PRUDENTIAL MULTI SECTOR FUND INC, DEFS14A, 1994-04-22

PRUDENTIAL MULTI SECTOR FUND INC
DEFS14A, 1994-04-22

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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:

/ / Preliminary proxy statement

/X/ Definitive proxy statement

/ / Definitive additional material

/ / Soliciting material pursuant to {Section}240.14a-11(c) or
{Section}240.14a-12

PRUDENTIAL MULTI-SECTOR FUND, INC.
- -----------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

PRUDENTIAL MULTI-SECTOR FUND, INC.
- -----------------------------------------------------------------------------
(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.
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PRUDENTIAL MUTUAL FUNDS
One Seaport Plaza
New York, NY 10292

April 18, 1994

RE: IMPORTANT PROXY MATERIAL--IMMEDIATE ACTION REQUIRED

Dear Shareholder:

We are pleased to enclose a notice and proxy statement for a special
meeting of shareholders of the Prudential Mutual Funds to be held on June 23,
1994. You are being asked to approve, among other things, a proposal to permit
the automatic conversion of Class B shares to Class A shares after a specified
number of years. Thereafter, converted shares will be subject to the lower
annual distribution-related fees applicable to Class A shares.

The proxy statement also includes proposals to revise the current
distribution and service plans for Class A and Class B shares and other
proposals recommended by the Fund's Manager and Subadviser.

Please read the enclosed materials carefully. The proxy statement
discusses each proposal in detail and the reasons why the Board of Direc-
tors/Trustees recommend that you vote in favor of those proposals.

The Fund is using Shareholder Communications Corporation (SCC), a
professional proxy solicitation firm, to assist shareholders in the voting
process. If we have not yet received your proxy card as the date of the
meeting approaches, you may receive a telephone call from SCC reminding you to
exercise your right to vote.

Your vote is critical in allowing your Fund to hold the meeting as
scheduled. Please take a moment now to sign and return the proxy card in the
enclosed postage-paid envelope. If less than a majority of the eligible shares
are represented, the Fund, at shareholders' expense, will have to continue to
solicit votes until a quorum is obtained. Your prompt attention in this matter
benefits all shareholders. Thank you.

Sincerely,

Lawrence C. McQuade
President

******************************************************************************
* SPECIAL NOTE: If you hold shares in more than one Prudential fund, *
* you will receive a separate proxy package for each Fund you hold. *
* Please be sure to sign and return each proxy card regardless of how *
* many you receive. *
******************************************************************************
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PRUDENTIAL MULTI-SECTOR FUND, INC.
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
Prudential Multi-Sector Fund, Inc. (the Fund), will be held at 3:00 P.M.
on June 23, 1994, at 199 Water Street, New York, N.Y. 10292, for the
following purposes:

1. To elect Directors.

2. To approve an amendment of the Fund's Articles of Incorporation 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 an amendment of the Fund's investment restriction regarding
restricted and illiquid securities.

6. To approve an amendment of the Fund's investment restriction limiting
the Fund's ability to purchase any security if the Fund would hold more than
10% of any class of securities of an issuer.

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

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

Only shares of Common Stock of the Fund of record at the close of
business on March 31, 1994 are entitled to notice of and to vote at this
Meeting or any adjournment thereof.

S. JANE ROSE
Dated: April 18, 1994 Secretary

************************************************************************
* 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. *
************************************************************************
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PRUDENTIAL MULTI-SECTOR FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292

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

This statement is furnished by the Board of Directors of Prudential
Multi-Sector Fund, Inc. (the Fund) in connection with its solicitation of
proxies for use at a Special Meeting of Shareholders to be held at 3:00 P.M.
on June 23, 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 Directors 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 re-
ceived, 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 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.

1
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The close of business on March 31, 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 13,887,748 shares of Common
Stock outstanding and entitled to vote, consisting of 4,182,792 Class A
shares and 9,704,957 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
April 22, 1994.

Management does not know of any person or group who owned beneficially 5%
or more of the outstanding shares of either class of Common Stock of the Fund
as of March 31, 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 Board of Directors of the Fund has 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 $11,500 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.

ELECTION OF DIRECTORS
(Proposal No. 1)

At the Meeting, seven Directors 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 members of the Board of
Directors. Each of the nominees has consented to be named in the Proxy
Statement and to serve as a Director if elected. All of the Directors, except
for Mr. Redeker, have previously been elected by shareholders. Messrs. Beach,
Lennox, McCorkindale, McQuade, Mooney and Weil have served as Directors of the
Fund since May 7, 1990. Mr. Redeker has served as a Director since November 9,
1993.

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

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

2
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INFORMATION REGARDING DIRECTORS

Edward D. Beach (69), President and Director of Director -0-
BMC Fund, Inc., a closed-end investment company;
prior thereto, Vice Chairman of Broyhill
Furniture Industries, Inc.; 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 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 and
Prudential Municipal Series Fund.

Donald D. Lennox (75), Chairman (since February Director 1,308
1990) and Director (since April 1989) of
International Imaging Materials, Inc.; Retired
Chairman, Chief Executive Officer and Director
of Schlegel Corporation (industrial
manufacturing) (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.

3
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Shares of
Common Stock
Name, age, business experience during the Position with owned at
past five years and directorships Fund March 31, 1994
----------------------------------------- ------------- --------------
Douglas H. McCorkindale (54), Vice Chairman, Director -0-
Gannett Co. Inc. (publishing and media) (since
March 1984); Director of Continental Airlines, Inc.,
Gannett Co., Inc., Rochester Telephone
Corporation, Inc., 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 President and 245
Prudential Mutual Fund Management, Inc. (PMF) Director
(since 1988); Managing Director, Investment
Banking, Prudential Securities (1988-1991); Di-
rector of 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 Intermediate Global Income
Fund, Inc., Prudential MoneyMart Assets,
Prudential 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

4
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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, 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,
Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential U.S.
Government Fund and The Target Portfolio Trust.

