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series Fund,
Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential National
Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Prudential-Bache Special Money Market Fund,
Inc. (d/b/a Prudential Special Money Market Fund), Prudential-Bache
Structured Maturity Fund, Inc. (d/b/a Prudential Structured Maturity Fund),
Prudential-Bache Tax-Free Money Fund, Inc., (d/b/a Prudential Tax-Free Money
Fund), Prudential U.S. Government Fund, Prudential-Bache Utility Fund, Inc.
(d/b/a Prudential Utility Fund), Prudential Institutional Liquidity
Portfolio, Inc., Prudential Intermediate Global Income Fund, Inc., Global
Utility Fund, Inc., Nicholas-Applegate Fund, Inc. and The BlackRock
Government Income Trust.

Closed-End Management Investment Companies: The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Income Fund, Inc.

The consolidated statement of financial condition of PMF and subsidiaries as
of December 31, 1993, is set forth as Exhibit A to this Proxy Statement.

Certain information regarding the directors and principal executive officers
of PMF is set forth below. Except as otherwise indicated, the address of each
person is One Seaport Plaza, New York, New York 10292.

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ------------------------------- -------------------- ----------------------------
<S> <C> <C>
Maureen Behning-Doyle ......... Executive Vice Executive Vice President,
President PMF; Senior Vice
President, Prudential
Securities
John D. Brookmeyer, Jr. . Director Senior Vice President,
Two Gateway Center Prudential
Newark, NJ 07102
Susan C. Cote ................. Senior Vice Senior Vice President, PMF;
President Senior Vice President,
Prudential Securities
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ------------------------------- -------------------- ----------------------------
<S> <C> <C>
Fred A. Fiandaca .............. Executive Vice Executive Vice President,
Raritan Plaza One President, Chief Chief Operating Officer
Edison, NJ 08847 Operating Officer and Director, PMF;
and Director Chairman, Chief Operating
Officer and Director,
Prudential Mutual Fund
Services, Inc.
Stephen P. Fisher ............. Senior Vice Senior Vice President, PMF;
President Senior Vice President,
Prudential Securities
Frank W. Giordano ............. Executive Vice Executive Vice President,
President, General General Counsel and
Counsel and Secretary, PMF; Senior
Secretary Vice President, Prudential
Securities
Robert F. Gunia ............... Executive Vice Executive Vice President,
President, Chief Chief Financial and
Financial and Administrative Officer,
Administrative Treasurer and Director,
Officer, Treasurer PMF; Senior Vice
and Director President, Prudential
Securities
Eugene B. Heimberg ............ Director Senior Vice President,
Prudential Plaza Prudential
Newark, NJ 07102
Lawrence C. McQuade............ Vice Chairman Vice Chairman, PMF
Leland B. Paton................ Director Executive Vice President and
Director, Prudential
Securities; Director, PSG
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ------------------------------- -------------------- ----------------------------
<S> <C> <C>
Richard A. Redeker............. President, Chief President, Chief Executive
Executive Officer Officer and Director, PMF;
and Director Executive Vice President,
Director and Member of the
Operating Committee,
Prudential Securities;
Director, PSG
S. Jane Rose................... Senior Vice Senior Vice President,
President, Senior Senior Counsel and
Counsel and Assistant Secretary, PMF;
Assistant Senior Vice President and
Secretary Senior Counsel, Prudential
Securities
Donald G. Southwell ........... Director Senior Vice President,
213 Washington Street Prudential; Director, PSG
Newark, NJ 07102
</TABLE>

THE SUBADVISER

Investment advisory services are provided to the Fund by PMF through its
affiliate, The Prudential Investment Corporation (PIC or the Subadviser),
Prudential Plaza, Newark, New Jersey 07102, under a Subadvisory Agreement. The
Subadvisory Agreement was approved by shareholders on February 19, 1988 and was
last approved by the Trustees of the Fund, including a majority of the Trustees
who are not parties to such contract or interested persons of such parties (as
defined in the Investment Company Act), on May 4, 1993.

TERMS OF THE SUBADVISORY AGREEMENT

Pursuant to the Subadvisory Agreement, PIC, subject to the supervision of
PMF and the Trustees and in conformity with the stated policies of the Fund,
manages the investment operations of the Fund and the composition of the Fund's
portfolios, including the purchase, retention and disposition of securities and
other investments. PIC is reimbursed by PMF for reasonable costs and expenses
incurred by it in furnishing such services. The fees paid by the Fund to PMF
under the Management Agreement with PMF are not affected by this arrangement.
PIC keeps certain books and records required to be maintained

17
<PAGE>
pursuant to the Investment Company Act. The investment advisory services of PIC
to the Fund are not exclusive under the terms of the Subadvisory Agreement and
PIC is free to, and does, render investment advisory services to others.

PIC has authorized any of its directors, officers and employees who may be
elected as Trustees or officers of the Fund to serve in the capacities in which
they have been elected. Services furnished by PIC under the Subadvisory
Agreement may be furnished by any such directors, officers or employees of PIC.
The Subadvisory Agreement provides that PIC shall not be liable for any error of
judgment or for any loss suffered by the Fund or PMF in connection with the
matters to which the Subadvisory Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on PIC's part in the
performance of its duties or from its reckless disregard of duty. The
Subadvisory Agreement provides that it shall terminate automatically if assigned
or upon termination of the Management Agreement and that it may be terminated
without penalty by either party upon not more than 60 days' nor less than 30
days' written notice.

INFORMATION ABOUT PIC

PIC was organized in June 1984 under the laws of the State of New Jersey.
The business and other connections of PIC's directors and executive officers are
as set forth below. Except as otherwise indicated, the address of each person is
Prudential Plaza, Newark, New Jersey 07102.

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- -------------------------------- -------------------- ----------------------------
<S> <C> <C>
Martin A. Berkowitz ............ Senior Vice Senior Vice President and
President, Chief Chief Financial and
Financial and Compliance Officer, PIC;
Compliance Officer Vice President, Prudential
William M. Bethke .............. Senior Vice Senior Vice President,
Two Gateway Center President Prudential
Newark, NJ 07102
John D. Brookmeyer, Jr. ........ Senior Vice Senior Vice President,
Two Gateway Center President Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Eugene B. Heimberg ............. President and Senior Vice President,
Director Prudential
</TABLE>

18
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- -------------------------------- -------------------- ----------------------------
<S> <C> <C>
Garnett L. Keith, Jr. .......... Director Vice Chairman and Director,
Prudential
William P. Link ................ Executive Vice Executive Vice President,
Four Gateway Center President Prudential
Newark, NJ 07102
Robert E. Riley ................ Executive Vice Executive Vice President,
800 Boylston Avenue President Prudential; Director, PSG
Boston, MA 02199
James W. Stevens ............... Executive Vice Executive Vice President,
Four Gateway Center President Prudential; Director, PSG
Newark, NJ 07102
Robert C. Winters .............. Director Chairman of the Board and
Chief Executive Officer,
Prudential; Chairman of
the Board, PSG
Claude J. Zinngrabe, Jr. ...... Executive Vice Vice President, Prudential
President
</TABLE>

THE DISTRIBUTORS

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

Under separate Distribution and Service Plans (the Class A Plan and the
Class B Plan, collectively, the Plans) adopted by the Fund under Rule 12b-1
under the Investment Company Act and separate distribution agreements (the
Distribution Agreements), PMFD and Prudential Securities (collectively, the
Distributor) incur the expenses of distributing the Fund's Class A and Class B
shares, respectively.

The Plans were last approved by the Trustees, including a majority of the
Trustees who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A or Class B Plan or
in any agreement related to either Plan (the Rule 12b-1 Trustees), on May 4,
1993. The Class A Plan was approved by the Class A shareholders of each
Portfolio on December 19, 1990. The Class B Plan was approved by the Class B
shareholders of each Portfolio on January 11, 1990.

19
<PAGE>
The plans are proposed to be amended as set forth in Proposals No. 3 and 4
below.

CLASS A PLAN. Under the Class A Plan, the Fund reimburses PMFD for its
distribution-related expenses with respect to Class A shares of each Portfolio
at an annual rate of up to .30 of 1% of the average daily net assets of the
Class A shares. The Class A Plan provides that (i) up to .25 of 1% of the
average daily net assets of the Class A shares may be used for personal service
and/or the maintenance of shareholder accounts (service fee) and (ii) total
distribution fees (including the service fee of .25 of 1%) may not exceed .30 of
1% of the average daily net assets of the Class A shares. PMFD has advised the
Fund that distribution-related expenses of the Fund will not exceed .25 of 1% of
the average daily net assets of the Class A shares of each Portfolio for the
fiscal year ending July 31, 1994.

For the fiscal year ended July 31, 1993, PMFD received payments of $30,784
for the Conservatively Managed Portfolio and $48,431 for the Strategy Portfolio
under the Class A Plan representing .20 of 1% of the average daily net assets of
the Class A shares of each Portfolio as reimbursement of expenses related to the
distribution of Class A shares. These amounts were primarily expended on account
servicing fees to Prudential Securities and Pruco Securities Corporation, an
affiliated broker-dealer (Prusec), for payments to financial advisers and other
salespersons who sell Class A shares. For the fiscal year ended July 31, 1993,
PMFD also received $405,000 and $338,000 on behalf of the Conservatively Managed
Portfolio and Strategy Portfolio, respectively, in initial sales charges.

CLASS B PLAN. Under the Class B Plan, the Fund reimburses Prudential
Securities for its distribution-related expenses with respect to Class B shares
of each Portfolio at an annual rate of up to .75 of 1% of the average daily net
assets of the Class B shares. The Class B Plan also provides for the payment of
a service fee to Prudential Securities at a rate not to exceed .25 of 1% of the
average daily net assets of Class B shares of each Portfolio. The aggregate
distribution fee for Class B shares (asset-based sales charge plus service fee)
will not exceed 1% of average daily net assets under the Class B Plan.

