AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1994
REGISTRATION NO. 33-42391
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 3 X
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 5
(Check appropriate box or boxes)
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PRUDENTIAL PACIFIC GROWTH FUND, INC.
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 214-1250
S. JANE ROSE, ESQ.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
/ / on (Date) pursuant to paragraph (a), of Rule 485
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HAS PREVIOUSLY REGISTERED AN INDEFINITE NUMBER OF SHARES OF ITS COMMON STOCK PAR
VALUE $.001 PER SHARE. THE REGISTRANT WILL FILE A NOTICE UNDER SUCH RULE FOR ITS
FISCAL YEAR ENDED OCTOBER 31, 1994 ON OR BEFORE DECEMBER 31, 1994.
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
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N-1A ITEM NO. LOCATION
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PART A
Item 1. Cover Page...................................... Cover Page
Item 2. Synopsis........................................ Fund Expenses; Fund Highlights
Item 3. Condensed Financial Information................. Fund Expenses; Financial Highlights; How the
Fund Calculates Performance
Item 4. General Description of Registrant............... Cover Page; Fund Highlights; How the Fund
Invests; General Information
Item 5. Management of the Fund.......................... Financial Highlights; How the Fund is Managed
Item 6. Capital Stock and Other Securities.............. Taxes, Dividends and Distributions; General
Information
Item 7. Purchase of Securities Being Offered............ Shareholder Guide; How the Fund Values its
Shares
Item 8. Redemption or Repurchase........................ Shareholder Guide; How the Fund Values its
Shares
Item 9. Pending Legal Proceedings....................... Not Applicable
PART B
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents............................... Table of Contents
Item 12. General Information and History................. General Information
Item 13. Investment Objectives and Policies.............. Investment Objective and Policies; Investment
Restrictions
Item 14. Management of the Fund.......................... Directors and Officers; Manager; Distributor
Item 15. Control Persons and Principal Holders of
Securities...................................... Not Applicable
Item 16. Investment Advisory and Other Services.......... Manager; Custodian, Transfer and Dividend
Disbursing Agent and Independent Accountants
Item 17. Brokerage Allocation and Other Practices........ Portfolio Transactions
Item 18. Capital Stock and Other Securities.............. Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities
Being Purchase and Redemption of Offered...... Fund Shares; Shareholder Investment Account
Item 20. Tax Status...................................... Taxes
Item 21. Underwriters.................................... Distributor
Item 22. Calculation of Performance Data................. Performance Information
Item 23. Financial Statements............................ Financial Statements
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered,
in Part C to this Post-Effective Amendment to the Registration Statement.
<PAGE>
Prudential Pacific Growth Fund, Inc.
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PROSPECTUS DATED , 1994
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Prudential Pacific Growth Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
common stocks, common stock equivalents (such as convertible debt securities and
warrants) and other securities of companies doing business in or domiciled in
the Pacific Basin region. See "How the Fund Invests--Investment Objective and
Policies." Under normal circumstances, the Fund intends to invest at least 65%
of its total assets in such securities. The Fund may invest in equity securities
of other companies and in non-convertible debt securities and options on stocks,
stock indices, foreign currencies and futures contracts on foreign currencies
and may purchase and sell futures contracts on foreign currencies and groups of
currencies and on financial or stock indices so as to hedge its portfolio and to
attempt to enhance income. See "How the Fund Invests--Investment Objective and
Policies." The Fund's address is One Seaport Plaza, New York, New York 10292,
and its telephone number is (800) 225-1852.
The Fund is not intended to constitute a complete investment program. Because of
its objective and policies, including its Pacific Basin orientation, the Fund is
subject to greater investment risks than certain other mutual funds. See "How
the Fund Invests--Special Considerations and Risks of Investing in Foreign
Securities" and "Portfolio Turnover."
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This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated , 1994, which information
is incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Fund at the
address or telephone number noted above.
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Investors are advised to read this Prospectus and retain it for future
reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FUND HIGHLIGHTS
The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.
WHAT IS PRUDENTIAL PACIFIC GROWTH FUND, INC.?
Prudential Pacific Growth Fund, Inc. is a mutual fund. A mutual fund pools
the resources of investors by selling its shares to the public and investing
the proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is an open-end, diversified
management investment company.
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is long term growth of capital. It seeks to
achieve this objective by investing primarily in common stocks, common stock
equivalents and other securities of companies doing business in or domiciled
in the Pacific Basin region. See "How the Fund Invests--Investment Objective
and Policies" at page 6.
WHAT ARE THE FUND'S SPECIAL CHARACTERISTICS AND RISKS?
Under normal circumstances, the Fund anticipates that at least 65% of its
total assets will consist of Pacific Basin region corporate securities,
primarily common stock and other securities convertible into common stock. See
"How the Fund Invests--Investment Objective and Policies" at page 6. Investing
in securities of foreign companies and countries involves certain risks and
considerations not typically associated with investments in U.S. Government
Securities and those of domestic companies. See "How the Fund Invests--Special
Considerations and Risks of Investing in Foreign Securities" at page 7.
WHO MANAGES THE FUND?
Prudential Mutual Fund Management, Inc. (PMF or the Manager), is the
Manager of the Fund and is compensated for its services at an annual rate of
.75 of 1% of the Fund's average daily net assets. As of March 31, 1994, PMF
served as manager or administrator to [66] investment companies, including
[37] mutual funds, with aggregate assets of approximately [$49] billion. The
Prudential Investment Corporation (PIC or the Subadviser) furnishes investment
advisory services in connection with the management of the Fund under a
Subadvisory Agreement with PMF. See "How the Fund is Managed--Manager" at page
13.