Thomas T. Mooney (52), President of the Greater Director -0-
Rochester Metro Chamber of Commerce; former
Rochester City Manager; Trustee of Center for
Government Research, Inc.; Director of Blue
Cross of Rochester, Monroe County Water
Authority, Rochester Jobs, Inc., Executive Service
Corps of Rochester, Monroe County Industrial
Development Corporation, Northeast Midwest
Institute, 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, Inc.; Trustee of
Prudential California Municipal Fund, Prudential
Equity Income Fund, Prudential FlexiFund,
Prudential Municipal Bond Fund and Prudential
Municipal Series Fund.

5
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Shares of
Common Stock
Name, age, business experience during the Position with owned at
past five years and directorships Fund March 31, 1994
----------------------------------------- ------------- ---------------
*Richard A. Redeker (50), President, Chief Director 116
Executive Officer and Director (since October
1993), PMF; Executive Vice President, Director
and Member of the Operating Committee (since
October 1993), Prudential Securities; Director
(since October 1993) of Prudential Securities
Group, Inc. (PSG); 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
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.

6
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- ----------------------
* Indicates "interested" Director, as defined in the Investment Company Act,
by reason of his affiliation with PMF or Prudential Securities.

The Directors and officers of the Fund as a group owned beneficially
4,371 shares of the Fund at March 31, 1994, representing less than 1% of the
outstanding shares of the Fund.

The Fund pays annual compensation of $7,500, plus travel and incidental
expenses, to each of the five Directors not affiliated with PMF or Prudential
Securities. The Directors have the option to receive the Director'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 Director's fee which
accrues interest at a rate equivalent to the prevailing rate applicable to
90-day U.S. Treasury Bills at the beginning of each calendar quarter or,
pursuant to an 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 Director.
The Fund's obligation to make payments of deferred Directors' fees, together
with interest thereon, is a general obligation of the Fund. During the fiscal
year ended April 30, 1993 and for the six months ended October 31, 1993, the
Fund paid Directors' fees of approximately $45,000 and $22,500, respectively,
and travel and incidental expenses of approximately $2,100 and $600,
respectively.

There were four regular meetings and one special meeting of the Fund's
Board of Directors held during the fiscal year ended April 30, 1993 and two
regular meetings

7
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and no special meetings during the period May 1, 1993 to October 31, 1993. The
Board of Directors presently has an Audit Committee, the members of which are
Messrs. Beach, Lennox, McCorkindale, Mooney and Weil, the Fund's
non-interested Directors. The Audit Committee met three times during the
fiscal year ended April 30, 1993 and once during the period May 1, 1993 to
October 31, 1993. The Audit Committee makes recommendations to the full Board
with respect to the engagement of independent accountants and reviews with the
independent accountants the plan and results of the audit engagement and
matters having a material effect upon the Fund's financial operations. The
Board also has a Nominating Committee, comprised of the Fund's non-interested
Directors, which selects and proposes candidates for election to the Board of
Directors. The Nominating Committee met once during the fiscal year ended
April 30, 1993 and once during the period May 1, 1993 to October 31, 1993. The
Nominating Committee does not consider nominees recommended by shareholders to
fill vacancies on the Board.

During the fiscal year ended April 30, 1993, no Director attended fewer
than 75% of the aggregate of the total number of meetings of the Board of
Directors and any committees thereof of which such Director was a member.
During the period May 1, 1993 to October 31, 1993, Donald D. Lennox and
Douglas H. McCorkindale attended fewer than 75% of the aggregate of the total
number of meetings of the Board of Directors and any committees thereof of
which such Director was a member.

The executive officers of the Fund, other than as shown above, are: S.
Jane Rose, Secretary, Robert F. Gunia, Vice President, and Susan C. Cote,
Treasurer and Principal Financial and Accounting Officer, each having held
office since May 7, 1990; 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 a 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 a Senior Vice President (since January
1989) of PMF and a Senior Vice President of Prudential Securities (since
January 1992). Prior thereto, she was a Vice President (January 1986-December
1991) of Prudential Securities. Ms. Rose is 48 years old and is a Senior Vice
President (since January 1991) and Senior Counsel of PMF and a Senior Vice
President and Senior Counsel of Prudential Securities (since July 1992). Prior
thereto, she was a First Vice President (June 1987-December 1990) of PMF and
a Vice President and Associate General Counsel of Prudential Securities. Ms.
Morrison is 38 years old and is a Vice President and Associate General Counsel
(since June 1991) of PMF and a Vice President and Associate General Counsel
of Prudential Securities. The executive officers of the Fund are elected
annually by the Board of Directors.

Required Vote

Directors 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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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 June 1, 1990 (the Management Agreement).

The Management Agreement was last approved by the Board of Directors of
the Fund, including a majority of the Directors who are not parties to 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 September 12,
1991.

Terms of the Management Agreement

Pursuant to the Management Agreement, PMF, subject to the supervision of
the Fund's Board of Directors and in conformity with the stated policies of
the Fund, 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 portfolio 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 corporate
affairs, subject to the supervision of the Fund's Board of Directors, 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 Directors 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 Directors not affiliated with PMF or the
Fund's investment adviser;

(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 Fund's average net assets.
The fee is computed

9
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daily and paid monthly. For the fiscal year ended April 30, 1993, PMF received
a management fee of $948,752. For the six month period ended October 31, 1993,
PMF received a management fee of $472,189.

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 April 30, 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 Directors 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 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 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 Board of Directors' meetings
and of preparing, printing and mailing reports, proxy statements and
prospectuses to shareholders in the amount necessary for distribution to the
shareholders, (l) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business and (m) distribution fees.

The Management Agreement provides that PMF will not be liable 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

10
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Management Agreement also provides that it will terminate automatically if
assigned and that it may be terminated without penalty by the Board of
Directors 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-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 its
subsidiaries as of December 31, 1993 is set forth as Exhibit A to this Proxy
Statement.