20
<PAGE>
For the fiscal year ended July 31, 1993, it is estimated that Prudential
Securities spent approximately the following amounts on behalf of the Portfolios
of the Fund:

<TABLE>
<CAPTION>
COMPENSATION TO
PRINTING AND COMMISSION PRUSEC FOR APPROXIMATE
MAILING PAYMENTS TO COMMISSION TOTAL AMOUNT
PROSPECTUSES TO FINANCIAL OVERHEAD PAYMENTS TO SPENT BY
OTHER THAN INTEREST AND ADVISERS OF COSTS OF ACCOUNT DISTRIBUTOR
CURRENT CARRYING PRUDENTIAL PRUDENTIAL EXECUTIVES AND ON BEHALF OF
PORTFOLIO SHAREHOLDERS CHARGES SECURITIES SECURITIES* OTHER EXPENSES* PORTFOLIO
- ------------------ --------------- ------------- ------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Conservatively
Managed
Portfolio........ $ 19,400 $358,900 $ 887,800 $ 1,182,900 $2,125,800 $4,574,800
Strategy
Portfolio........ $ 18,600 $298,900 $ 1,115,100 $ 1,571,200 $ 857,700 $3,861,500
<FN>
- ------------------------------
* Including lease, utility and sales promotional expenses.
</TABLE>

The term "overhead costs" 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, communication costs and
the costs of stationery and supplies, (b) the cost of client sales seminars, (c)
expenses of mutual fund sales coordinators to promote the sale of Fund shares
and (d) other incidental expenses relating to branch promotion of sales.

Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by holders of Class B shares upon certain redemptions of
Class B shares. The amount of distribution expenses reimbursable by Class B
shares of the Fund is reduced by the amount of such contingent deferred sales
charges. For the fiscal year ended July 31, 1993, Prudential Securities received
approximately $425,000 on behalf of the Conservatively Managed Portfolio and
$736,000 on behalf of the Strategic Portfolio, in contingent deferred sales
charges. As of December 31, 1993, the aggregate amount of unreimbursed
distribution expenses for the Fund's Class B shares was approximately
$20,079,700 ($11,499,600 for the Conservatively Managed Portfolio and $8,580,100
for the Strategy Portfolio).

The Class A and Class B Plans continue in effect from year to year, provided
that each such continuance is approved at least annually by a vote of the
Trustees, including a majority vote of the Rule 12b-1 Trustees, cast in person
at a meeting called for the purpose of voting on such continuance. The Class A
and Class B Plans may each be terminated at any time, without penalty, by the
vote of a majority of the Rule 12b-1 Trustees or by the vote of the holders of a
majority of the outstanding shares of the applicable class on not more than 30

21
<PAGE>
days' written notice to any other party to the Plans. Neither Plan may be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class,
and all material amendments are required to be approved by the Trustees 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 either the Class A Plan or the Class B Plan if it is terminated
or not continued. In the event of termination or noncontinuation of the Class B
Plan, the Trustees may consider the appropriateness of having the Fund reimburse
Prudential Securities for the outstanding carry forward amounts plus interest
thereon.

Pursuant to each Plan, the Trustees review at least quarterly a written
report of the distribution expenses incurred on behalf of the Class A and Class
B shares of the Portfolios of the Fund by PMFD and Prudential Securities,
respectively. The report includes an itemization of the distribution expenses
and the purposes of such expenditures. In addition, as long as the Plans remain
in effect, the selection and nomination of Rule 12b-1 Trustees shall be
committed to the Rule 12b-1 Trustees.

Pursuant to 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. Each Distribution Agreement was
last approved by the Trustees, including a majority of the Rule 12b-1 Trustees,
on May 4, 1993.

PORTFOLIO TRANSACTIONS

The Manager is responsible for decisions to buy and sell securities and
options on securities and futures for each Portfolio of the Fund, the selection
of brokers, dealers and futures commission merchants to effect the transactions
and the negotiation of brokerage commissions, if any. For purposes of this
section, the term "Manager" includes the Subadviser. Broker-dealers may receive
negotiated brokerage commissions on Fund portfolio transactions, including
options and the purchase and sale of underlying securities upon the exercise of
options. Orders may be directed to any broker or futures commission merchant
including, to the extent and in the manner permitted by applicable law,
Prudential Securities and its affiliates.

Equity securities traded in the over-the-counter market and bonds 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

22
<PAGE>
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
On occasion, certain money market instruments and U.S. Government agency
securities may be purchased directly from the issuer, in which case no
commissions or discounts are paid. The Fund will not deal with Prudential
Securities (or any affiliate) in any transaction in which Prudential Securities
(or any affiliate) acts as principal. Thus, it will not deal with Prudential
Securities (or any affiliate) acting as market maker, and it will not execute a
negotiated trade with Prudential Securities if execution involves Prudential
Securities (or any affiliate) acting as principal with respect to any part of
the Fund's order.

In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund's, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker, dealer or
futures commission merchant in the light of generally prevailing rates. The
Manager's policy is to pay higher commissions to brokers, other than Prudential
Securities, for particular transactions than might be charged if a different
broker had been selected, on occasions when, in the Manager's opinion, this
policy furthers the objective of obtaining best price and execution. In
addition, the manager is authorized to pay higher commissions on brokerage
transactions for the Fund to brokers other than Prudential Securities in order
to secure research and investment services described above, subject to

23
<PAGE>
review by the Fund's Trustees from time to time as to the extent and
continuation of this practice. The allocation of orders among brokers and the
commission rates paid are reviewed periodically by the Fund's Trustees.
Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities (or any affiliate), during the
existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the SEC. This
limitation, in the opinion of the Fund, will not significantly affect the
ability of the Portfolios to pursue their investment objectives. However, in the
future in other circumstances, the Portfolios may be at a disadvantage because
of this limitation in comparison to other funds with similar objectives but not
subject to such limitations.

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

24
<PAGE>
The table below sets forth information concerning the payment of commissions
by the Fund, including the commissions paid to Prudential Securities, for the
fiscal year ended July 31, 1993:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JULY 31, 1993
--------------------
<S> <C>
Total brokerage commissions paid by the Fund..................... $714,203
Total brokerage commissions paid to Prudential Securities or any
affiliate....................................................... $ 38,171
Percentage of total brokerage commissions paid to Prudential
Securities or any affiliate..................................... 5.3%
</TABLE>

The Fund effected approximately 5.6% of the total dollar amount of its
transactions involving the payment of commissions through Prudential Securities
during the fiscal year ended July 31, 1993. Of the total brokerage commissions
paid during the fiscal year ended July 31, 1993, $216,009 (or 30%) for the
Conservatively Managed Portfolio and $384,806 (or 53%) for the Strategy
Portfolio were paid to firms which provide research, statistical or other
services to PIC on behalf of those Portfolios.

25
<PAGE>
APPROVAL OF A PROPOSAL TO AMEND
THE FUND'S DECLARATION OF TRUST TO PERMIT
THE IMPLEMENTATION OF A CONVERSION FEATURE
(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS, VOTING JOINTLY)
(PROPOSAL NO. 2)

The Trustees are recommending that shareholders approve an amendment to the
Fund's Declaration of Trust to permit the implementation of a conversion feature
for Class B shares of each Portfolio. The conversion feature is authorized
pursuant to an exemptive order of the SEC (the SEC Order) and would provide for
the automatic conversion of Class B shares to Class A shares of each Portfolio
at relative net asset value approximately seven years after purchase. Class A
shares are subject to a lower annual distribution and service fee than Class B
shares and conversions would occur without the imposition of any additional
sales charge. A description of the conversion feature is set forth in greater
detail below. Amendment of the Declaration of Trust requires approval by a
majority of the Fund's outstanding shares.

THE CLASSES OF SHARES

The Fund currently offers two classes of shares for each Portfolio,
designated as Class A and Class B shares pursuant to the Alternative Purchase
Plan, in reliance upon the SEC Order. Class A shares are currently offered with
an initial sales charge of up to 5.25% of the offering price and are subject to
an annual distribution and service fee of up to .30 of 1% of the average daily
net assets of the Class A shares of each Portfolio pursuant to a Rule 12b-1
plan. This fee is currently charged at a rate of .25 of 1% of the average daily
net assets of the Class A shares. PMFD has agreed to so limit its fee under the
Class A Plan to .25 of 1% of the average daily net assets of the Class A shares
of each Portfolio for the fiscal year ending July 31, 1994. Class B shares are
currently offered without an initial sales charge but are subject to a
contingent deferred sales charge or CDSC (declining from 5% to zero of the
lesser of the amount invested or the redemption proceeds) on certain redemptions
generally made within six years of purchase and to an annual distribution and
service fee pursuant to a Rule 12b-1 plan of up to 1% of the average daily net
asset value of the Class B shares.

In accordance with the SEC Order, the Trustees may, among other things,
authorize the creation of additional classes of shares from time to time. The
Trustees have approved the offering of a new class of shares for each Portfolio,
to be designated Class C shares, which will be offered simultaneously with the
offering of Class B shares with the proposed conversion feature. Class C shares
will be offered without either an initial or a deferred sales charge but will be

26
<PAGE>
subject to an annual distribution and service fee not to exceed 1% of the
average daily net assets of the Class C shares. If the proposed conversion
feature for Class B shares of each Portfolio is not approved, Class C shares
will not be offered.

THE PROPOSED CONVERSION FEATURE

On March 17, 1993, the Fund's Trustees, including a majority of the Trustees
who are not "interested persons" of the Fund (as defined in the Investment
Company Act), approved an amendment to the Fund's Declaration of Trust to permit
the implementation of a conversion feature for each Portfolio's Class B shares.
A copy of the proposed amendment to the Fund's Declaration of Trust is attached
hereto as Exhibit B.

If this proposal is approved, it is currently contemplated that conversions
of Class B shares to Class A shares will occur on a quarterly basis
approximately seven years from the purchase. The first conversion is currently
anticipated to occur in or about January 1995. Conversions will be effected
automatically at relative net asset value without the imposition of any
additional sales charge. Class B shareholders will benefit from the conversion
feature because they will thereafter be subject to the lower annual distribution
and service fee applicable to Class A shares.

Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, it is currently anticipated that 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 for each Portfolio 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 a shareholder's account (ii) multiplied by the total
number of Class B shares then held in such shareholder's account. Each time any
Eligible Shares in a shareholder's account convert to Class A shares, all shares
or amounts representing Class B shares then in such 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 a shareholder's 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

27
<PAGE>
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, or 47.62%, multiplied by 200 shares, or 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.

If the net asset value per share of Class A is higher than that of Class B
at the time of conversion (which may be the case because of the higher
distribution and service fee applicable to Class B shares), shareholders will
receive fewer Class A shares than Class B shares converted although the
aggregate dollar value will be the same.

For purposes of calculating the applicable holding period for conversions,
all payments for purchases of Class B shares during a month will be deemed to
have been made on the last day of the month, or for Class B shares acquired
through exchange or a series of exchanges, on the last day of the month in which
the original payment for purchases of such Class B shares was made. For Class B
shares previously exchanged for shares of a money market fund, the time period
during which such shares were held in the money market fund will be excluded.
For example, Class B shares held in a money market fund for a period of one year
will not convert to Class A 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. As of the date of the first conversion (which, as noted above, is
currently anticipated to occur in or about January 1995) all amounts
representing Class B shares then outstanding beyond the expiration of the
applicable conversion period will automatically convert to Class A shares,
together with all shares or amounts representing Class B shares acquired through
the automatic reinvestment of dividends and distributions then held in the
shareholder's account.