WHO DISTRIBUTES THE FUND'S SHARES?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the Distributor of
the Fund's Class A shares and is currently paid for its services at an annual
rate of .25 of 1% of the average daily net assets of the Class A shares.
Prudential Securities Incorporated (Prudential Securities or PSI), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's Class B and Class C shares and is paid for its
services at an annual rate of 1% of the average daily net assets of each of
the Class B and Class C shares. See "How the Fund is Managed--Distributor" at
page 13.
2
<PAGE>
WHAT IS THE MINIMUM INVESTMENT?
The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is $100
for all classes. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan,
the minimum initial and subsequent investment is $50. See "Shareholder Guide--
How to Buy Shares of the Fund" at page 19 and "Shareholder Guide--Shareholder
Services" at page 27.
HOW DO I PURCHASE SHARES?
You may purchase shares of the Fund through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund, through its
transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the Transfer
Agent), at the net asset value per share (NAV) next determined after receipt
of your purchase order by the Transfer Agent or Prudential Securities plus a
sales charge which may be imposed either (i) at the time of purchase (Class A
shares) or (ii) or on a deferred basis (Class B or Class C shares). See "How
the Fund Values Its Shares" at page 16 and "Shareholder Guide-- How to Buy
Shares of the Fund" at page 19.
WHAT ARE MY PURCHASE ALTERNATIVES?
The Fund offers three classes of shares:
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<S> <C>
. Class A Shares: Sold with an initial sales charge of up to 5% of the offering price
. Class B Shares: Sold without an initial sales charge but are subject to a contingent deferred
sales charge or CDSC (declining from 5% to zero of the lower of the amount
invested or the redemption proceeds) which will be imposed on certain redemptions
made within six years of purchase. Although Class B shares are subject to higher
ongoing distribution-related expenses than Class A shares, Class B shares will
automatically convert to Class A shares (which are subject to lower ongoing
expenses) approximately seven years after purchase.
. Class C Shares: Sold without an initial sales charge and for one year after purchase, are subject
to a 1% CDSC on redemptions. Like Class B shares, Class C shares are
subject to higher ongoing distribution-related expenses than Class A shares but
do not convert to another class.
</TABLE>
See "Shareholder Guide--Alternative Purchase Plan" at page 20.
HOW DO I SELL MY SHARES?
You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order. However,
the proceeds of redemptions of Class B and Class C shares may be subject to a
CDSC. See "Shareholder Guide--How to Sell Your Shares" at page 23.
HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?
The Fund expects to pay dividends of net investment income, if any, and
make distributions of any net capital gains at least annually. Dividends and
distributions will be automatically reinvested in additional shares of the
Fund at NAV without a sales charge unless you request that they be paid to you
in cash. See "Taxes, Dividends and Distributions" at page 17.
3
<PAGE>
FUND EXPENSES
<TABLE><CAPTION>
CLASS A
SHARES CLASS B SHARES CLASS C SHARES
----------- ------------------------ ------------------------
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SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)..................... 5% None None
Maximum Sales Load or Deferred Sales
Load Imposed on Reinvested Dividends..... None None None
Deferred Sales Load (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)................................... None 5% during the first 1% on redemptions made
year, decreasing by 1% within one year of
annually to 1% in the purchase
fifth and the sixth
years and 0% the seventh
year*
Redemption Fees...................... None None None
Exchange Fees........................ None None None
</TABLE>
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ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------- ---------------------------- ----------------------------
Management Fees...................... .75% .75% .75%
12b-1 Fees........................... .25%++ 1.00% 1.00%
Other Expenses....................... .68% .62% .62%
--- --- ---
Total Fund Operating Expenses........ 1.68% 2.37% 2.37%
--- --- ---
--- --- ---
</TABLE>
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EXAMPLE 1 3 5 10
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YEAR YEARS YEARS YEARS
--------- --------- --------- ---------
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
Class A.................................................................. $ 66 $ 100 $ 137 $ 239
Class B.................................................................. $ 74 $ 104 $ 137 $ 245
Class C**................................................................ $ 34 $ 74 $ 127 $ 271
You would pay the following expenses on the same investment, assuming no
redemption:
Class A.................................................................. $ 66 $ 100 $ 137 $ 239
Class B.................................................................. $ 24 $ 74 $ 127 $ 245
Class C**................................................................ $ 24 $ 74 $ 127 $ 271
</TABLE>
The above example with respect to Class A and Class B shares is based
on restated data for the Fund's fiscal year ended October 31, 1993. The
above example with respect to Class C shares is based on expenses expected
to have been incurred if Class C shares had been in existence during the
fiscal year ended October 31, 1993. The example should not be considered a
representation of past or future expenses. Actual expenses may be greater
or less than those shown.
The purpose of this table is to assist an investor in understanding the
various types of costs and expenses that an investor in the Fund will
bear, whether directly or indirectly. For more complete descriptions of
the various costs and expenses, see "How the Fund is Managed." "Other
Expenses" include operating expenses of the Fund, such as Directors' and
professional fees, registration fees, reports to shareholders, transfer
agency and custodian (domestic and foreign) fees (but excludes foreign
withholding taxes).
------------------------
* Class B shares will automatically convert to Class A shares
approximately seven years after purchase. See "Shareholder Guide--
Conversion Feature--Class B Shares."
** Estimated based on expenses expected to have been incurred if Class C
shares had been in existence during the fiscal year ended October 31,
1993.
+ Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Fund may not exceed 6.25% of
total gross sales, subject to certain exclusions. This 6.25% limitation
is imposed on the Fund rather than on a per shareholder basis.
Therefore long-term Class B and Class C shareholders of the Fund may
pay more in total sales charges than the economic equivalent of 6.25%
of such shareholders' investment in such shares. See "How the Fund is
Managed--Distributor."
++ Although the Class A Distribution and Service Plan provides that the
Fund may pay up to an annual rate of .30 of 1% of average daily net
assets of the Class A shares, the Distributor has agreed to limit its
distribution expenses with respect to Class A shares of the Fund so as
not to exceed .25 of 1% of the average daily net asset value of the
Class A shares for the fiscal year ending October 31, 1994. See "How
the Fund is Managed--Distributor."
4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
The following financial highlights have been audited by Deloitte & Touche,
independent accountants, whose report thereon was unqualified. This information
should be read in conjunction with the financial statements and notes thereto,
which appear in the Statement of Additional Information. The following financial
highlights contain selected data for a Class A and Class B share of common stock
outstanding, respectively, total return, ratios to average net assets and other
supplemental data for the periods indicated. The information is based on data
contained in the financial statements. No Class C shares were outstanding during
the periods indicated.
<TABLE><CAPTION>
CLASS A CLASS B
------------------------------ -----------------------------
JULY 24, JULY 24,
FISCAL 1992* FISCAL 1992*
YEAR ENDED THROUGH YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1993+ 1992 1993+ 1992
--------------- ------------- -------------- -------------
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........ $ 10.65 $ 10.00 $ 10.63 $ 10.00
------- ------------- -------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss......................... (.01) (.02) (.10) (.04)
Net realized and unrealized gain on
investment and foreign currency
transactions................................ 5.48 .67 5.43 .67
------- ------------- -------------- -------------
Total from investment operations............ 5.47 .65 5.33 .63
------- ------------- -------------- -------------
LESS DISTRIBUTIONS:
Distributions from foreign currency
gains....................................... (.02) -- (.02) --
------- ------------- -------------- -------------
Net asset value, end of period.............. $ 16.10 $ 10.65 $ 15.94 $ 10.63
------- ------------- -------------- -------------
------- ------------- -------------- -------------
TOTAL RETURN***............................. 51.39% 6.50% 50.17% 6.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............. $ 64,353 $ 13,918 $ 250,997 $ 20,050
Average net assets (000).................... $ 26,264 $ 12,884 $ 74,590 $ 16,025
Ratios to average net assets:
Expenses, including distribution fees..... 1.63% 2.72%** 2.37% 3.52%**
Expenses, excluding distribution fees..... 1.43% 2.52%** 1.37% 2.52%**
Net investment loss....................... (.04)% (.75)%** (.83)% (1.55)%**
Portfolio turnover rate..................... 44% 0% 44% 0%
</TABLE>
------------------------
* Commencement of investment operations.
** Annualized.
*** Total return represents the change in net asset value from the first
day to the last day of each period reported and does not take into
account any sales charges. Total returns for periods of less than one
year are not annualized.
+ Calculated based upon average shares outstanding during the year.
5
<PAGE>
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. THE FUND
SEEKS TO ACHIEVE THIS OBJECTIVE BY INVESTING PRIMARILY IN EQUITY SECURITIES OF
CORPORATIONS DOMICILED IN THE PACIFIC BASIN REGION, INCLUDING, BUT NOT LIMITED
TO, JAPAN, AUSTRALIA, HONG KONG, SINGAPORE, SOUTH KOREA, MALAYSIA, THAILAND,
INDONESIA, THE PHILIPPINES AND NEW ZEALAND. CURRENT INCOME FROM DIVIDENDS AND
INTEREST WILL NOT BE AN IMPORTANT CONSIDERATION IN SELECTING PORTFOLIO
SECURITIES. THE FUND ANTICIPATES THAT UNDER NORMAL CONDITIONS AT LEAST 65% OF
ITS TOTAL ASSETS WILL CONSIST OF PACIFIC BASIN REGION CORPORATE SECURITIES,
PRIMARILY COMMON STOCKS AND OTHER SECURITIES CONVERTIBLE INTO COMMON STOCK.
THERE IS NO LIMIT ON THE PERCENTAGE OF FUND ASSETS THAT MAY BE INVESTED IN ANY
SINGLE COUNTRY. THE FUND RESERVES THE RIGHT AS A DEFENSIVE MEASURE TO HOLD OTHER
TYPES OF SECURITIES WITHOUT LIMIT, INCLUDING COMMERCIAL PAPER OF CORPORATIONS,
BANKERS' ACCEPTANCES, NON-CONVERTIBLE DEBT SECURITIES OR GOVERNMENT AND HIGH
QUALITY MONEY MARKET SECURITIES OF UNITED STATES AND NON-UNITED STATES ISSUERS,
OR CASH (FOREIGN CURRENCIES OR UNITED STATES DOLLARS), IN SUCH PROPORTIONS AS,
IN THE OPINION OF THE FUND'S INVESTMENT ADVISER, PREVAILING MARKET, ECONOMIC OR
POLITICAL CONDITIONS WARRANT. A PORTION OF THE PORTFOLIO NORMALLY WILL BE HELD
IN DOLLARS OR SHORT-TERM INTEREST-BEARING DOLLAR-DENOMINATED SECURITIES TO
PROVIDE FOR POSSIBLE REDEMPTIONS. THERE CAN BE NO ASSURANCE THAT THE FUND'S
OBJECTIVE WILL BE ACHIEVED. See "Investment Objective and Policies" in the
Statement of Additional Information.