11
<PAGE>
<PAGE>

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>

Brendan D. Boyle . . . . . . . . . Executive Vice Executive Vice President
President and and Director of
Director of Marketing, PMF
Marketing

John D. Brookmeyer, Jr. . . . . . . Director Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC

Susan C. Cote . . . . . . . . . . . Senior Vice Senior Vice President,
President PMF; Senior Vice
President, Prudential
Securities

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,
President PMF; Senior Vice President,
Prudential Securities

Frank W. Giordano . . . . . . . . . Executive Vice Executive Vice President,
President, General General Counsel and
Counsel and Secretary Secretary, PMF; Senior
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
</TABLE>
12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
<S> <C> <C>

Eugene B. Heimberg. . . . . . . . . Director Senior Vice President,
Prudential Plaza Prudential; President,
Newark, NJ 07102 Director and Chief
Investment Officer, PIC

Lawrence C. McQuade . . . . . . . . Vice Chairman Vice Chairman, PMF

Leland B. Paton . . . . . . . . . . Director Executive Vice President
and Director, Prudential
Securities; Director, PSG

Richard A. Redeker. . . . . . . . . President, Chief President, Chief Executive
Executive Officer Officer and Director,
and Director PMF; 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,
Assistant Secretary PMF; Senior Vice President
and Senior Counsel,
Prudential Securities

Donald G. Southwell . . . . . . . . Director Senior Vice President,
213 Washington Street Prudential; Director,
Newark, NJ 07102 PSG
</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
dated as of June 1, 1990. The Subadvisory Agreement was approved by
shareholders on September 12, 1991 and was last approved by the Board of
Directors of the Fund, including a majority of the Directors 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 Board of Directors and in conformity with the stated policies of
the Fund, manages the investment operations of the Fund and the composition of
the Fund's portfolio, 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

13
<PAGE>
<PAGE>

and records required to be maintained 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 Directors 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 the Fund, PMF or PIC 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 Vice President, Prudential;
President and Senior Vice President and
Chief Financial Chief Financial and
and Compliance Compliance Officer, PIC
Officer

William M. Bethke . . . . . . . . . Senior Vice Senior Vice President,
Two Gateway Center President Prudential; Senior
Newark, NJ 07102 Vice President, PIC

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, Senior Vice President,
Director and Chief Prudential; President,
Investment Officer Director and Chief
Investment Officer, PIC

Garnett L. Keith, Jr. . . . . . . . Director Vice Chairman and
Director, Prudential

Harry E. Knapp, Jr. . . . . . . . . Vice President Vice President,
Four Gateway Center Prudential; Vice
Newark, NJ 07102 President, PIC

</TABLE>
14
<PAGE>
<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
<S> <C> <C>
William P. Link . . . . . . . . . . Senior Vice Executive Vice President,
Four Gateway Center President Prudential; Senior Vice
Newark, NJ 07102 President, PIC

Robert E. Riley . . . . . . . . . . Executive Vice Executive Vice President,
800 Boylston Avenue President Prudential; Executive
Boston, MA 02199 Vice President, PIC;
Director, PSG

James W. Stevens. . . . . . . . . . Executive Vice Executive Vice President,
Four Gateway Center President Prudential; Executive
Newark, NJ 07102 Vice President, PIC;
Director, PSG

Robert C. Winters . . . . . . . . . Director Chairman of the Board and
Chief Executive Officer,
Prudential; Director, PIC;
Chairman of the Board, PSG

Claude J. Zinngrabe, Jr.. . . . . . Executive Vice Vice President, Prudential;
President Executive Vice President,
PIC

</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. PMFD and Prudential
Securities are indirect, wholly-owned subsidiaries of Prudential.

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 Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Class A
or Class B Plan or in any agreement related to either Plan (the Rule 12b-1
Directors), on May 4, 1993. The Class A Plan was approved by the Class A
shareholders and the Class B Plan was approved by the Class B shareholders on
September 12, 1991.

The Plans are proposed to be amended as set forth in Proposals No. 3
and 4.

Class A Plan. Under the Class A Plan, the Fund reimburses PMFD for its
distribution-related expenses with respect to Class A shares at an annual rate
of up to .30 of 1% of the average daily net assets of the Class A shares. The
Class A Plan provides that (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 for the fiscal year ending April 30, 1995.

For the fiscal year ended April 30, 1993 and the six month period ended
October 31, 1993, PMFD received payments of $93,780 and $46,618, respectively,
under the Class A Plan representing .20 of 1% of the average daily net assets
of the Class A shares 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 payment to financial advisers and other
salespersons who sell Class A shares. For the fiscal year ended April 30, 1993
and the six month period ended October 31, 1993, PMFD also received $54,000
and $72,000, 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 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. 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.

For the fiscal year ended April 30, 1993 and the six month period ended
October 31, 1993, Prudential Securities received $990,720 and $493,356,
respectively, from the Fund under the Class B Plan and spent approximately
$373,200 and $637,900, respectively, in distributing the Fund's Class B
shares. It is estimated that of the latter amount approximately 2.3% ($8,400)
and 1.1% ($6,900) was spent on printing and mailing of prospectuses to other
than current shareholders during the fiscal year ended April 30, 1993 and the
six month period ended October 31, 1993, respectively; 4.1% ($15,400) and 3.0%
($19,600) on compensation to Prusec for commissions to its financial advisers
and other expenses, including an allocation of overhead and other branch
office distribution-related expenses, incurred by it for distribution of Fund
shares during the fiscal year ended April 30, 1993 and the six month period
ended October 30, 1993, respectively; 22.7% ($84,900) and 4.6% ($29,100) on
interest and/or carrying charges during the fiscal year ended April 30, 1993
and the six month period ended October 31, 1993, respectively; and 70.9%
($264,500) and 91.3% ($582,300) during the fiscal year ended April 30, 1993
and the six month period ended October 31, 1993, respectively on the aggregate
of (i) payments of commissions to financial advisers during the fiscal year
ended April 30, 1993 and during the six month period ended October 31, 1993,
of 42.5% ($158,600) and 40.2% ($256,200), respectively, and (ii) an
allocation of overhead and other branch office distribution-related expenses
during the fiscal year ended April 30, 1993 and during the six month period
ended October 31, 1993 of 28.4% ($105,900) and 51.1% ($326,100), respectively.
The term "overhead and other branch office distribution-related

16
<PAGE>
<PAGE>

expenses" represents (a) the expenses of operating Prudential Securities branch
offices in connection with the sale of Fund shares, including lease costs, the
salaries and employee benefits of operations and sales support personnel,
utility costs, communications costs and the costs of stationery and supplies,
(b) the costs of client sales seminars, (c) expenses of mutual fund sales
coordinators to promote the sale of Fund shares and (d) other incidental
expenses relating to branch promotion of Fund 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. Under the current Class B Plan, 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 April 30,
1993 and the six months ended October 31, 1993, Prudential Securities received
approximately $559,500 and $146,800, respectively, 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
$1,856,400.