Under current law, no gain or loss will be recognized by a shareholder for
U.S. income tax purposes as a result of a conversion of Class B shares into
Class A shares.

If approved by shareholders, the conversion feature will be subject to the
continuing availability of opinions of counsel (i) that the dividends and other

28
<PAGE>
distributions paid on Class A and Class B shares will not constitute
"preferential dividends" under the Internal Revenue Code of 1986, as amended,
and (ii) that the conversion of shares does not constitute a taxable event.

REQUIRED VOTE

The proposed amendment to the Fund's Declaration of Trust to implement the
conversion feature requires the affirmative vote of a majority of the Fund's
outstanding shares. In the event shareholders of the Fund do not approve the
proposed amendment, the conversion feature will not be implemented for the Fund
and Class B shares of the Fund will continue to be subject, possibly
indefinitely, to their higher annual distribution and service fee.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 2.

APPROVAL OF AMENDED AND
RESTATED CLASS A DISTRIBUTION
AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS, VOTING SEPARATELY)
(PROPOSAL NO. 3)

On May 4, 1993, the Fund's Trustees approved an amended and restated Class A
Distribution and Service Plan pursuant to Rule 12b-1 under the Investment
Company Act and an amended and restated Distribution Agreement with PMFD for
Class A shares of the Fund (the Proposed Class A Plan and the Proposed Class A
Distribution Agreement, respectively) and recommend submission of the Proposed
Class A Plan to the Fund's Class A shareholders for approval or disapproval at
this Special Meeting of Shareholders. As contemplated by the SEC Order
(previously defined under Proposal No. 2), the Proposed Class A Plan is also
being submitted for approval by Class B shareholders because, subject to
approval of Proposal No. 2, Class B shares will automatically convert to Class A
shares approximately seven years after purchase. The Proposed Class A
Distribution Agreement does not require, and is not being submitted for,
shareholder approval.

The purpose of the Proposed Class A Plan is to compensate PMFD, the
distributor of the Fund's Class A shares, for providing distribution assistance
to broker-dealers, including Prudential Securities and Prusec, affiliated
broker-dealers, and other qualified broker-dealers, if any, whose customers
invest in Class A shares of the Fund and to defray the costs and expenses,
including the payment of account servicing fees, of the services provided and
activities undertaken to distribute Class A shares (Distribution Activities).

29
<PAGE>
The Trustees previously adopted a plan of distribution for the Fund's Class
A shares pursuant to Rule 12b-1 under the Investment Company Act which was
approved by shareholders on December 19, 1990 and last approved by the Trustees
on May 4, 1993 (the Existing Class A Plan). Shareholders of the Fund's Class A
and Class B shares are being asked to approve amendments to the Existing Class A
Plan that change it from a reimbursement type plan to a compensation type plan.
The amendments do not change the maximum annual fee that may be paid to PMFD
under the Existing Class A Plan, although the possibility exists that expenses
incurred by PMFD for which it is entitled to be reimbursed under the Existing
Class A Plan may be less than the fee PMFD will receive under the Proposed Class
A Plan. The amendments are being proposed to facilitate administration and
accounting. The Trustees believe that the Proposed Class A Plan is in the best
interest of the Fund and is reasonably likely to benefit the Fund's Class A
shareholders. A copy of the Proposed Class A Plan is attached hereto as Exhibit
C.

THE EXISTING CLASS A PLAN

Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
incurred for Distribution Activities at an annual rate of up to .30 of 1% of the
average daily net assets of the Class A shares of each Portfolio (up to .25 of
1% of which may constitute a service fee for the servicing and maintenance of
shareholder accounts). Article III, Section 26 of the NASD Rules of Fair
Practice (the NASD Rules) places an annual limit of .25 of 1% on fees that may
be imposed for the provision of personal service and/or the maintenance of
shareholder accounts (service fees) and an annual limit of .75 of 1% on
asset-based sales charges (as defined in the NASD Rules). Subject to these
limits, the Fund may impose any combination of service fees and asset-based
sales charges under both the Existing Class A Plan and the Proposed Class A
Plan, provided that the total do not exceed .30 of 1% per annum of the average
daily net assets of the Class A shares.

The Existing Class A Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class A shares of the Fund. In addition, all
material amendments thereof must be approved by vote of a majority of the
Trustees, including a majority of the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on the Plan. So long as the Existing
Class A Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Fund will be committed to the discretion of the Rule
12b-1 Trustees.

30
<PAGE>
The Existing Class A Plan may be terminated at any time without payment of
any penalty by the vote of a majority of the Rule 12b-1 Trustees or by the vote
of a majority of the outstanding Class A shares of the Fund (as defined in the
Investment Company Act) on written notice to any other party to such Plan and
will automatically terminate in the event of its assignment (as defined in the
Investment Company Act). For a more detailed description of the Existing Class A
Plan, see "Management of the Fund--The Distributors--Class A Plan."

THE PROPOSED CLASS A PLAN

The Proposed Class A Plan amends the Existing Class A Plan in one material
respect. Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
actually incurred for Distribution Activities up to a maximum of .30 of 1% per
annum of the average daily net assets of the Class A shares. The Proposed Class
A Plan authorizes the Fund to pay PMFD the same maximum annual fee as
compensation for its Distribution Activities regardless of the expenses incurred
by PMFD for Distribution Activities. The Distributor may, however, as it
currently does, voluntarily agree to limit its fee to an amount less than the
maximum annual fee. In contrast to the Existing Class A Plan, the amounts
payable by the Fund under the Proposed Class A Plan would not be directly
related to the expenses actually incurred by PMFD for its Distribution
Activities. Consequently, if PMFD's expenses for Distribution Activities are
less than the distribution and service fees it receives under the Proposed Class
A Plan, it will retain its full fees and realize a profit.

Since inception of the Existing Class A Plan, the reimbursable expenses
incurred thereunder by PMFD have generally equalled or exceeded the amount
reimbursed by the Fund. For each of the fiscal years ended July 31, 1991, 1992
and 1993, PMFD received payments of $5,495, $14,207 and $30,784, respectively,
for the Conservatively Managed Portfolio and $13,389, $31,409 and $48,431,
respectively, for the Strategy Portfolio under the Existing Class A Plan
representing .20 of 1% of the average daily net assets of the Class A shares for
each Portfolio as reimbursement of expenses incurred for Distribution
Activities. Although PMFD agreed to limit its fees under the Existing Class A
Plan to .25 of 1% for the fiscal years ended July 31, 1991, 1992 and 1993, it in
fact further limited its fee to .20 of 1% even though its direct and indirect
reimbursable distribution expenses exceeded such amount. PMFD believes that it
would have similarly limited its fee had the Proposed Class A Plan been in
effect during the past three fiscal years, although it could have assessed the
maximum annual fee of .30 of 1%. Regardless of which Plan will be in effect, the
Distributor has voluntarily agreed to limit its fees for Distribution Activities
to no more

31
<PAGE>
than .25 of 1% of the average daily net assets of the Class A shares of each
Portfolio for the fiscal year ending July 31, 1994. Other expenses incurred by
PMFD for Distribution Activities have been, and will continue to be, paid from
the proceeds of initial sales charges.

Among the major perceived benefits of a compensation type plan, such as the
Proposed Class A Plan, over a reimbursement type plan, such as the Existing
Class A Plan, is the facilitation of administration and accounting. Under
reimbursement plans, all expenses must be specifically accounted for by the
Distributor and attributed to the specific class of shares of a fund in order to
qualify for reimbursement. Although the Proposed Class A Plan will continue to
require quarterly reporting to the Trustees of the amounts accrued and paid
under the Plan and of the expenses actually borne by the Distributor, there will
be no need to match specific expenses to reimbursements as under the Existing
Class A Plan. Thus, the accounting for the Proposed Class A Plan would be
simplified and the timing of when expenditures are to be made by the Distributor
would not be an issue. These considerations, combined with the reasonable
likelihood, although there is no assurance, that the per annum payment rate
under the Proposed Class A Plan will not exceed the expenses incurred by PMFD
for Distribution Activities, suggest that the costs and efforts associated with
a reimbursement plan are unwarranted.

In considering whether to approve the Proposed Class A Plan, the Trustees
reviewed, among other things, the nature and scope of the services to be
provided by PMFD, the purchase options available to investors under the
Alternative Purchase Plan, the amount of expenditures under the Existing Class A
Plan, the relationship of such expenditures to the overall cost structure of
each Portfolio, and comparative data with respect to distribution arrangements
adopted by other investment companies. Based upon such review, the Trustees,
including a majority of the Rule 12b-1 Trustees, determined that there is a
reasonable likelihood that the Proposed Class A Plan will benefit the Fund and
its Class A shareholders.

If approved by shareholders, the Proposed Class A Plan will continue in
effect from year to year, provided such continuance is approved at least
annually by vote of a majority of the Trustees, including a majority of the Rule
12b-1 Trustees.

REQUIRED VOTE

If Proposal No. 2 is approved by shareholders, the Proposed Class A Plan
will require the approval of a majority of the outstanding Class A shares and
Class B shares (as defined in the Investment Company Act) of each Portfolio,

32
<PAGE>
voting separately. If Proposal No. 2 is not approved by shareholders, the
Proposed Class A Plan will only require the approval of a majority of each
Portfolio's outstanding Class A shares. Under the Investment Company Act, a
majority of a class' outstanding shares is defined as the lesser of (i) 67% of a
class' outstanding shares represented at a meeting at which more than 50% of the
outstanding shares of the class are present in person or represented by proxy,
or (ii) more than 50% of a class' outstanding shares. If the Proposed Class A
Plan is not approved as described above by the Shareholders of a Portfolio, the
Existing Class A Plan will continue in its present form with respect to such
Portfolio.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 3.

APPROVAL OF AMENDED AND RESTATED CLASS B
DISTRIBUTION AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS B SHAREHOLDERS ONLY)
(PROPOSAL NO. 4)

On May 4, 1993, the Fund's Trustees approved an amended and restated Class B
Distribution and Service Plan pursuant to Rule 12b-1 under the Investment
Company Act and an amended and restated Class B Distribution Agreement with
Prudential Securities for Class B shares of the Fund (the Proposed Class B Plan
and the Proposed Class B Distribution Agreement, respectively) and recommend
submission of the Proposed Class B Plan to the Fund's Class B shareholders for
approval or disapproval at this Special Meeting of Shareholders. The Proposed
Class B Distribution Agreement does not require, and is not being submitted for,
shareholder approval.