UNDER NORMAL CIRCUMSTANCES, THE FUND MAY INVEST UP TO 35% OF ITS TOTAL ASSETS
IN THE SECURITIES OF ISSUERS DOMICILED OUTSIDE OF THE PACIFIC BASIN REGION. For
example, the Fund may invest in a company outside of the Pacific Basin region
when the Fund's investment adviser believes at the time of investment that the
value of the company's securities may be enhanced by conditions or developments
in the Pacific Basin region even though the company's production facilities are
located outside of the Pacific Basin region.
THE FUND MAY INVEST IN SECURITIES NOT LISTED ON SECURITIES EXCHANGES. THESE
SECURITIES WILL GENERALLY HAVE AN ESTABLISHED MARKET (SUCH AS THE
OVER-THE-COUNTER MARKET), THE DEPTH AND LIQUIDITY OF WHICH MAY VARY FROM TIME TO
TIME AND FROM SECURITY TO SECURITY. THE FUND MAY INVEST UP TO 5% OF ITS NET
ASSETS (DETERMINED AT THE TIME OF INVESTMENT) IN SECURITIES FOR WHICH MARKET
QUOTATIONS ARE NOT READILY AVAILABLE AND IN REPURCHASE AGREEMENTS WHICH HAVE A
MATURITY LONGER THAN SEVEN DAYS. THE FUND MAY FROM TIME TO TIME LEND ITS
PORTFOLIO SECURITIES TO BROKERS OR DEALERS, BANKS OR OTHER RECOGNIZED
INSTITUTIONAL BORROWERS OF SECURITIES AND MAY INVEST TO A LIMITED EXTENT IN
SECURITIES OF COMPANIES THAT HAVE BEEN IN EXISTENCE FOR LESS THAN THREE YEARS
AND IN SECURITIES OF OTHER REGISTERED INVESTMENT COMPANIES. See "Investment
Restrictions" in the Statement of Additional Information.
In addition to analyzing the companies in which investments are made, the
investment adviser also considers such factors as prospects for economic growth
for each foreign country; expected levels of inflation and interest rates;
government policies influencing business conditions; the range of individual
investment opportunities available to international investors; and other
pertinent financial, tax, social, political and national factors--all in
relation to the prevailing prices of securities in each country.
IN ADDITION TO PURCHASING EQUITY SECURITIES OF PACIFIC BASIN REGION ISSUERS,
THE FUND MAY INVEST IN AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY
RECEIPTS (EDRS) OR OTHER SECURITIES CONVERTIBLE INTO SECURITIES OF CORPORATIONS
DOMICILED IN PACIFIC BASIN REGION COUNTRIES. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. Generally, ADRs, in registered form, are designed for use
in the United States securities markets and EDRs, in bearer form, are designed
for use in European securities markets.
6
<PAGE>
THE FUND MAY INVEST UP TO 5% OF ITS NET ASSETS IN WARRANTS. A warrant gives
the holder thereof the right to subscribe by a specified date to a stated number
of shares of stock of the issuer at a fixed price. Warrants tend to be more
volatile than the underlying stock, and if at a warrant's expiration date the
stock is trading at a price below the price set in the warrant, the warrant will
expire worthless. Conversely, if at the expiration date the underlying stock is
trading at a price higher than the price set in the warrant, the Fund can
acquire the stock at a price below its market value.
IN ADDITION TO THE PACIFIC BASIN REGION COUNTRIES LISTED ABOVE, THE FUND MAY
INVEST DIRECTLY IN TAIWAN, INDIA, PAKISTAN, VIETNAM AND THE PEOPLE'S REPUBLIC OF
CHINA, IF AND WHEN THEIR RESPECTIVE STOCK MARKETS BECOME OPEN TO DIRECT FOREIGN
INVESTMENT AND SUBJECT TO LOCAL RESTRICTIONS. Due to restrictions on direct
investment in equity securities in those countries, the Fund may currently
invest in such markets only through a limited number of approved vehicles. At
present, this includes investments through listed and unlisted funds. Investment
in such funds is subject to limitations under the Investment Company Act of
1940, as amended (the Investment Company Act), and market availability and may
involve the payment of substantial premiums above the value of such funds'
portfolio securities. The yield of such securities will be reduced by operating
expenses of such funds. To the extent to which such vehicles would be treated as
"passive foreign investment companies" under the Internal Revenue Code of 1986,
as amended (the Internal Revenue Code), the Fund may further limit its
investments in order to avoid adverse U.S. federal income tax consequences.
AS INDICATED ABOVE, WHEN CONDITIONS DICTATE A DEFENSIVE STRATEGY, THE FUND
MAY INVEST, WITHOUT LIMIT, IN HIGH QUALITY MONEY MARKET INSTRUMENTS OF UNITED
STATES AND NON-UNITED STATES ISSUERS (INCLUDING, WITH RESPECT TO UNITED STATES
ISSUERS, REPURCHASE AGREEMENTS MATURING IN SEVEN DAYS OR LESS). The Fund will
only invest in money market instruments that have short term ratings in at least
the second highest category by at least one Nationally Recognized Statistical
Rating Organization (NRSRO) or are issued by companies that have outstanding
debt securities rated BBB or higher, or its equivalent by an NRSRO or in unrated
securities of issuers that the Fund's investment adviser has determined to be of
comparable quality. Subsequent to its purchase by the Fund, a security may be
assigned a lower rating or cease to be rated. Such an event would not require
the elimination of the issue from the portfolio, but the investment adviser will
consider such an event in determining whether the Fund should continue to hold
the security in its portfolio. Securities rated Baa by Moody's Investors Service
Inc. (Moodys) or BBB by Standard & Poor's Ratings Group (S&P), for example,
although considered to be investment grade, lack outstanding investment
characteristics and, in fact, have speculative characteristics. See "Description
of Security Ratings" in the Statement of Additional Information.
THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND MAY NOT BE
CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES, AS DEFINED IN THE INVESTMENT COMPANY ACT. FUND
POLICIES THAT ARE NOT FUNDAMENTAL MAY BE MODIFIED BY THE BOARD OF DIRECTORS.
SPECIAL CONSIDERATIONS AND RISKS OF INVESTING IN FOREIGN SECURITIES
FOREIGN SECURITIES INVOLVE CERTAIN RISKS, WHICH SHOULD BE CONSIDERED
CAREFULLY BY AN INVESTOR IN THE FUND. THESE RISKS INCLUDE POLITICAL OR ECONOMIC
INSTABILITY IN THE COUNTRY OF THE ISSUER, THE DIFFICULTY OF PREDICTING
INTERNATIONAL TRADE PATTERNS, THE POSSIBILITY OF IMPOSITION OF EXCHANGE CONTROLS
AND THE RISK OF CURRENCY FLUCTUATIONS. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. Government, its instrumentalities or agencies. In
addition, there may be less publicly available information about a foreign
company than about a domestic company. Foreign companies generally are not
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of securities exchanges, brokers and listed companies
abroad than in the United States and there is a possibility of expropriation,
confiscatory taxation or diplomatic developments which could affect investment.
ALTHOUGH THE FUND INTENDS TO INVEST PRIMARILY IN EQUITY SECURITIES, IT MAY
INVEST FROM TIME TO TIME IN DEBT SECURITIES OF FOREIGN ISSUERS. In many
instances, foreign debt securities may provide higher yields than securities of
domestic issuers
7
<PAGE>
which have similar maturities and quality. These investments, however, may be
less liquid than the securities of U.S. corporations. In the event of default of
any such foreign debt obligations, it may be more difficult for the Fund to
obtain or enforce a judgment against the issuers of such securities.
ADDITIONAL COSTS COULD BE INCURRED IN CONNECTION WITH THE FUND'S
INTERNATIONAL INVESTMENT ACTIVITIES. Foreign brokerage commissions are generally
higher than in the United States. Increased custodian costs as well as
administrative difficulties (such as the applicability of foreign laws to
foreign custodians in various circumstances) may be associated with the
maintenance of assets in foreign jurisdictions.
If the security is denominated in a foreign currency, it will be affected by
changes in currency exchange rates and in exchange control regulations, and
costs will be incurred in connection with conversions between currencies. A
change in the value of any such currency against the U.S. dollar will result in
a corresponding change in the U.S. dollar value of the Fund's securities
denominated in that currency. Such changes also will affect the Fund's income
and distributions to shareholders. In addition, although the Fund will receive
income in such currencies, the Fund will be required to compute and distribute
its income in U.S. dollars. Therefore, if the exchange rate for any such
currency declines after the Fund's income has been accrued and translated into
U.S. dollars, the Fund could be required to liquidate portfolio securities to
make such distributions, particularly in instances in which the amount of income
the Fund is required to distribute is not immediately reduced by the decline in
such currency. Similarly, if an exchange rate declines between the time the Fund
incurs expenses in U.S. dollars and the time such expenses are paid, the amount
of such currency required to be converted into U.S. dollars in order to pay such
expenses in U.S. dollars will be greater than the equivalent amount in any such
currency of such expenses at the time they were incurred. The Fund may, but need
not, enter into futures contracts on foreign currencies, forward foreign
currency exchange contracts and options on foreign currencies for hedging
purposes, including: locking-in the U.S. dollar price of the purchase or sale of
securities denominated in a foreign currency; locking-in the U.S. dollar
equivalent of interest or dividends to be paid on such securities which are held
by the Fund; and protecting the U.S. dollar value of such securities which are
held by the Fund.
SHAREHOLDERS SHOULD BE AWARE THAT INVESTING IN THE EQUITY AND FIXED-INCOME
MARKETS OF DEVELOPING COUNTRIES INVOLVES EXPOSURE TO ECONOMIES THAT ARE
GENERALLY LESS DIVERSE AND MATURE, AND TO POLITICAL SYSTEMS WHICH CAN BE
EXPECTED TO HAVE LESS STABILITY THAN THOSE OF DEVELOPED COUNTRIES. HISTORICAL
EXPERIENCE INDICATES THAT THE MARKETS OF DEVELOPING COUNTRIES HAVE BEEN MORE
VOLATILE THAN THE MARKETS OF DEVELOPED COUNTRIES.
HEDGING AND INCOME ENHANCEMENT STRATEGIES
THE FUND MAY ALSO ENGAGE IN VARIOUS PORTFOLIO STRATEGIES TO REDUCE CERTAIN
RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO ENHANCE INCOME. These strategies
currently include the use of options, forward currency exchange contracts and
futures contracts and options thereon. The Fund's ability to use these
strategies may be limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that any of these strategies will
succeed. See "Investment Objective and Policies" and "Taxes" in the Statement of
Additional Information. New financial products and risk management techniques
continue to be developed and the Fund may use these new investments and
techniques to the extent consistent with its investment objective and policies.