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 Board of Directors, including a majority vote of the Rule 12b-1 Directors,
cast in person at a meeting called for the purpose of voting on such
continuance. The Class A and Class B Plans may each be terminated at any time,
without penalty, by the vote of a majority of the Rule 12b-1 Directors or by
the vote of the holders of a majority of the outstanding shares of the
applicable class on not more than 30 days' written notice to any other party
to the Plans. 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 Board of Directors in the manner described above. Each
Plan will automatically terminate in the event of its assignment. The Fund
will not be contractually obligated to pay expenses incurred under 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 Board of
Directors 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 Board of Directors reviews at least quarterly
a written report of the distribution expenses incurred on behalf of the Class
A and Class B shares 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 Directors shall
be committed to the Rule 12b-1 Directors.

Pursuant to each Distribution Agreement, the Fund has agreed to indemnify
PMFD and Prudential Securities to the extent permitted by applicable law
against certain liabilities under the Securities Act. Each Distribution
Agreement was last

17
<PAGE>
<PAGE>

approved by the Board of Directors, including a majority of the Rule 12b-1
Directors, on May 4, 1993.

Portfolio Transactions

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

In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On
occasion, certain money market instruments may be purchased directly from an
issuer, in which case no commissions or discounts are paid. The Fund will not
deal with Prudential Securities (or any affiliate) in any transaction in which
Prudential Securities acts as principal. Thus it will not deal in
over-the-counter securities 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

18
<PAGE>
<PAGE>

commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on
the quality and quantity of execution services provided by the broker, dealer
or futures commission merchant in the light of generally prevailing rates.
The Manager's policy is to pay higher commissions to brokers, other than
Prudential Securities, for particular transactions than might be charged if a
different broker had been selected, on occasions when, in the Manager's opinion,
this policy furthers the objective of obtaining best price and execution. In
addition, the Manager is authorized to pay higher commissions on brokerage
transactions for the Fund to brokers, dealers and futures commission merchants
other than Prudential Securities in order to secure research and investment
services described above, subject to review by the Fund's Board of Directors
from time to time as to the extent and continuation of this practice. The
allocation of orders among brokers, dealers and futures commission merchants
and the commission rates paid are reviewed periodically by the Fund's Board of
Directors. Portfolio securities may not be purchased from any underwriting or
selling syndicate of which Prudential Securities (or any affiliate), during
the existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the SEC. This
limitation, in the opinion of the Fund, will not significantly affect the
Fund's ability to pursue its present investment objective. However, in the
future in other circumstances, the Fund may be at a disadvantage because of
this limitation in comparison to other funds with similar objectives but not
subject to such limitations.

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

19
<PAGE>
<PAGE>

Securities from transactions effected for the Fund during the applicable period.
Brokerage and futures transactions with Prudential Securities or any affiliate
are also subject to such fiduciary standards as may be imposed upon Prudential
Securities or such affiliate by applicable law.

Transactions in options by the Fund will be subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options are written or held on the same
or different exchanges or are written or held in one or more accounts or
through one or more brokers. Thus, the number of options which the Fund may
write or hold may be affected by options written or held by the Manager and
other investment advisory clients of the Manager. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

The table below set forth information concerning the payment of
commissions by the Fund, including the commissions paid to Prudential
Securities, during the fiscal year ended April 30, 1993 and the six months
ended October 31, 1993.

Six
Fiscal Months Ended
Year Ended October 31,
April 30, 1993 1993
-------------- ----------
Total brokerage commissions paid by the Fund. . . $641,156 $296,224
Total brokerage commissions paid to Prudential
Securities and its foreign affiliates. . . . . . $ 84,496 $ 40,986
Percentage of total brokerage commissions paid to
Prudential Securities and its foreign
affiliates . . . . . . . . . . . . . . . . . . . 13.2% 13.8%

The Fund effected approximately 20% and 13.1% of the total dollar amount
of its transactions involving the payment of commissions through Prudential
Securities during the fiscal year ended April 30, 1993 and six months ended
October 31, 1993, respectively. Of the total brokerage commissions paid during
the fiscal year ended April 30, 1993 and six months ended October 31, 1993,
$557,806 (or 87%) and 270,156 (or 91.2%), respectively, were paid to firms
which provide research, statistical or other services to PIC.

APPROVAL OF A PROPOSAL TO AMEND
THE FUND'S ARTICLES OF INCORPORATION
TO PERMIT THE IMPLEMENTATION OF A CONVERSION FEATURE

(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS, VOTING JOINTLY)
(PROPOSAL NO. 2)

The Board of Directors is recommending that shareholders approve an
amendment to the Fund's Articles of Incorporation to permit the implementation
of a conversion feature for Class B shares. 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 at
relative net asset value approximately seven years after purchase. Class A
shares are subject to a lower annual distribution

20
<PAGE>
<PAGE>

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 Articles of
Incorporation requires approval by a majority of the Fund's outstanding
shares.

The Classes of Shares

The Fund currently offers two classes of shares, 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 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 and PMFD has agreed to so limit its fee under the
Class A Plan for the fiscal year ending April 30, 1995. 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 assets of the Class B shares.

In accordance with the SEC Order, the Board of Directors may, among other
things, authorize the creation of additional classes of shares from time to
time. The Board of Directors has approved the offering of a new class of
shares, to be designated Class C shares, which will be offered simultaneously
with the offering of Class B shares with the proposed conversion feature.
It is anticipated that Class C shares will be offered without an initial
sales charge but will be subject to an annual distribution and
service fee not to exceed 1% of the average daily net assets of the Class C
shares and, subject to approval by the Board of Directors, a CDSC on certain
redemptions made within one year of purchase. If the proposed conversion
feature for Class B shares is not approved, Class C shares will not be offered.