The purpose of the Proposed Class B Plan is to compensate Prudential
Securities, the distributor of the Fund's Class B shares, for providing
distribution assistance to broker-dealers, including Prusec, an affiliated
broker-dealer, and other qualified broker-dealers, if any, whose customers
invest in Class B shares of the Fund and to defray the costs and expenses,
including the payment of account servicing fees, of the services provided and
activities undertaken to distribute Class B shares (Distribution Activities).

The Trustees previously adopted a plan of distribution for the Fund's Class
B shares pursuant to Rule 12b-1 under the Investment Company Act which was
approved by shareholders on January 11, 1990 and last approved by the Trustees
on May 4, 1993 (the Existing Class B Plan). Shareholders of the Fund's Class B
shares are being asked to approve amendments to the Existing Class B Plan that
change it from a reimbursement type plan to a compensation

33
<PAGE>
type plan. The amendments do not change the maximum annual fee that may be paid
to Prudential Securities under the Existing Class B Plan, although the
possibility exists that expenses incurred by Prudential Securities for which it
is entitled to be reimbursed under the Existing Class B Plan may be less than
the fee Prudential Securities will receive under the Proposed Class B Plan. The
amendments are being proposed to facilitate administration and accounting. The
Trustees believe that the Proposed Class B Plan is in the best interest of the
Fund and is reasonably likely to benefit the Fund's Class B shareholders. A copy
of the Proposed Class B Plan is attached hereto as Exhibit D.

THE EXISTING CLASS B PLAN

Under the Existing Class B Plan, the Fund reimburses Prudential Securities
for expenses incurred for Distribution Activities at an annual rate of up to 1%
of the average daily net assets of the Class B shares (up to .25 of 1% of which
may constitute a service fee for the servicing and maintenance of shareholder
accounts). Amounts reimbursable under the Plan that are not paid because they
exceed the maximum annual fee payable thereunder are carried forward and may be
recovered in future years by Prudential Securities from asset-based sales
charges imposed on Class B shares, to the extent such charges do not exceed .75
of 1% per annum of the average daily net assets of the Class B shares, and from
contingent deferred sales charges received from certain redeeming shareholders,
subject to the limitations of the NASD Rules (previously defined under Proposal
No. 3).The NASD Rules place an annual limit of .25 of 1% on fees that may be
imposed for the provision of personal service and/or the maintenance of
shareholder accounts (service fees) and an annual limit of .75 of 1% on asset-
based sales charges (as defined in the NASD Rules). Pursuant to the NASD Rules,
the aggregate deferred sales charges and asset-based sales charges on Class B
shares of the Fund may not, subject to certain exclusions, exceed 6.25% of total
gross sales of Class B shares.

The Existing Class B Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class B shares of the Fund. In addition, all
material amendments thereof must be approved by vote of a majority of the Rule
12b-1 Trustees, cast in person at a meeting called for the purpose of voting on
the Plan. So long as the Existing Class B Plan is in effect, the selection and
nomination of Trustees who are not interested persons of the Fund will be
committed to the discretion of the Rule 12b-1 Trustees.

The Existing Class B Plan may be terminated at any time without payment of
any penalty by the vote of a majority of the Rule 12b-1 Trustees or by the vote
of a majority of the outstanding Class B shares of the Fund (as defined in the

34
<PAGE>
Investment Company Act) on written notice to any other party to such Plan and
will automatically terminate in the event of its assignment (as defined in the
Investment Company Act). For a more detailed description of the Existing Class B
Plan, see "Management of the Fund--The Distributors--Class B Plan."

THE PROPOSED CLASS B PLAN

The Proposed Class B Plan amends the Existing Class B Plan in one material
respect. Under the Existing Class B Plan, the Fund reimburses Prudential
Securities for expenses actually incurred for Distribution Activities up to a
maximum of 1% per annum of the average daily net assets of the Class B shares.
The Proposed Class B Plan authorizes the Fund to pay Prudential Securities the
same maximum annual fee as compensation for its Distribution Activities
regardless of the expenses incurred by Prudential Securities for Distribution
Activities. In contrast to the Existing Class B Plan, the amounts payable by the
Fund under the Proposed Class B Plan would not be directly related to the
expenses actually incurred by Prudential Securities for its Distribution
Activities. Consequently, if Prudential Securities' expenses are less than its
distribution and service fees, it will retain its full fees and realize a
profit. However, if Prudential Securities' expenses exceed the distribution and
service fees received under the Proposed Class B Plan, it will no longer carry
forward such amounts for reimbursement in future years.

Since inception of the Existing Class B Plan, the cumulative reimbursable
expenses incurred thereunder by Prudential Securities have exceeded the amounts
reimbursed by the Fund. As of December 31, 1993, the aggregate amount of
distribution expenses incurred and not yet reimbursed by the Fund or recovered
through contingent deferred sales charges was approximately $11,499,600 for the
Conservatively Managed Portfolio and $8,580,100 for the Strategy Portfolio.

For the fiscal years ended July 31, 1991, 1992 and 1993, Prudential
Securities received $1,499,059, $1,893,579 and $2,673,399, respectively, from
the Fund under the Existing Class B Plan for the Conservatively Managed
Portfolio, representing 1% of the average daily net assets of the Class B shares
of that Portfolio in each year, and spent approximately $2,096,700, $3,414,500
and $4,574,800, respectively, for Distribution Activities for that Portfolio.
For the fiscal years ended July 31, 1991, 1992 and 1993, Prudential Securities
received $1,842,184, $2,675,247 and $3,392,254, respectively, from the Fund
under the Existing Class B Plan for the Strategy Portfolio, representing 1% of
the average daily net assets of the Class B shares of that Portfolio in each
year, and spent approximately $3,037,900, $4,841,800 and $3,861,500,
respectively, for Distribution Activities for that Portfolio. Since the maximum
annual fee under the

35
<PAGE>
Existing Class B Plan is the same as under the Proposed Class B Plan, Prudential
Securities would have received the same annual fee for each Portfolio under the
Proposed Class B Plan as it did under the Existing Class B Plan for the fiscal
years ended July 31, 1991, 1992 and 1993.

Among the major perceived benefits of a compensation type plan, such as the
Proposed Class B Plan, over a reimbursement type plan, such as the Existing
Class B Plan, is the facilitation of administration and accounting. Under
reimbursement plans, all expenses must be specifically accounted for by the
distributor and attributed to the specific class of shares of a fund in order to
qualify for reimbursement. Although the Proposed Class B Plan will continue to
require quarterly reporting to the Trustees of the amounts accrued and paid
under the Plan and of the expenses actually borne by the Distributor, there will
be no need to match specific expenses to reimbursements and no carrying forward
of such amounts as under the Existing Class B Plan. Thus, the accounting for the
Proposed Class B Plan would be simplified and the timing of when expenditures
are to be made by the Distributor ordinarily would not be an issue. Currently,
because the Existing Class B Plan is a reimbursement plan, the Distributor
retains an independent expert to perform a study of its methodology for
determining and substantiating which of its expenses should properly be
allocated to the Fund's Class B shares for reimbursement, the cost of which is
borne by the Fund and other funds for which Prudential Securities serves as
distributor. These considerations, combined with the fact that the cumulative
expenses incurred by Prudential Securities for Distribution Activities have
exceeded the amounts reimbursed by the Portfolios under the Existing Class B
Plan, suggest that the costs and efforts associated with a reimbursement plan
are unwarranted.

In considering whether to approve the Proposed Class B Plan, the Trustees
reviewed, among other things, the nature and scope of the services to be
provided by Prudential Securities, the purchase options available to investors
under the Alternative Purchase Plan, the amount of expenditures under the
Existing Class B Plan, the relationship of such expenditures to the overall cost
structure of each Portfolio, and comparative data with respect to distribution
arrangements adopted by other investment companies. Based upon such review, the
Board of Trustees, including a majority of the Rule 12b-1 Trustees, determined
that there is a reasonable likelihood that the Proposed Class B Plan will
benefit the Fund and its Class B shareholders.

36
<PAGE>
If approved by Class B shareholders, the Proposed Class B Plan will continue
in effect from year to year, provided such continuance is approved at least
annually by vote of a majority of the Trustees, including a majority of the Rule
12b-1 Trustees.

REQUIRED VOTE

The Proposed Class B Plan requires the approval of a majority of the Fund's
outstanding Class B shares of each Portfolio as defined in the Investment
Company Act and as described under Proposal No. 3 above. If the Proposed Class B
Plan is not approved, the Existing Class B Plan will continue in its present
form.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.

APPROVAL OF ELIMINATION OF THE PORTFOLIOS' FUNDAMENTAL
INVESTMENT RESTRICTIONS REGARDING RESTRICTED
AND ILLIQUID SECURITIES
(PROPOSAL NO. 5)

On May 4, 1993, at the request of the Fund's Manager and Subadviser, the
Trustees considered and recommend for shareholder approval revision of each
Portfolio's fundamental investment restrictions regarding illiquid and
restricted securities. The current restrictions are overly confining in light of
the development of an active market in those securities that, although subject
to restrictions on resale, are transferable under Rule 144A under the Securities
Act of 1933, as amended (the Securities Act). The Trustees recommend elimination
of each Portfolio's Investment Restrictions Nos. 12 and 16, which limit the
purchase of any security that is restricted as to disposition under federal
securities laws or contractually and repurchase agreements with maturities of
more than seven days.

Investment Restriction No. 12, which is proposed to be eliminated, currently
provides that each Portfolio may not:
Purchase any security restricted as to disposition under federal
securities laws if such purchase would result in more than 5% of the value
of the total assets of the Portfolio being invested in such securities.

Investment Restriction No. 16, which is proposed to be eliminated, currently
provides that each Portfolio may not:
Purchase securities for which there are legal or contractual
restrictions on resale or invest in securities for which there is no readily
available

37
<PAGE>
market, including repurchase agreements having maturities of more than seven
days, if more than 10% of the Portfolio's total assets would be invested in
such securities.