OPTIONS TRANSACTIONS
THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON
SECURITIES AND CURRENCIES THAT ARE TRADED ON U.S. OR FOREIGN SECURITIES
EXCHANGES OR IN THE OVER-THE-COUNTER MARKET TO ENHANCE INCOME OR TO HEDGE THE
FUND'S PORTFOLIO. THESE OPTIONS WILL BE ON EQUITY SECURITIES, FINANCIAL INDICES
(E.G., S&P 500) AND FOREIGN CURRENCIES. The Fund may write covered put and call
options to generate additional income through the receipt of premiums, purchase
put options in an effort to protect the value of a security that it owns against
a decline in market value and purchase call options in an effort to protect
against an increase in the price of securities (or currencies) it intends to
purchase. The Fund may also
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<PAGE>
purchase put and call options to offset previously written put and call options
of the same series. See "Investment Objective and Policies--Options on
Securities" in the Statement of Additional Information.
A CALL OPTION GIVES THE PURCHASER, IN EXCHANGE FOR A PREMIUM PAID, THE RIGHT
FOR A SPECIFIED PERIOD OF TIME TO PURCHASE THE SECURITIES OR CURRENCY SUBJECT TO
THE OPTION AT A SPECIFIED PRICE (THE EXERCISE PRICE OR STRIKE PRICE). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver, depending upon the terms of the option contract, the
underlying securities or a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Fund writes a call option, the Fund
gives up the potential for gain on the underlying securities or currency in
excess of the exercise price of the option during the period that the option is
open.
A PUT OPTION GIVES THE PURCHASER, IN RETURN FOR A PREMIUM, THE RIGHT, FOR A
SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES OR CURRENCY SUBJECT TO THE
OPTION TO THE WRITER OF THE PUT AT THE SPECIFIED EXERCISE PRICE. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities or currency underlying the option at the
exercise price. The Fund might, therefore, be obligated to purchase the
underlying securities or currency for more than their current market price.
THE FUND WILL WRITE ONLY "COVERED" OPTIONS. An option is covered if, so long
as the Fund is obligated under the option, it owns an offsetting position in the
underlying security or currency or maintains cash, U.S. Government securities or
other liquid high-grade debt obligations with a value sufficient at all times to
cover its obligations in a segregated account. See "Investment Objective and
Policies--Options on Securities" in the Statement of Additional Information.
There is no limitation on the amount of call options the Fund may write. The
Fund has undertaken with certain state securities commissions that, so long as
shares of the Fund are registered in those states, it will not (a) write puts
having aggregate exercise prices greater than 25% of total net assets, or (b)
purchase (i) put options on stocks not held in the Fund's portfolio, (ii) put
options on stock indices or foreign currencies or (iii) call options on stock,
stock indices or foreign currencies if, after any such purchase, the aggregate
premiums paid for such options would exceed 10% of the Fund's total assets;
provided, however, that the Fund may purchase put options on stocks held by the
Fund if after such purchase the aggregate premiums paid for such options do not
exceed 20% of the Fund's total assets. The aggregate value of the obligations
underlying put options will not exceed 50% of the Fund's assets.
FORWARD CURRENCY EXCHANGE CONTRACTS
THE FUND MAY ENTER INTO FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO
PROTECT THE VALUE OF ITS ASSETS AGAINST FUTURE CHANGES IN THE LEVEL OF CURRENCY
EXCHANGE RATES. The Fund may enter into such contracts on a spot, i.e., cash,
basis at the rate then prevailing in the currency exchange market or on a
forward basis, by entering into a forward contract to purchase or sell currency.
A forward contract on foreign currency is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days agreed
upon by the parties from the date of the contract at a price set on the date of
the contract.
THE FUND'S DEALINGS IN FORWARD CONTRACTS WILL BE LIMITED TO HEDGING INVOLVING
EITHER SPECIFIC TRANSACTIONS OR PORTFOLIO POSITIONS. Transaction hedging is the
purchase or sale of a forward contract with respect to specific receivables or
payables of the Fund generally arising in connection with the purchase or sale
of its portfolio securities and accruals of interest or dividends receivable and
Fund expenses. Position hedging is the sale of a foreign currency with respect
to portfolio security positions denominated or quoted in that currency or in a
currency bearing a substantial correlation to the value of that currency (cross
hedge). Although there are no limits on the number of forward contracts which
the Fund may enter into, the Fund may not position hedge (including cross
hedges) with respect to a particular currency for an amount greater than the
aggregate market value (determined at the time of making any sale of forward
currency) of the securities being hedged. See "Investment Objective and
Policies--Risks Related to Forward Currency Exchange Contracts" in the Statement
of Additional Information.
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<PAGE>
FUTURES CONTRACTS AND OPTIONS THEREON
THE FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS AND OPTIONS
THEREON WHICH ARE TRADED ON A COMMODITIES EXCHANGE OR BOARD OF TRADE FOR CERTAIN
HEDGING, RETURN ENHANCEMENT AND RISK MANAGEMENT PURPOSES IN ACCORDANCE WITH
REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION. These futures contracts
and related options will be on financial indices and foreign currencies or
groups of foreign currencies such as the European Currency Unit. A European
Currency Unit is a basket of specified amounts of the currencies of certain
member states of the European Economic Community, a Western European economic
cooperative organization including France, Germany, the Netherlands and the
United Kingdom. A financial futures contract is an agreement to purchase or sell
an agreed amount of securities or currencies at a set price for delivery in the
future.