The Proposed Conversion Feature

On March 17, 1993, the Fund's Board of Directors, including a majority of
the Rule 12b-1 Directors, approved an amendment to the Fund's Articles of
Incorporation to permit the implementation of a conversion feature for the
Fund's Class B shares. A copy of the proposed amendment to the Fund's Articles
of Incorporation 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 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.

21
<PAGE>
<PAGE>

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 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 such conversion date. For example, if 100 shares were initially
purchased at $10 per share (for a total of $1,000) and a second purchase of
100 shares was subsequently made at $11 per share (for a total of $1,100),
95.24 shares would convert approximately seven years from the initial purchase
(i.e., $1,000 divided by $2,100 (47.62%), multiplied by 200 shares equals
95.24 shares). The Manager reserves the right to modify the formula for
determining the number of Eligible Shares in the future as it deems appropriate
on notice to shareholders.

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 shares until approximately
eight years from purchase. For purposes of measuring the time period during
which shares are held in a money market fund, exchanges will be deemed to have
been made on the last day of the month. Class B shares acquired through
exchange will convert to Class A shares after expiration of the conversion
period applicable to the original purchase of such shares. 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

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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.

The Fund has obtained an opinion of counsel to the effect that the
conversion of Class B shares into Class A Shares does not constitute a
taxable event for U.S. income tax purposes. However, such opinion is not
binding on the Internal Revenue Service.

If approved by shareholders, the conversion feature may be subject to
the continuing availability of opinions of counsel or rulings of the Internal
Revenue Service (i) that the dividends and other distributions paid on Class A
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. The conversion of Class B shares
into Class A shares may be suspended if such options or rulings are no longer
available. If conversions are suspended, Class B shares of the Fund will
continue to be subject, possible indefinitely, to their higher annual
distribution and service fee.

Required Vote

The proposed amendment to the Fund's Articles of Incorporation 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 BOARD OF DIRECTORS RECOMMENDS 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 Board of Directors 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 recommends
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 above),
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

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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).

The Board of Directors 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 September 12, 1991 and last approved by
the Board of Directors 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
and 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 Board of Directors believes 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 (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 fees 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
Directors, including a majority of the Rule 12b-1 Directors, cast in person
at a meeting called for the purpose of voting on the

24
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<PAGE>

Plan. So long as the Existing Class A Plan is in effect, the selection and
nomination of the Rule 12b-1 Directors will be committed to the discretion
of the Rule 12b-1 Directors.

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 Directors 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 period from June 29, 1990 through
April 30, 1991 and the fiscal years ended April 30, 1992 and 1993, PMFD
received payments of $93,741, $114,806 and $93,780, respectively, under the
Existing Class A Plan representing .20 of 1% of the average daily net assets
of the Class A shares as reimbursement of expenses incurred for Distribution
Activities. Although PMFD agreed to limit its fees under the Existing Class A
Plan to .20 of 1% for the period from June 29, 1990 through April 30, 1991 and
the fiscal year ended April 30, 1992 and to .25 of 1% for the fiscal year
ended April 30, 1992, it in fact limited its fee to .20 of 1% for all three
fiscal periods 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 period
from June 29, 1990 through April 30, 1991 and the past two 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 than .25 of 1%
of the average daily net assets of the Class A shares for the fiscal year
ending April 30, 1995. Other expenses incurred by PMFD for Distribution
Activities have been, and will continue to be, paid from the proceeds of
initial sales charges.

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<PAGE>

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 Board of Directors 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 expendi-
tures 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
Directors 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
the Fund, and comparative data with respect to distribution arrangements
adopted by other investment companies. Based upon such review, the Directors,
including a majority of the Rule 12b-1 Directors, 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 Board of Directors, including a majority
of the Rule 12b-1 Directors.

Required Vote

If Proposal No. 2 is approved by shareholders, the Proposed Class A Plan
will require the approval of a majority of the Fund's outstanding Class A
shares and Class B shares (as defined in the Investment Company Act), 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 the Fund's
outstanding Class A shares. Under the Investment Company Act, a majority of a
class' outstanding voting shares is defined as the lesser of (i) 67% of a
class' outstanding voting shares represented at a meeting at which more than
50% of the outstanding voting shares of the class are present in person or
represented by proxy, or (ii) more than 50% of a class' outstanding voting
shares. If the Proposed Class A Plan is not approved as described above, the
Existing Class A Plan will continue in its present form.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 3.

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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 Board of Directors 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 recommends 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 Board of Directors 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 September 12, 1991 and last approved by
the Board of Directors 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 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 and 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 Board of Directors believes 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

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<PAGE>

reimbursable under the Plan that are not paid because they exceed the
maximum 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 Article III, Section 26 of
the NASD Rules. 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
Directors, including a majority of the Rule 12b-1 Directors, 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 Directors
who are not interested persons of the Fund will be committed to the discretion
of the Rule 12b-1 Directors.

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 Directors or by the
vote of a majority of the outstanding Class B 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 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.

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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
$1,856,400.

For the period from June 29, 1990 through April 30, 1991 and the fiscal
years ended April 30, 1992 and 1993, Prudential Securities received $699,459,
$1,085,103 and $990,720, respectively, from the Fund under the Existing Class
B Plan, representing .80%, 1% and 1%, respectively, of the average daily net
assets of the Class B shares, and spent approximately $4,569,500, $1,305,300,
and $373,200, respectively, for Distribution Activities. Since the maximum
annual fee under the Existing Class B Plan is the same as under the Proposed
Class B Plan, Prudential Securities would have received the same annual fee
under the Proposed Class B Plan as it did under the Existing Class B Plan for
the period ended April 30, 1991 and the fiscal years ended April 30, 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 Board of Directors 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 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 Fund 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
Directors 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 the Fund and comparative data with respect to
distribution arrangements adopted by other investment companies. Based upon
such review, the Directors, including a majority of

29
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<PAGE>

the Rule 12b-1 Directors, determined that there is a reasonable
likelihood that the Proposed Class B Plan will benefit the Fund and its Class B
shareholders.