The Trustees recommend replacement of such fundamental investment
restrictions with a non-fundamental investment policy that could be modified by
the vote of the Trustees in response to regulatory or market developments
without further approval by shareholders. The change would expand each
Portfolio's ability to invest in securities which have restrictions on resale
but have a readily available institutional market, such as securities eligible
for resale pursuant to Rule 144A under the Securities Act. The proposed
non-fundamental policy would provide as follows:

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

An open-end investment company may not hold a significant amount of
restricted securities or illiquid securities because such securities may present
problems of accurate valuation and because it is possible that the investment
company would have difficulty satisfying redemptions within seven days. The
proposed investment policy is not expected by the Manager or the Trustees to
affect either Portfolio's liquidity because it excludes from illiquid securities
only those Rule 144A securities for which there is a readily available market.

Historically, illiquid securities have been defined to include securities
subject to contractual or legal restrictions on resale, securities for which
there is no readily available market and repurchase agreements having a maturity
of longer than seven days. In recent years, however, the securities markets have
evolved significantly, with the result that new types of instruments have
developed which make the Portfolios' present restrictions on illiquid
investments overly broad and unnecessarily restrictive in the view of the Fund's
Manager. In particular, the SEC adopted Rule 144A in April 1990, which allows
for a broader institutional trading market for securities otherwise subject to
restrictions on resale to the general public. SEC interpretations give directors
of registered investment

38
<PAGE>
companies the discretion to designate restricted securities as liquid if the
presence of a readily available market can be demonstrated and if a current
market value can be ascertained. In adopting Rule 144A, the SEC recognized the
increased size and liquidity of the institutional markets for unregistered
securities and the importance of institutional investors in the capital
formation process. In 1992, the SEC staff issued amended guidelines to the
effect that up to 15% (as opposed to 10%) of an open-end fund's net assets may
be invested in illiquid securities, including repurchase agreements with a
maturity of longer than seven days. The guidelines were amended in connection
with the SEC's efforts to remove unnecessary barriers to capital formation and
to facilitate access to the capital markets by small businesses.

The staff of the SEC has also taken the position that purchased over-the-
counter options and the assets used as "cover" for written over-the-counter
options are illiquid securities unless a fund and the counterparty have provided
for the fund at its option to unwind the over-the-counter option. The exercise
of such an option ordinarily would involve the payment by a fund of an amount
designed to reflect the counterparty's economic loss from an early termination,
but does allow the fund to treat the assets used as "cover" as "liquid."

The proposed change would expand each Portfolio's ability to invest in
securities which are eligible for resale pursuant to Rule 144A. Rule 144A
securities generally have a readily available institutional market, and the
proposed change would expand to 10% the amount of net assets that may be
invested in illiquid assets. The markets for certain equity securities,
corporate bonds and notes are almost exclusively institutional. These
institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold. In the opinion of the Fund's
Manager, the fact that there are restrictions on resale to the general public is
therefore not necessarily indicative of the liquidity of such investments. If
designated as liquid (under the supervision of the Trustees), these Rule 144A
securities would be exempt from the 10% limitation.

In order to take advantage of the market for Rule 144A securities, including
Rule 144A securities, and the increasingly liquid institutional trading markets,
the Manager recommends that the Portfolios eliminate their fundamental policies
regarding illiquid and restricted securities so that Rule 144A securities that
are nonetheless liquid may be purchased without regard to the current
limitations. By making the Portfolios' policies on illiquid securities
non-fundamental, the Portfolios will be able to respond more quickly to
regulatory and market developments because a shareholder vote will not be
required to define what types of securities should be deemed illiquid or to
change the applicable permissible percentage limitation. If this proposal is
approved by shareholders, the Manager and the Subadviser, under the supervision
of the Trustees, will

39
<PAGE>
monitor the liquidity of specific types of securities and, based on their
recommendations, the Trustees will from time to time determine whether such
securities should be deemed to be liquid in light of legal, regulatory and
market developments.

In reaching liquidity decisions, the Manager and the Subadviser will
consider, INTER ALIA, the following factors:

1. the frequency of trades and quotes for the security;

2. the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers;

3. dealer undertakings to make a market in the security; and

4. the nature of the security and the nature of the marketplace trades
(E.G., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).

The Trustees believe that adoption of Proposal No. 5 is in the best
interests of each Portfolio and its shareholders.

REQUIRED VOTE

Amendment of the Portfolios' investment restrictions to eliminate Investment
Restrictions Nos. 12 and 16 requires the approval of a majority of the
outstanding voting securities of each Portfolio. Under the Investment Company
Act, a majority of a Portfolio's outstanding securities is defined as the lesser
of (i) 67% of the Portfolio's outstanding shares represented at a meeting at
which more than 50% of the Portfolio's outstanding shares are present in person
or represented by proxy, or (ii) more than 50% of the Portfolio's outstanding
shares. In the event shareholders do not approve the proposed modification of a
Portfolio's investment policies, the current limitations would remain
fundamental policies which could not be changed without the approval of a
majority of the outstanding voting securities of the Portfolio.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 5.

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<PAGE>
APPROVAL OF A MODIFICATION OF EACH PORTFOLIO'S INVESTMENT
RESTRICTION LIMITING THE PORTFOLIO'S ABILITY TO INVEST IN A
SECURITY IF THE PORTFOLIO WOULD HOLD MORE THAN TEN
PERCENT OF ANY CLASS OF SECURITIES OF AN ISSUER
(PROPOSAL NO. 6)

On May 4, 1993, at the request of the Fund's Manager and Subadviser, the
Trustees considered and recommend for shareholder approval modification of
Investment Restriction No. 5 to delete the restriction that prohibits each
Portfolio from purchasing a security if the Portfolio would hold more than ten
percent of any class of securities of an issuer.

Each Portfolio currently may not purchase a security if the Portfolio would
then hold more than 10% of any class of securities of an issuer. Under this
restriction, all common stock issues of an issuer, all preferred stock issues,
and all debt issues are each taken as a separate single class. The Fund's
Subadviser believes the restriction is confining and has requested its deletion.
This restriction is not required under federal securities laws. If the proposal
is approved, and a state securities commission requires inclusion of this
limitation, each Portfolio would continue to comply with the restriction as a
non-fundamental operating policy so long as the Portfolio sells its shares in
that state.

Investment Restriction No. 5 provides that each Portfolio may not:

Purchase any security if as a result the Portfolio would then hold more
than 10% of any class of securities of an issuer (taking all common
stock issues of an issuer as a single class, all preferred stock issues
as a single class and all debt issues as a single class) or more than
10% of the outstanding voting securities of an issuer.

The Trustees are proposing that Investment Restriction No. 5 be modified
to read as follows:

Each Portfolio may not:

Purchase any security if as a result the Portfolio would then hold more
than 10% of the outstanding voting securities of an issuer.

Currently, each Portfolio may not hold more than 10% of the outstanding
voting securities of an issuer pursuant to Section 5(b)(1) of the Investment
Company Act and state securities laws. This restriction would remain in effect.

The Trustees believe that adoption of Proposal No. 6 is in the best
interests of each Portfolio and its shareholders.

41
<PAGE>
REQUIRED VOTE

Adoption of Proposal No. 6 requires the approval of a majority of the
outstanding voting securities of each Portfolio, as defined by the Investment
Company Act and described under Proposal No. 5. If the proposed change in
investment policy is not approved by the shareholders of a Portfolio, the
current limitations would remain a fundamental policy which could not be changed
without the approval of a majority of the outstanding voting securities of the
Portfolio.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 6.

APPROVAL OF ELIMINATION OF EACH PORTFOLIO'S INVESTMENT
RESTRICTION LIMITING INVESTMENT IN THE SECURITIES OF ANY
ISSUER IN WHICH THE OFFICERS AND TRUSTEES OF THE FUND
OR THE OFFICERS AND DIRECTORS OF ITS INVESTMENT ADVISER
OWN MORE THAN A SPECIFIED INTEREST
(PROPOSAL NO. 7)

On May 4, 1993, at the request of the Fund's Manager, the Trustees
considered and recommend for shareholder approval elimination of each
Portfolio's Investment Restriction No. 7, which provides that each Portfolio may
not:

Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or Trustee of the Fund or the Fund's Manager or Subadviser owns more
than 1/2 of 1% of the outstanding securities of such issuer, and such
officers and Trustees who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer.

The Manager has advised the Trustees that the restriction upon the
Portfolios' investing in companies in which officers and Trustees of the Fund or
officers and directors of the Manager own more than 1/2 of 1% of the outstanding
securities of such company was initially adopted to comply with a restriction
imposed in connection with the sale of the Portfolios' shares in Ohio. If the
proposal is approved, each Portfolio would continue to comply with the
restriction as a non-fundamental operating policy so long as the Portfolio sells
its shares in Ohio. However, if Ohio were to eliminate the requirement or the
Portfolios stopped offering their shares for sale in Ohio, the Trustees could
eliminate the operating policy without the necessity of shareholder approval.
The Portfolios do not currently intend to stop offering their shares in Ohio,
nor

42
<PAGE>
is the Fund or the Fund's Manager aware of any proposal to change the Ohio law.
The Trustees believe that adoption of Proposal No. 7 is in the best interests of
each Portfolio and its shareholders.

REQUIRED VOTE

Amendment of the Portfolios' investment restrictions to delete Investment
Restriction No. 7 requires the approval of a majority of each Portfolio's
outstanding voting securities, as defined in the Investment Company Act and as
described under Proposal No. 5. If the proposed change in investment policy is
not approved by the shareholders of a Portfolio, the current limitations would
remain a fundamental policy which could not be changed without the approval of a
majority of the outstanding voting securities of the Portfolio.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 7.

APPROVAL OF A MODIFICATION OF THE PORTFOLIOS'
INVESTMENT RESTRICTIONS TO PERMIT EACH PORTFOLIO
TO ENTER INTO INTEREST RATE SWAP TRANSACTIONS
(PROPOSAL NO. 8)

On February 8, 1994, at the request of the Fund's Subadviser, the Trustees
considered and recommend for shareholder approval modification of the
Portfolios' investment restrictions to permit each Portfolio to enter into
interest rate swap transactions with respect to up to 5% of its total assets.
Interest rate swaps would be used to hedge the value of existing portfolio
assets or assets a Portfolio intends to acquire. Interest rate swaps involve the
exchange by a Portfolio with another party of their respective commitments to
pay or receive interest (E.G., an exchange of floating rate payments for
fixed-rate payments). Each Portfolio would enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio or to protect against any increase in the price of securities
it anticipates purchasing at a later date. Each Portfolio would use interest
rate swaps for hedging purposes and not as a speculative investment.