The Fund may not purchase or sell futures contracts and related options for
return enhancement or risk management purposes, if immediately thereafter the
sum of the amount of initial margin deposits on the Fund's existing futures and
options on futures and premiums paid for such related options would exceed 5% of
the liquidation value of the Fund's total assets. The Fund may purchase and sell
futures contracts and related options, without limitation, for bona fide hedging
purposes. The value of all futures contracts sold will not exceed the total
market value of the Fund's portfolio.
THE FUND'S SUCCESSFUL USE OF FUTURES CONTRACTS AND RELATED OPTIONS DEPENDS
UPON THE INVESTMENT ADVISER'S ABILITY TO PREDICT THE DIRECTION OF THE MARKET AND
IS SUBJECT TO VARIOUS ADDITIONAL RISKS. The correlation between movements in the
price of a futures contract and the movements in the index or price of the
currencies being hedged is imperfect and there is a risk that the value of the
indicies or currencies being hedged may increase or decrease at a greater rate
than the related futures contracts resulting in losses to the Fund. Certain
futures exchanges or boards of trade have established daily limits on the amount
that the price of futures contracts or related options may vary, either up or
down, from the previous day's settlement price. These daily limits may restrict
the Fund's ability to purchase or sell certain futures contracts or related
options on any particular day.
The Fund's ability to enter into futures contracts and options thereon is
limited by the requirements of the Internal Revenue Code for qualification as a
regulated investment company. See "Taxes" in the Statement of Additional
Information.
SPECIAL RISKS OF HEDGING AND INCOME ENHANCEMENT STRATEGIES
PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS AND IN CURRENCY EXCHANGE
TRANSACTIONS INVOLVES INVESTMENT RISKS AND TRANSACTION COSTS TO WHICH THE FUND
WOULD NOT BE SUBJECT ABSENT THE USE OF THESE STRATEGIES. If the investment
adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such strategies were not
used. Risks inherent in the use of options, foreign currency and futures
contracts and options on futures contracts include (1) dependence on the
investment adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; (5) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences; and (6) the possible inability of the Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable for it to do so,
or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions. See "Taxes" in the
Statement of Additional Information.
The Fund will generally purchase options and futures on an exchange only if
there appears to be a liquid secondary market for such options or futures; the
Fund will generally purchase OTC options only if management believes that the
other party to the options will continue to make a market for such options.
However, there can be no assurance that a liquid
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<PAGE>
secondary market will continue to exist or that the other party will continue to
make a market. Thus, it may not be possible to close an options or futures
transaction. The inability to close options and futures positions also could
have an adverse impact on the Fund's ability to effectively hedge its portfolio.
There is also the risk of loss by the Fund of margin deposits or collateral in
the event of bankruptcy of a broker with whom the Fund has an open position in
an option, a futures contract or related option.
OTHER INVESTMENTS AND POLICIES
REPURCHASE AGREEMENTS
The Fund will enter into repurchase agreements, whereby the seller of the
security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The repurchase date is usually within a day or two
of the original purchase, although it may extend over a number of months. The
Fund's repurchase agreements will at all times be fully collateralized in an
amount at least equal to the purchase price of the underlying securities
(including accrued interest earned thereon). In the event of a default or
bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase are less than the repurchase price, the Fund
will suffer a loss. The Fund participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management, Inc.
pursuant to an order of the Securities and Exchange Commission (SEC). See
"Investment Objective and Policies--Repurchase Agreements" in the Statement of
Additional Information.
BORROWING
The Fund may borrow an amount equal to no more than 20% of the value of its
total assets (calculated when the loan is made) from banks for temporary,
extraordinary or emergency purposes or for the clearance of transactions. The
Fund may pledge up to 20% of its total assets to secure these borrowings.
ILLIQUID SECURITIES
The Fund may invest up to 5% 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 in securities markets
either within or outside of the United States. 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.
The staff of the SEC has taken the position that 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
the Fund's election, 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."
PORTFOLIO TURNOVER
As a result of the Fund's investment policies, its portfolio turnover rate
may exceed 100%, although the rate is not expected to exceed 200%. High
portfolio turnover may involve correspondingly greater brokerage commissions and
other transaction costs, which will be borne directly by the Fund. See
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In addition, high portfolio turnover may result in increased
short-term capital gains, which, when distributed to shareholders, are treated
as ordinary income. See "Taxes, Dividends and Distributions."
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<PAGE>
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase or sell securities on a when-issued or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place a month or
more in the future in order to secure what is considered to be an advantageous
price and yield to the Fund at the time of entering into the transaction. While
the Fund will only purchase securities on a when-issued or delayed delivery
basis with the intention of acquiring the securities, the Fund may sell the
securities before the settlement date, if it is deemed advisable. At the time
the Fund makes the commitment to purchase securities on a when-issued or delayed
delivery basis, the Fund will record the transaction and thereafter reflect the
value, each day, of such security in determining the net asset value of the
Fund. At the time of delivery of the securities, the value may be more or less
than the purchase price. The Fund's Custodian will maintain, in a segregated
account of the Fund, cash, U.S. Government securities or other liquid high-grade
debt obligations having a value equal to or greater than the Fund's purchase
commitments; the Custodian will likewise segregate securities sold on a delayed
delivery basis. Subject to this requirement, the Fund may purchase securities on
such basis without limit. See "Investment Objective and Policies--When-Issued
and Delayed Delivery Securities" in the Statement of Additional Information.