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 Board of Directors, including a
majority of the Rule 12b-1 Directors.

Required Vote

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

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.

APPROVAL OF AN AMENDMENT OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING RESTRICTED
AND ILLIQUID SECURITIES
(PROPOSAL NO. 5)

On May 4, 1993, at the request of the Fund's Manager and Subadviser, the
Board of Directors considered and recommends for shareholder approval revision
of the Fund's fundamental investment restriction regarding illiquid and
restricted securities. The current restriction is 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 Board of
Directors recommends modification of Investment Restriction No. 6 to eliminate
restrictions on investments in equity securities for which market quotations
are not readily available.

Investment Restriction No. 6, which is proposed to be modified, provides
that the Fund may not (deletions are in brackets):

6. Purchase any security if as a result the Fund would then have
more than 5% of its total assets (determined at the time of investment)
invested in securities of companies (including predecessors) less than
three years old [or in equity securities for which market quotations are
not readily available,] provided that there is no limit on the Fund's
ability to invest in the securities of any U.S. Government agency or
instrumentality, and in any security guaranteed by such an agency or
instrumentality.

The Board recommends replacement of such fundamental investment
restriction with a non-fundamental investment policy that could be modified by
the vote of the

30
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Board of Directors in response to regulatory or market
developments without further approval by shareholders. The change would expand
the Fund'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:

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

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 investment adviser
or the Board of Directors to affect the Fund'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 Fund's present restriction 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 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.

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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 the 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 the 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 the Fund'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 Board of Directors),
these Rule 144A securities would be exempt from the 10% limitation.

In order to take advantage of the market for Rule 144A securities and the
increasingly liquid institutional trading market, the Manager recommends that
the Fund eliminate its fundamental policy 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 Fund's
policy on illiquid securities non-fundamental, the Fund 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 Board of Directors, will monitor the
liquidity of specific types of securities and, based on their recommendations,
the Board of Directors 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 trade
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

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Required Vote

Amendment of the Fund's investment restrictions to modify Investment
Restriction No. 6 requires the approval of a majority of the outstanding
voting securities of the Fund. Under the Investment Company Act, a majority of
the Fund's outstanding voting securities is defined as the lesser of (i) 67% of
the Fund's outstanding voting shares represented at a meeting at which more than
50% of the Fund's outstanding voting shares are present in person or represented
by proxy, or (ii) more than 50% of the Fund's outstanding voting shares. In the
event shareholders do not approve the proposed modification of the Fund's
investment policy, the current limitation would remain a fundamental policy
which could not be changed without the approval of a majority of the outstanding
voting securities of the Fund.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO.5.

APPROVAL OF AN AMENDMENT OF THE FUND'S INVESTMENT
RESTRICTION LIMITING THE FUND'S ABILITY TO INVEST IN A
SECURITY IF THE FUND 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
Board of Directors considered and recommends for shareholder approval
modification of Investment Restriction No. 5 to delete the restriction that
prohibits the Fund from purchasing a security if the Fund would hold more than
ten percent of any class of securities of an issuer.

The Fund currently may not purchase a security if the Fund 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, the Fund would continue to comply with the restriction as
a non-fundamental operating policy so long as the Fund sells its shares in
that state.

Investment Restriction No. 5 provides that the Fund may not:

Purchase any security if as a result the Fund 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 Board of Directors is proposing that Investment Restriction No. 5 be
modified to read as follows:

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<PAGE>

The Fund may not:

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

Currently, the Fund 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 Board of Directors believes that adoption of Proposal No. 6 is in the
best interests of the Fund and its shareholders.

Required Vote

Adoption of Proposal No. 6 requires the approval of a majority of the
outstanding voting securities of the Fund, as defined by the Investment
Company Act and described under Proposal No. 5 above. If the proposed change
in investment policy is not approved, 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 Fund.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO.6.

APPROVAL OF ELIMINATION OF THE FUND'S INVESTMENT
RESTRICTION LIMITING INVESTMENT IN THE SECURITIES OF ANY
ISSUER IN WHICH THE OFFICERS AND DIRECTORS OF THE FUND
OR 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 Board of
Directors considered and recommends for shareholder approval elimination of
the Fund's Investment Restriction No. 7, which provides that the Fund may not:

Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or Director 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 Directors 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 Board of Directors that the restriction upon
the Fund's investing in companies in which officers and Directors of the Fund
or 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 Fund's shares in Ohio. If the proposal is
approved, the Fund would continue to comply with the restriction as a
non-fundamental operating policy so long as the Fund sells its shares in Ohio.
However, if Ohio were to eliminate the requirement or the Fund

34
<PAGE>
<PAGE>

stopped offering its shares for sale in Ohio, the Board of Directors could
eliminate the operating policy without the necessity of shareholder approval.
The Fund does not currently intend to stop offering its shares in Ohio, nor
is the Fund or the Fund's Manager aware of any proposal to change the Ohio law.

The Board of Directors believes that adoption of Proposal No. 7 is in the
best interests of the Fund and its shareholders.

Required Vote

Amendment of the Fund's investment restrictions to delete Investment
Restriction No. 7 requires the approval of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act and as
described under Proposal No. 5 above. If the proposed change in investment
policy is not approved, 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 Fund.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL
NO.7.

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 interest of the Fund.

SHAREHOLDER PROPOSALS

The Fund is not required to hold annual meetings of shareholders and the
Board of Directors currently does 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 Board of Directors' solicitation relating
thereto is made in order to be included in the Fund's proxy statement and form
of proxy relating to that meeting and presented at the 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: April 18, 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.

35
<PAGE>
<PAGE>
EXHIBIT A

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

ASSETS

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
============

See notes to consolidated statement of financial condition.

A-1
<PAGE>
<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:

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
===========

A-2
<PAGE>
<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 prospec-
tuses 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.