The use of interest rate swaps is a highly speculative activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Manager were incorrect in its
forecast of market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared to what it would have
been if this investment technique were never used. Interest rate swaps do not
involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate swaps is limited to
the net amount of interest payments that a Portfolio is contractually obligated
to make. If the other party to an interest rate swap defaults, a Portfolio's
risk of loss consists of

43
<PAGE>
the net amount of interest payments that the Portfolio is contractually entitled
to receive. Since interest rate swaps are individually negotiated, each
Portfolio expects to achieve an acceptable degree of correlation between its
rights to receive interest on its portfolio securities and its rights and
obligations to receive and pay interest pursuant to interest rate swaps.

The use of interest rate swaps would require modification of each
Portfolio's Investment Restriction No. 3 to clarify that collateral arrangements
with respect to interest rate swap transactions are not deemed to be a senior
security or a borrowing.

Investment Restriction No. 3 is proposed to be amended as follows (added
language underlined, deleted language in brackets):

Each Portfolio may not:

3. Issue senior securities, borrow money or pledge its assets, except that
the Portfolio may borrow up to 20% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or for
the clearance of transactions. The Portfolio may pledge up to 20% of the value
of its total assets to secure such borrowings. For purposes of this restriction,
the preference as to shares of a Portfolio in liquidation and as to dividends
over all other Portfolios of the Fund with respect to assets specifically
allocated to that Portfolio, the purchase or sale of securities on a when-issued
or delayed delivery basis, the purchase of forward foreign currency exchange
contracts and collateral arrangements relating thereto, the purchase and sale of
options, financial futures contracts, options on such contracts and collateral
arrangements with respect thereto and with respect to interest rate swap
transactions involving up to 5% of the Portfolio's total assets and obligations
of the Fund to Trustees pursuant to deferred compensation arrangements are not
deemed to be the issuance of a senior security or a pledge of assets.

The Trustees believe that adoption of Proposal No. 8 is in the best
interests of the Fund and its shareholders.

REQUIRED VOTE

Adoption of Proposal No. 8 requires the approval of a majority of the
outstanding voting securities of each Portfolio, as defined by the Investment
Company Act and described under Proposal No. 5. If the proposed change in
investment policy is not approved by the shareholders of a Portfolio, the
current limitations would remain a fundamental policy which could not be changed
without the approval of a majority of the outstanding voting securities of the
Portfolio.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 8.

44
<PAGE>
RATIFICATION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 9)

The Trustees of the Fund, including Trustees who are not interested persons
of the Fund, have selected Deloitte & Touche as independent accountants for the
Fund for the fiscal year ending July 31, 1994. The ratification of the selection
of independent public accountants is to be voted upon at the Meeting and it is
intended that the persons named in the accompanying Proxy will vote for Deloitte
& Touche. No representative of Deloitte & Touche is expected to be present at
the Meeting of Shareholders.

The policy of the Trustees regarding engaging independent accountants'
services is that management may engage the Fund's principal independent public
accountants to perform any service(s) normally provided by independent
accounting firms, provided that such service(s) meet(s) any and all of the
independent requirements of the American Institute of Certified Public
Accountants and the SEC. In accordance with this policy, the Audit Committee
reviews and approves all services provided by the independent public accountants
prior to their being rendered. The Trustees of the Fund receive a report from
their Audit Committee relating to all services after they have been performed by
the Fund's independent accountants.

REQUIRED VOTE

The affirmative vote of a majority of the shares present, in person or by
proxy, at the Meeting is required for ratification.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 9.

OTHER MATTERS

No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of shareholders arise,
including any question as to an adjournment of the Meeting, the persons named in
the enclosed Proxy will vote thereon according to their best judgment in the
interests of the Fund.

45
<PAGE>
SHAREHOLDER PROPOSALS

The Fund is not required to hold annual meetings of shareholders and the
Trustees currently do not intend to hold such meetings unless shareholder action
is required in accordance with the Investment Company Act or the Fund's By-laws.
A shareholder proposal intended to be presented at any meeting of shareholders
of the Fund hereinafter called must be received by the Fund a reasonable time
before the Trustees' solicitation relating thereto is made in order to be
included in the Fund's proxy statement and form of proxy relating to that
meeting. The mere submission of a proposal by a shareholder does not guarantee
that such proposal will be included in the proxy statement because certain rules
under the federal securities laws must be complied with before inclusion of the
proposal is required.

S. JANE ROSE
SECRETARY

Dated: March , 1994

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.

46
<PAGE>
EXHIBIT A

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993

ASSETS

<TABLE>
<S> <C>
CASH AND SHORT-TERM INVESTMENTS....................... $42,667,507
LOAN TO AFFILIATE..................................... 85,000,000
MANAGEMENT, ADMINISTRATION AND OTHER FEES
RECEIVABLE........................................... 17,897,292
TRANSFER AGENCY AND FIDUCIARY FEES RECEIVABLE......... 3,744,874
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
NET.................................................. 10,495,702
OTHER ASSETS.......................................... 4,676,430
-----------
$164,481,805
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to affiliates................................... $48,794,366
Accounts payable and accrued expenses............... 11,208,209
Income taxes payable to affiliate -- net............ 2,937,828
-----------
62,940,403
-----------
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Class A common stock, $1 par value (1,000 shares
authorized, 850 shares outstanding)................ 850
Class B common stock, $1 par value (1,000 shares
authorized, 150 shares outstanding)................ 150
Additional paid-in capital.......................... 24,999,000
Retained earnings................................... 76,541,402
-----------
101,541,402
-----------
$164,481,805
-----------
-----------
</TABLE>

See notes to consolidated statement of financial condition.

A-1
<PAGE>
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prudential Mutual Fund Management, Inc. ("PMF") and subsidiaries (the
"Company"), an indirect wholly-owned subsidiary of The Prudential Insurance
Company of America (the "Prudential"), were created to operate as the manager,
distributor and/or transfer agent for investment companies.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statement includes the accounts of PMF and its
wholly-owned subsidiaries, Prudential Mutual Fund Services, Inc. ("PMFS") and
Prudential Mutual Fund Distributors, Inc. ("PMFD"). All intercompany profits,
transactions and balances have been eliminated.

INCOME TAXES

The Company is a member of a group of affiliated companies which join in
filing a consolidated Federal income tax return. Pursuant to a tax allocation
agreement, tax expense is determined for individual profitable companies on a
separate return basis. Profit members pay this amount to an affiliated company
which in turn apportions the payment among the loss members in proportion to
their losses. In January 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
adoption of SFAS 109 did not have a material effect on the Company's financial
position.

2. SHORT-TERM INVESTMENTS
At December 31, 1993, the Company had invested $35,411,571 in several money
market funds which PMF manages.

3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:

<TABLE>
<S> <C>
Furniture...................................... $6,481,799
Equipment...................................... 9,181,984
Leasehold improvements......................... 3,407,213
----------
19,070,996
Less accumulated depreciation and
amortization.................................. 8,575,294
----------
$10,495,702
----------
----------
</TABLE>

A-2
<PAGE>
4. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company participates in a variety of
financial and administrative transactions with affiliates.

The loan to affiliate bears interest at 3.45 percent at December 31, 1993
and is due on demand.

The caption "Due to affiliates" includes $18,241,795 at December 31, 1993
for reimbursement of employee compensation and benefits, and other
administrative and operating expenses. This amount is noninterest-bearing and
payable on demand.

The Company has entered into subadvisory agreements with The Prudential
Investment Corporation ("PIC"), a wholly-owned subsidiary of Prudential. Under
these agreements, PIC furnishes investment advisory services to substantially
all the funds for which the Company acts as Manager. At December 31, 1993 there
were unpaid fees due to PIC of $23,926,277, included in the caption "Due to
affiliates."

Distribution expenses include commissions and account servicing fees paid
to, or on account of, financial advisors of Prudential Securities Incorporated
("Prudential Securities") and Pruco Securities Corporation ("PruSec"),
affiliated broker-dealers and indirect wholly-owned subsidiaries of Prudential,
advertising expenses, the cost of printing and mailing prospectuses to potential
investors, and indirect and overhead costs of Prudential Securities and PruSec,
including lease, utility, communications and sales promotion expenses. At
December 31, 1993 there were unpaid distribution expenses of approximately
$6,626,000, included in the caption "Due to affiliates."

5. CAPITAL
PMFD is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which
requires the maintenance of minimum net capital and requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not exceed 15 to
1. At December 31, 1993, PMFD had net capital of $2,308,981, which was
$1,859,405 in excess of its required net capital of $449,576. PMFD had a ratio
of aggregate indebtedness to net capital of 2.9 to 1.

A-3
<PAGE>
6. COMMITMENTS
The Company leases office space under operating leases expiring in 2003. The
leases are subject to escalation based upon certain costs incurred by the
lessor. Future minimum rentals, as of December 31, 1993, under the leases, are
as follows:

<TABLE>
<CAPTION>
YEAR MINIMUM RENTAL
- -------------------------------------------------------- ----------------
<S> <C>
1994.................................................... $ 2,738,000
1995.................................................... 2,865,000
1996.................................................... 3,375,000
1997.................................................... 3,385,000
1998.................................................... 3,230,000
Thereafter.............................................. 13,800,000
----------------
$ 29,393,000
----------------
----------------
</TABLE>

7. PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has two defined benefit pension plans (the "Plans") sponsored by
the Prudential and Prudential Securities. The Plans cover substantially all of
the Company's employees. The funding policy is to contribute annually the amount
necessary to satisfy the Internal Revenue Service funding standards. In
addition, the Company has two defined benefit plans for key executives, the
Supplemental Retirement Plan (SRP) for which estimated pension costs are
currently accrued but not funded.

The Company provides certain health care and life insurance benefits for
eligible retired employees. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"). SFAS 106 changed the
practice of accounting for postretirement benefits on a cash basis to an accrual
basis, whereby employers record the projected future cost of providing such
postretirement benefits as employees render services instead of when benefits
are paid. This new accounting method has no effect on the Company's cash outlays
for these retirement benefits. The adoption of SFAS 106 did not materially
impact the Company's financial position.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," ("SFAS 112") which is effective for fiscal years beginning after
December 15, 1993. Although several benefits are fully insured which result in
no SFAS 112 obligation, the Company currently has an obligation and resulting

A-4
<PAGE>
7. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
expense under SFAS 112 for medical benefits provided under long-term disability.
The Company will adopt SFAS 112 on January 1, 1994. Management believes that
implementation will have no material effect on the Company's financial position.

8. CONTINGENCY
On October 12, 1993, a purported class action lawsuit was instituted against
PMF, et al and certain current and former directors of a fund managed by PMF.
The plaintiffs seek damages in an unspecified amount for excessive management
and distribution fees they allege were incurred by them. Although the outcome of
this litigation cannot be predicted at this time, the defendants believe they
have meritorious defenses to the claims asserted in the complaint and intend to
defend this action vigorously. In any case, management does not believe that the
outcome of this action is likely to have a material adverse effect on the
Company's financial position.

A-5
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Prudential Mutual Fund Management, Inc.:

We have audited the accompanying consolidated statement of financial
condition of Prudential Mutual Fund Management, Inc. and subsidiaries as of
December 31, 1993. This consolidated financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement based on our audit.

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 consolidated financial statement is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated statement of
financial condition. 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, such consolidated statement of financial condition presents
fairly, in all material respects, the financial position of Prudential Mutual
Fund Management, Inc. and subsidiaries at December 31, 1993 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE

New York, New York
January 26, 1994

A-6
<PAGE>
EXHIBIT B

PRUDENTIAL FLEXIFUND
FORM OF AMENDMENT TO CERTIFICATE OF DESIGNATION

(a) The following five new paragraphs, numbered 3 through 7, are inserted
immediately after paragraph 2 of the Amended and Restated Establishment and
Designation of Series of Shares, dated November 16, 1990 and filed with the
Secretary of State of The Commonwealth of Massachusetts on November 27, 1990
(the "Certificate of Designation"), reading as follows:

3. The shares of beneficial interest of each series of the Trust are
classified into three classes, designated "Class A Shares," "Class B
Shares," and "Class C Shares." An unlimited number of each such class of
each such series may be issued. All Class A Shares and Class B Shares of
each such series outstanding on the date on which the amendments provided
for herein become effective shall be and continue to be Class A Shares and
Class B Shares, respectively, of such series.

4. The holders of Class A Shares, Class B Shares and Class C Shares of
each series having the same shall be considered Shareholders of such series,
and shall have the relative rights and preferences set forth herein and in
the Declaration of Trust with respect to Shares of such series, and shall
also be considered Shareholders of the Trust for all other purposes
(including, without limitation, for purposes of receiving reports and
notices and the right to vote) and, for matters reserved to the Shareholders
of one or more other classes or series by the Declaration of Trust or by any
instrument establishing and designating a particular class or series, or as
required by the Investment Company Act of 1940 and/or the rules and
regulations of the Securities and Exchange Commission thereunder
(collectively, as from time to time in effect, the "1940 Act") or other
applicable laws.

5. The Class A Shares, Class B Shares and Class C Shares of each series
shall represent an equal proportionate interest in the share of such class
in the Trust Property belonging to that series, adjusted for any liabilities
specifically allocable to the Shares of that class, and each Share of any
such class shall have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that the expenses related
directly or indirectly to the distribution of the Shares of a class, and any
service fees to which such class is subject (as determined by the Trustees),

B-1
<PAGE>
shall be borne solely by such class, and such expenses shall be
appropriately reflected in the determination of net asset value and the
dividend, distribution and liquidation rights of such class.

6. (a) Class A Shares of each series shall be subject to (i) a front-
end sales charge and (ii) (A) an asset-based sales charge pursuant to a plan
under Rule 12b-1 of the 1940 Act (a "Plan"), and/or (B) a service fee for
the maintenance of shareholder accounts and personal services, in such
amounts as shall be determined from time to time.

(b) Class B Shares of each series shall be subject to (i) a
contingent deferred sales charge and (ii) (A) an asset-based sales charge
pursuant to a Plan, and/or (B) a service fee for the maintenance of
shareholder accounts and personal services, in such amounts as shall be
determined from time to time.

(c) Class C Shares of each series shall not be subject to either a
front-end sales charge or a contingent deferred sales charge but shall be
subject to (A) an asset-based sales charge pursuant to a Plan, and/or (B) a
service fee for the maintenance of shareholder accounts and personal
services, in such amounts as shall be determined from time to time.

7. Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that holders of Shares of any
series shall have the right to convert said Shares into Shares of one or
more other series of registered investment companies specified for the
purpose in this Trust's Prospectus for the series accorded such right, that
holders of any class of Shares of a series shall have the right to convert
such Shares into Shares of one or more other classes of such series, and
that Shares of any class of a series shall be automatically converted into
Shares of another class of such series, in each case in accordance with such
requirements and procedures as the Trustees may from time to time establish.
The requirements and procedures applicable to such mandatory or optional
conversion of Shares of any such class or series shall be set forth in the
Prospectus in effect with respect to such Shares.

(b) Paragraph 3 of the Certificate of Designation is renumbered as paragraph
8, and amended in its entirety to read as follows:

8. Shareholders of each series and class shall vote as a separate
series or class, as the case may be, on any matter to the extent required
by, and any matter shall be deemed to have been effectively acted upon with
respect to any series or class as provided in, Rule 18f-2, as from time to
time in effect, under the 1940 Act, or any successor rule and by the
Declaration

B-2
<PAGE>
of Trust. Except as otherwise required by the 1940 Act, the Shareholders of
each class of any series having more than one class of Shares, voting as a
separate class, shall have sole and exclusive voting rights with respect to
the provisions of any Plan applicable to Shares of such class, and shall
have no voting rights with respect to provisions of any Plan applicable
solely to any other class of Shares of such series.

B-3
<PAGE>
EXHIBIT C

PRUDENTIAL FLEXIFUND
DISTRIBUTION AND SERVICE PLAN
(CLASS A SHARES)
INTRODUCTION

The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential FlexiFund (the Fund) and by
Prudential Mutual Fund Distributors, Inc., the Fund's distributor (the
Distributor).

The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will employ the Distributor to distribute
Class A shares issued by the Fund (Class A shares). Under the Distribution
Agreement, the Distributor will be entitled to receive payments from investors
of front-end sales charges with respect to the sale of Class A shares. Under the
Plan, the Fund intends to pay to the Distributor, as compensation for its
services, a distribution and service fee with respect to Class A shares.

A majority of the Trustees of the Fund, including a majority of Trustees who
are not "interested persons" of the Fund (as defined in the Investment Company
Act) and who have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it (the Rule 12b-1 Trustees), have
determined by votes cast in person at a meeting called for the purpose of voting
on this Plan that there is a reasonable likelihood that adoption of this Plan
will benefit the Fund and its shareholders. Expenditures under this Plan by the
Fund for Distribution Activities (defined below) are primarily intended to
result in the sale of Class A shares of the Fund within the meaning of paragraph
(a)(2) of Rule 12b-1 promulgated under the Investment Company Act.

The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.

C-1
<PAGE>
THE PLAN

The material aspects of the Plan are as follows:

1. DISTRIBUTION ACTIVITIES

The Fund shall engage the Distributor to distribute Class A shares of
the Fund and to service shareholder accounts using all of the facilities of
the distribution networks of Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), including sales
personnel and branch office and central support systems, and also using such
other qualified broker-dealers and financial institutions as the Distributor
may select. Services provided and activities undertaken to distribute Class
A shares of the Fund are referred to herein as "Distribution Activities."

2. PAYMENT OF SERVICE FEE

The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of
.25 of 1% per annum of the average daily net assets of the Class A shares
(service fee). The Fund shall calculate and accrue daily amounts payable by
the Class A shares of the Fund hereunder and shall pay such amounts monthly
or at such other intervals as the Trustees may determine.

3. PAYMENT FOR DISTRIBUTION ACTIVITIES

The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2
hereof), of .30 of 1% per annum of the average daily net assets of the Class
A shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class A shares
of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Trustees may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice.

Amounts paid to the Distributor by the Class A shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any
other class of shares of the Fund except that distribution expenses
attributable to the Fund as a whole will be allocated to the Class A shares
according to the ratio of the sales of Class A shares to the total sales of
the Fund's shares over the Fund's fiscal year or such other allocation
method approved by the Trustees. The allocation of distribution expenses
among classes will be subject to the review of the Trustees.

C-2
<PAGE>
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:

(a) amounts paid to Prudential Securities for performing services
under a selected dealer agreement between Prudential Securities and the
Distributor for sale of Class A shares of the Fund, including sales
commissions and trailer commissions paid to, or on account of, account
executives and indirect and overhead costs associated with Distribution
Activities, including central office and branch offices;

(b) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of Class A
shares of the Fund, including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;

(c) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports and
sales literature to persons other than current shareholders of the Fund;
and

(d) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class A shares of
the Fund.

4. QUARTERLY REPORTS; ADDITIONAL INFORMATION

An appropriate officer of the Fund will provide to the Trustees of the
Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1.
The Distributor will provide to the Trustees of the Fund such additional
information as the Trustees shall from time to time reasonably request,
including information about Distribution Activities undertaken or to be
undertaken by the Distributor.

The Distributor will inform the Trustees of the Fund of the commissions
and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor.

C-3
<PAGE>
5. EFFECTIVENESS; CONTINUATION

The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.

If approved by a vote of a majority of the outstanding voting securities
of the Class A shares of the Fund, the Plan shall, unless earlier terminated
in accordance with its terms, continue in full force and effect thereafter
for so long as such continuance is specifically approved at least annually
by a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.

6. TERMINATION

This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class A shares
of the Fund.

7. AMENDMENTS

The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof
so as to increase materially the amounts payable under this Plan unless such
amendment shall be approved by the vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act) of the Class A
shares of the Fund. All material amendments of the Plan shall be approved by
a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.

8. RULE 12B-1 TRUSTEES

While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.

9. RECORDS

The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less
than six years from the date of effectiveness of the Plan, such agreements
or reports, and for at least the first two years in an easily accessible
place.

C-4
<PAGE>
10. ENFORCEMENT OF CLAIMS

The name "Prudential FlexiFund" is the designation of the Trustees under
a Declaration of Trust dated February 23, 1987 and all persons dealing with
the Fund must look solely to the property of the Fund for the enforcement of
any claims against the Fund, and neither the Trustees, nor officers, nor
agents of the shareholders assume any personal liability for obligations
entered into on behalf of the Fund.

Dated:

C-5
<PAGE>
EXHIBIT D

PRUDENTIAL FLEXIFUND
DISTRIBUTION AND SERVICE PLAN
(CLASS B SHARES)
INTRODUCTION

The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential FlexiFund (the Fund) and by
Prudential Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).

The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will employ the Distributor to distribute
Class B shares issued by the Fund (Class B shares). Under the Distribution
Agreement, the Distributor will be entitled to receive payments from investors
of contingent deferred sales charges with respect to certain repurchases and
redemptions of Class B shares. Under the Plan, the Fund wishes to pay to the
Distributor, as compensation for its services, a distribution and service fee
with respect to Class B shares.