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:

Year Minimum Rental
---- --------------
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
===========

A-3
<PAGE>
<PAGE>

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 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-4
<PAGE>
<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-5
<PAGE>
<PAGE>
EXHIBIT B
FORM OF AMENDMENT TO ARTICLES OF INCORPORATION

Article IV, Section 1 of the Fund's Articles of Incorporation is
proposed to be amended and restated as follows:

ARTICLE IV
COMMON STOCK

SECTION 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is 2,000,000,000 shares of the par
value of $.001 per share and of the aggregate par value of $2,000,000 to be
divided initially into three classes, consisting of 6,666,666 2/3 shares of
Class A Common Stock, 6,666,666 2/3 shares of Class B Common Stock and
6,666,666 2/3 shares of Class C Common Stock.

(a) Each share of Class A, Class B and Class C Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation and other rights except that (i)
expenses related to the distribution of each class of shares shall be
borne solely by such class; (ii) the bearing of such expenses solely by
shares of each class shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset value, dividends,
distribution and liquidation rights of the shares of such class; (iii)
the Class A Common Stock shall be subject to a front-end sales load and a
Rule 12b-1 distribution fee as determined by the Board of Directors from
time to time; (iv) the Class B Common Stock shall be subject to a
contingent deferred sales charge and a Rule 12b-1 distribution fee as
determined by the Board of Directors from time to time; and (v) the Class
C Common Stock shall be subject to a contingent deferred sales charge and
a Rule 12b-1 distribution fee as determined by the Board of Directors from
time to time. All shares of each particular class shall represent an equal
proportionate interest in that class, and each share of any particular
class shall be equal to each other share of that class.

(b) Each share of the Class B Common Stock of the Corporation shall
be converted automatically, and without any action or choice on the part
of the holder thereof, into shares (including fractions thereof) of the
Class A Common Stock of the Corporation (computed in the manner
hereinafter described), at the applicable net asset value of each Class,
at the time of the calculation of the net asset value of such Class B
Common Stock at such times, which may vary between shares originally
issued for cash and shares acquired through the automatic reinvestment
of dividends and distributions with respect to Class B Common Stock,
(each "Conversion Date") determined by the Board of Directors in
accordance with applicable laws, rules, regulations and interpretations
of the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. and pursuant to such procedures as may be
established from time to time by the Board of Directors and disclosed in
the Corporation's then current prospectus for such Class A and Class B
Common Stock.
B-1
<PAGE>
<PAGE>

(c) The number of shares of the Class A Common Stock of the
Corporation into which a share of the Class B Common Stock is converted
pursuant to Paragraph (1)(b) hereof shall equal the number (including for
this purpose fractions of a share) obtained by dividing the net asset
value per share of the Class B Common Stock for purposes of sales and
redemptions thereof at the time of the calculation of the net asset value
on the Conversion Date by the net asset value per share of Class A Common
Stock for purposes of sales and redemptions thereof at the time of the
calculation of the net asset value on the Conversion Date.

(d) On the Conversion Date, the shares of the Class B Common Stock
of the Corporation converted into shares of the Class A Common Stock will
cease to accrue dividends and will no longer be outstanding and the
rights of the holders thereof will cease (except the right to receive
declared but unpaid dividends to the Conversion Date).

(e) The Board of Directors shall have full power and authority to
adopt such other terms and conditions concerning the conversion of shares
of the Class B Common Stock to shares of the Class A Common Stock as they
deem appropriate; provided such terms and conditions are not inconsistent
with the terms contained in this Section 1 and subject to any
restrictions or requirements under the Investment Company Act of 1940 and
the rules, regulations and interpretations thereof promulgated or issued
by the Securities and Exchange Commission, any conditions or limitations
contained in an order issued by the Securities and Exchange Commission
applicable to the Corporation, or any restrictions or requirements under
the Internal Revenue Code of 1986, as amended, and the rules, regulations
and interpretations promulgated or issued thereunder.

B-2
<PAGE>
<PAGE>

EXHIBIT C

PRUDENTIAL MULTI-SECTOR FUND

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 Multi-Sector Fund (the
Fund) and by Prudential Mutual Fund Distributors, Inc., the Fund's distributor
(the Distributor).

The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class A shares issued by the
Fund (Class A shares). Under the Plan, the Fund intends to pay to the
Distributor, as compensation for its services, a distribution and service fee
with respect to Class A shares.

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

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

C-1
<PAGE>
<PAGE>

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
or 1% per annum of the average daily net assets of the Class A shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class A
shares of the Fund hereunder and shall pay such amounts monthly or at such
other intervals as the Board of Directors 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 Board of Directors 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 Board of Directors. The allocation of distribution expenses
among classes will be subject to the review of the Board of Directors.

The Distributor shall spend such amounts as its 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 expenses;

(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-2
<PAGE>
<PAGE>

(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 Board of Directors
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 Board of Directors of the Fund such additional information as
the Board shall from time to time reasonably request, including information
about Distribution Activities undertaken or to be undertaken by the
Distributor.

The Distributor will inform the Board of Directors 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.

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 Board of Directors of the Fund and a majority of the Rule
12b-1 Directors 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 Directors, 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
C-3
<PAGE>
<PAGE>

materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act) of the Class A shares of the Fund.
All material amendments of the Plan shall be approved by a majority of the
Board of Directors of the Fund and a majority of the Rule 12b-1 Directors by
votes cast in person at a meeting called for the purpose of voting on the
Plan.

8. Rule 12b-1 Directors

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

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.

Dated: .

C-4
<PAGE>
<PAGE>

EXHIBIT D

PRUDENTIAL MULTI-SECTOR FUND

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 Multi-Sector Fund (the
Fund) and by Prudential Securities Incorporated (Prudential Securities), the
Fund's distributor (the Distributor).

The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class B shares issued by the
Fund (Class B shares). Under the Plan, the Fund 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 Board of Directors 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
Directors), have determined by votes cast in person at a meeting called for
the purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined below) are
primarily intended to result in the sale of Class B shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the Investment
Company Act.

THE 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
D-1
<PAGE>
<PAGE>

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 Board of Directors 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 Board of Directors 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 Board of Directors. The allocation of distribution expenses
among classes will be subject to the review of the Board of Directors.

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,

D-2
<PAGE>
<PAGE>

statements of additional information and periodic financial reports and
sales literature to persons other than current shareholders of the Fund;
and

(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and financial institutions (other than 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 Board of Directors
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 Board of Directors 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 Board of Directors 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.

If approved by a vote of a majority of the outstanding voting securities
of the Class B shares of the Fund, the Plan shall, unless earlier terminated
in accordance with its terms, continue in full force and effect thereafter for
so long as such continuance is specifically approved at least annually by a
majority of the Board of Directors of the Fund and a majority of the Rule
12b-1 Directors 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 Directors 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

D-3
<PAGE>
<PAGE>

approved by the vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act) of the Class B shares of the Fund.
All material amendments of the Plan shall be approved by a majority of the
Board of Directors of the Fund and a majority of the Rule 12b-1 Directors by
votes cast in person at a meeting called for the purpose of voting on the
Plan.

8. Rule 12b-1 Directors

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

9. Records

Dated: .

D-4
<PAGE>
<TABLE>
<CAPTION>
/x/
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.
- ---------------------------------------------------------------------------------------------------------------------------------
PROXY (CLASS A) This Proxy is solicited on behalf of
the Board of Directors.
PRUDENTIAL MULTI-SECTOR FUND, INC.
The undersigned hereby appoints Susan C. Cote,
ONE SEAPORT PLAZA S. Jane Rose and Marguerite E. H. Morrison as
Proxies, each with the power of substitution,
NEW YORK, NEW YORK 10292 and hereby authorizes each of them
to represent and to vote, as designated below,
all the shares of Class A common stock of THIS PROXY WHEN PROPERLY EXECUTED
Prudential Multi-Sector Fund, Inc. held of WILL BE VOTED IN THE MANNER DIRECTED
record by the undersigned on March 31, 1994 at HEREIN BY THE UNDERSIGNED SHAREHOLDER(S).
the Special Meeting of Shareholders to be held IF NO DIRECTION IS MADE, THIS PROXY WILL
on June 23, 1994, or any adjournment thereof. BE VOTED FOR ALL THE PROPOSALS
LISTED BELOW.

Your Account No.
Your voting shares are:
1-ELECTION OF DIRECTORS PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<C> <S> <C> <C> <C> <C>
For Against Abstain
/ / / / / / 2. To approve an amendment of the Fund's Articles of 2 / / / / / /
APPROVE WITHHOLD WITHHOLD Incorporation to permit a conversion feature for
ALL ALL THOSE LISTED Class B shares.
NOMINEES NOMINEES ON BACK

TO WITHHOLD AUTHORITY FOR ANY 3. To approve an amended and restated Class A 3 / / / / / /
INDIVIDUAL NOMINEE, PLEASE Distribution and Service Plan.
WRITE NAME ON BACK OF FORM.
4. NOT APPLICABLE TO CLASS A SHAREHOLDERS. 4 / / / / / /

Edward D. Beach
Donald D. Lennox 5. To approve an amendment of the Fund's investment restriction 5 / / / / / /
Douglas H. McCorkindale regarding restricted and illiquid securities.
Lawrence C. McQuade
Thomas T. Mooney 6. To approve an amendment of the Fund's investment 6 / / / / / /
Richard A. Redeker restriction limiting the Fund's ability to purchase any
Louis A. Weil, III security if the Fund would hold more than 10% of any class
of securities of an issuer.

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

8. To transact such other business as may properly come before 8 / / / / / /
the Meeting or any adjournment thereof.
</TABLE>

Only shares of Class A common stock
of the Fund of record at the close
of business on March 31, 1994 are
entitled to notice of and to vote
at this Meeting or any adjournment
thereof.

Please sign exactly as name appears at
- -------------------------------------- left. When shares are held by joint
Signature Date tenants, both should sign. When
signing as attorney, executor,
- -------------------------------------- administrator, trustee or guardian,
Signature (Joint Ownership) 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>
<TABLE>
<CAPTION>
/x/

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

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.
- ---------------------------------------------------------------------------------------------------------------------------------
PROXY (CLASS B) This Proxy is solicited on behalf of
the Board of Directors.
PRUDENTIAL MULTI-SECTOR FUND, INC.
The undersigned hereby appoints Susan C. Cote,
ONE SEAPORT PLAZA S. Jane Rose and Marguerite E. H. Morrison as
Proxies, each with the power of substitution,
NEW YORK, NEW YORK 10292 and hereby authorizes each of them
to represent and to vote, as designated below,
all the shares of Class B common stock of THIS PROXY WHEN PROPERLY EXECUTED
Prudential Multi-Sector Fund, Inc. held of WILL BE VOTED IN THE MANNER DIRECTED
record by the undersigned on March 31, 1994 at HEREIN BY THE UNDERSIGNED SHAREHOLDER(S).
the Special Meeting of Shareholders to be held IF NO DIRECTION IS MADE, THIS PROXY WILL
on June 23, 1994,or any adjournment thereof. BE VOTED FOR ALL THE PROPOSALS
LISTED BELOW.

TO WITHHOLD AUTHORITY FOR ANY 3. To approve an amended and restated Class A 3 / / / / / /
INDIVIDUAL NOMINEE, PLEASE Distribution and Service Plan.
WRITE NAME ON BACK OF FORM.
4. To approve an amended and restated Class B 4 / / / / / /
Distribution and Service Plan.
Edward D. Beach
Donald D. Lennox 5. To approve an amendment of the Fund's investment restriction 5 / / / / / /
Douglas H. McCorkindale regarding restricted and illiquid securities.
Lawrence C. McQuade
Thomas T. Mooney 6. To approve an amendment of the Fund's investment 6 / / / / / /
Richard A. Redeker restriction limiting the Fund's ability to purchase any
Louis A. Weil, III security if the Fund would hold more than 10% of any class
of securities of an issuer.

8. To transact such other business as may properly come before 8 / / / / / /
the Meeting or any adjournment thereof.
</TABLE>

Only shares of Class B common stock
of the Fund of record at the close
of business on March 31, 1994 are
entitled to notice of and to vote
at this Meeting or any adjournment
thereof.