A majority of the Trustees of the Fund including a majority who are not
"interested persons" of the Fund (as defined in the Investment Company Act) and
who have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the Rule 12b-1 Trustees), have determined by
votes cast in person at a meeting called for the purpose of voting on this Plan
that there is a reasonable likelihood that adoption of this Plan will benefit
the Fund and its shareholders. Expenditures under this Plan by the Fund for
Distribution Activities (defined below) are primarily intended to result in the
sale of Class B shares of the Fund within the meaning of paragraph (a)(2) of
Rule 12b-1 promulgated under the Investment Company Act.

D-1
<PAGE>
THE PLAN

The material aspects of the Plan are as follows:

1. DISTRIBUTION ACTIVITIES
The Fund shall engage the Distributor to distribute Class B shares of
the Fund and to service shareholder accounts using all of the facilities of
the Prudential Securities distribution network including sales personnel and
branch office and central support systems, and also using such other
qualified broker-dealers and financial institutions as the Distributor may
select, including Pruco Securities Corporation (Prusec). Services provided
and activities undertaken to distribute Class B shares of the Fund are
referred to herein as "Distribution Activities."

2. PAYMENT OF SERVICE FEE
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of
.25 of 1% per annum of the average daily net assets of the Class B shares
(service fee). The Fund shall calculate and accrue daily amounts payable by
the Class B shares of the Fund hereunder and shall pay such amounts monthly
or at such other intervals as the Trustees may determine.

3. PAYMENT FOR DISTRIBUTION ACTIVITIES
The Fund shall pay to the Distributor as compensation for its services a
distribution fee of .75 of 1% per annum of the average daily net assets of
the Class B shares of the Fund for the performance of Distribution
Activities. The Fund shall calculate and accrue daily amounts payable by the
Class B shares of the Fund hereunder and shall pay such amounts monthly or
at such other intervals as the Trustees may determine. Amounts payable under
the Plan shall be subject to the limitations of Article III, Section 26 of
the NASD Rules of Fair Practice.

Amounts paid to the Distributor by the Class B shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any
other class of shares of the Fund except that distribution expenses
attributable to the Fund as a whole will be allocated to the Class B shares
according to the ratio of the sale of Class B shares to the total sales of
the Fund's shares over the Fund's fiscal year or such other allocation
method approved by the Trustees. The allocation of distribution expenses
among classes will be subject to the review of the Trustees.

D-2
<PAGE>
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:

(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;

(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;

(c) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of Class B
shares of the Fund, including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;

(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports and
sales literature to persons other than current shareholders of the Fund;
and

(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other than
Prusec) which have entered into selected dealer agreements with the
Distributor with respect to Class B shares of the Fund.

4. QUARTERLY REPORTS; ADDITIONAL INFORMATION
An appropriate officer of the Fund will provide to the Trustees of the
Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1.
The Distributor will provide to the Trustees of the Fund such additional
information as they shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be undertaken by
the Distributor.

The Distributor will inform the Trustees of the Fund of the commissions
and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.

5. EFFECTIVENESS; CONTINUATION
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund.

D-3
<PAGE>
If approved by a vote of a majority of the outstanding voting securities
of the Class B shares of the Fund, the Plan shall, unless earlier terminated
in accordance with its terms, continue in full force and effect thereafter
for so long as such continuance is specifically approved at least annually
by a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.

6. TERMINATION
This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class B shares
of the Fund.

7. AMENDMENTS
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof
so as to increase materially the amounts payable under this Plan unless such
amendment shall be approved by the vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act) of the Class B
shares of the Fund. All material amendments of the Plan shall be approved by
a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.

8. RULE 12B-1 TRUSTEES
While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.

9. RECORDS
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less
than six years from the date of effectiveness of the Plan, such agreements
or reports, and for at least the first two years in an easily accessible
place.

10. ENFORCEMENT OF CLAIMS
The name "Prudential FlexiFund" is the designation of the Trustees under
a Declaration of Trust dated February 23, 1987 and all persons dealing with
the Fund must look solely to the property of the Fund for the enforcement of
any claims against the Fund, and neither the Trustees, officers, or agents
of shareholders assume any personal liability for obligations entered into
on behalf of the Fund.

Dated:

D-4

<PAGE>

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PROXY (CLASS A)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.

PRUDENTIAL FLEXIFUND
STRATEGY PORTFOLIO
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.
The undersigned hereby appoints Susan C.Cote, S. Jane Rose and Marguerite E.H.
Morrison as proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the Class A
shares of beneficial interest of Prudential Flexifund-Strategy Portfolio held of
record by the undersigned on _____________, 1994 at the Special Meeting of
Shareholders to be held on _____________, 1994, or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES
WITHHOLD ALL NOMINEES
WITHHOLD THOSE LISTED ON BACK

To withhold authority for any individual nominee, please write name on back of
form.
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III

FOR AGAINST ABSTAIN
2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

3. To approve an amended and restated Class A Distribution and Service Plan.

4. Not applicable to Class A shareholders.

5. To approve the elimination of the Strategy Portfolio's investment
restrictions regarding restricted and illiquid securities.

6. To approve an amendment of the Strategy Portfolio's investment restriction
limiting the Portfolio's ability to invest in a security if the Portfolio would
hold more than 10% of any class of securities of an issuer.

7. To approve elimination of the Strategy Portfolio's investment restrictions
limiting the Portfolio's ability to invest in the securities of any issuer in
which officers and Trustees of the Fund or officers and directors of its
investment adviser own more than a specified interest.

8. To approve a modification of the Strategy Portfolio's investment
restrictions to permit the Portfolio to enter into interest rate swap
transactions.

9. To ratify the selection by the Trustees of Deloitte & Touche as independent
accountants for the fiscal year ending July 31, 1994.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING

Only shares of beneficial interest of the Fund of record at the close of
business on ________, 1994 are entitled to notice of and to vote at the Meeting
or any adjournment thereof.

- -------------------------------------------------
SIGNATURE DATE

- -------------------------------------------------
SIGNATURE (JOINT OWNERSHIP)

Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

<PAGE>

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

PROXY (CLASS A)

PRUDENTIAL FLEXIFUND
CONSERVATIVELY MANAGED PORTFOLIO
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.

This Proxy is Solicited on Behalf of the Trustees.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Marguerite E. H.
Morrison as proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the Class A
shares of beneficial interest of Prudential FlexiFund - Conservatively Managed
Portfolio held of record by the undersigned on ____________, 1994 at the Special
Meeting of Shareholders to be held on ___________, 1994, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES
WITHHOLD ALL NOMINEES
WITHHOLD THOSE LISTED ON BACK

FOR AGAINST ABSTAIN

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

3. To approve an amended and restated Class A Distribution and Service Plan.

4. Not applicable to Class A shareholders.

5. To approve the elimination of the Conservatively Managed Portfolio's
investment restrictions regarding restricted and illiquid securities.

6. To approve an amendment of the Conservatively Managed Portfolio's investment
restriction limiting the Portfolio's ability to invest in a security if the
Portfolio would hold more than 10% of any class of securities of an issuer.

7. To approve elimination of the Conservatively Managed Portfolio's investment
restriction limiting the Portfolio's ability to invest in the securities of any
issuer in which officers and Trustees of the Fund or officers and directors of
its investment adviser own more than a specified interest.

8. To approve a modification of the Conservatively Managed Portfolio's
investment restrictions to permit the Portfolio to enter into interest rate
swap transactions.

9. To ratify the selection by the Trustees of Deloitte & Touche as independent
accountants for the fiscal year ending July 31, 1994.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING

Only shares of beneficial interest of the Fund of record at the close of
business on __________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

- -------------------------------------------------
SIGNATURE DATE

- -------------------------------------------------
SIGNATURE (JOINT OWNERSHIP)

<PAGE>

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

PROXY (CLASS B)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.

PRUDENTIAL FLEXIFUND
STRATEGY PORTFOLIO
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Margueite E. H.
Morrison as proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the Class B
shares of beneficial interest of Prudential Flexifund - Strategy Portfolio held
of record by the undersigned on _________,1994 at the Special Meeting of
Shareholders to be held on _______, 1994, or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

FOR AGAINST ABSTAIN

3. To approve an amended and restated Class A distribution and service Plan.

4. To approve an amended and restated Class B distribution and service Plan.

5. To approve elimination of the Strategy Portfolio's investment restrictions
regarding restricted and illiquid securities.

7. To approve the elimination of the Strategy Portfolio's investment
restriction limiting the Portfolio's ability to invest in the securities of any
issuer in which officers and Trustees of the Fund or officers and directors of
its investment adviser own more than a specified interest.

8. To approve a modification of the Strategy Portfolio's investment
restrictions to permit the Portfolio to enter into investment rate swap
transactions.

9. To ratify the selection by the Trustees of Deloitte & Touche as independent
accountants for the fiscal year ending July 31, 1994.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.

Only shares of beneficial interest of the Fund of record at the close of
business on _________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

- -------------------------------------------------
SIGNATURE DATE

- -------------------------------------------------
SIGNATURE (JOINT OWNERSHIP)

<PAGE>

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

PROXY (CLASS B)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.

PRUDENTIAL FLEXIFUND
CONSERVATIVELY MANAGED PORTFOLIO
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Margueite E. H.
Morrison as proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the Class B
shares of beneficial interest of Prudential Flexifund - Conservatively Managed
Portfolio held of record by the undersigned on _________, 1994 at the Special
Meeting of Shareholders to be held on _______, 1994, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

FOR AGAINST ABSTAIN
2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

3. To approve an amended and restated Class A Distribution and Service Plan.

4. To approve an amended and restated Class B Distribution and Service Plan.

5. To approve elimination of the Conservatively Managed Portfolio's investment
restrictions regarding restricted and illiquid securities.

7. To approve the elimination of the Conservatively Managed Portfolio's
investment restriction limiting the Portfolio's ability to invest in the
securities of any issuer in which officers and Trustees of the Fund or officers
and directors of its investment adviser own more than a specified interest.

8. To approve a modification of the Conservatively Managed Portfolio's
investment restrictions to permit the Portfolio to enter into interest rate
swap transactions.

9. To ratify the selection by the Trustees of Deloitte & Touche as independent
accountants for the fiscal year ending July 31.1994.

Only shares of beneficial interest of the Fund of record at the close of
business on _________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

- -------------------------------------------------
SIGNATURE DATE

- -------------------------------------------------
SIGNATURE (JOINT OWNERSHIP)