SECURITIES LENDING
The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Fund in an amount equal to at least 100%,
determined daily, of the market value of the securities loaned which are
maintained in a segregated account pursuant to applicable regulations. During
the time portfolio securities are on loan, the borrower will pay the Fund an
amount equivalent to any dividend or interest paid on such securities and the
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower. As with any
extensions of credit, there are risks of delay in recovery and in some cases
loss of rights in the collateral should the borrower of the securities fail
financially. As a matter of fundamental policy, the Fund cannot lend more than
30% of the value of its total assets. See "Investment Objective and
Policies--Lending of Securities" in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.
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<PAGE>
HOW THE FUND IS MANAGED
THE FUND HAS A BOARD OF DIRECTORS WHICH, IN ADDITION TO OVERSEEING THE
ACTIONS OF THE FUND'S MANAGER, SUBADVISER AND DISTRIBUTOR, DECIDES UPON MATTERS
OF GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND SUPERVISES THE DAILY BUSINESS
OPERATIONS OF THE FUND. THE FUND'S SUBADVISER FURNISHES DAILY INVESTMENT
ADVISORY SERVICES.
For the fiscal year ended October 31, 1993, the total expenses as a
percentage of average net assets for the Fund's Class A and Class B shares were
1.63% and 2.37%, respectively. See "Financial Highlights." No Class C shares
were outstanding during the fiscal year ended October 31, 1993.
MANAGER
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (PMF OR THE MANAGER), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS THE MANAGER OF THE FUND AND IS COMPENSATED
FOR ITS SERVICES AT AN ANNUAL RATE OF .75 OF 1% OF THE FUND'S AVERAGE DAILY NET
ASSETS. It was incorporated in May 1987 under the laws of the State of Delaware.
For the fiscal year ended October 31, 1993, the Fund paid management fees to PMF
of 0.75% of the Fund's average net assets. See "Manager" in the Statement of
Additional Information.
As of March 31, 1994, PMF served as the manager to [37] open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to [29] closed-end investment companies with aggregate assets of
approximately [$49] billion.
UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PMF MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. SEE
"MANAGER" IN THE STATEMENT OF ADDITIONAL INFORMATION.
UNDER A SUBADVISORY AGREEMENT BETWEEN PMF AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC OR THE SUBADVISER), PIC FURNISHES INVESTMENT ADVISORY SERVICES
IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PMF FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PMF continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.
The current portfolio manager of the Fund is Daniel J. Duane, a Managing
Director and Chief Investment Officer for Global Equity Investments of
Prudential Investment Advisors, a unit of PIC. Mr. Duane has responsibility for
the day-to-day management of the Fund's portfolio. Mr. Duane has managed the
Fund's portfolio since its inception in July 1992 and has been employed by PIC
as a portfolio manager since 1990. He was formerly with First Investors Asset
Management from 1986 to 1990 as senior portfolio manager and head of global
equity investments. Mr. Duane is a Chartered Financial Analyst. Mr. Duane also
serves as the portfolio manager of the Prudential Series Fund Global Equity
Portfolio, Prudential Global Fund and Prudential Global Genesis Fund.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance and
financial services company.
DISTRIBUTOR
PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC. (PMFD), ONE SEAPORT PLAZA, NEW
YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF
DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS A SHARES OF THE FUND. IT IS
A WHOLLY-OWNED SUBSIDIARY OF PMF.
PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR PSI), ONE
SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE
LAWS OF THE STATE OF DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS B AND
CLASS C SHARES OF THE FUND. IT IS AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF
PRUDENTIAL.
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<PAGE>
UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND SEPARATE DISTRIBUTION AGREEMENTS
(THE DISTRIBUTION AGREEMENTS), PMFD AND PRUDENTIAL SECURITIES (COLLECTIVELY, THE
DISTRIBUTOR) INCUR THE EXPENSES OF DISTRIBUTING THE FUND'S CLASS A, CLASS B AND
CLASS C SHARES. These expenses include commissions and account servicing fees
paid to, or on account of, financial advisers of Prudential Securities and Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, commissions and
account servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) which have entered into
agreements with the Distributor, advertising expenses, the cost of printing and
mailing prospectuses to potential investors and indirect and overhead costs of
Prudential and Prusec associated with the sale of Fund shares, including lease,
utility, communications and sales promotion expenses. The State of Texas
requires that shares of the Fund may be sold in that state only by dealers or
other financial institutions which are registered there as broker-dealers.
Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
UNDER THE CLASS A PLAN, THE FUND MAY PAY 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 daily net assets of the Class A shares may be
used to pay for personal service and/or the maintenance of shareholder accounts
(service fee) and (ii) total distribution fees (including the service fee of .25
of 1%) may not exceed .30 of 1% of the average daily net assets of the Class A
shares. PMFD has agreed to limit its distribution-related fees payable under the
Class A Plan to .25 of 1% of the average daily net assets of the Class A shares
for the fiscal year ending October 31, 1994.
For the fiscal year ended October 31, 1993, PMFD received payments of $52,529
under the Class A Plan as reimbursement of expenses related to the distribution
of Class A shares. This amount was primarily expended for payment of account
servicing fees to financial advisers and other persons who sell Class A shares.
For the fiscal year ended October 31, 1993, PMFD also received approximately
$1,305,500 in initial sales charges.
UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS PRUDENTIAL SECURITIES FOR
ITS DISTRIBUTION-RELATED EXPENSES WITH RESPECT TO CLASS B AND CLASS C SHARES AT
AN ANNUAL RATE OF 1% OF THE AVERAGE DAILY NET ASSETS OF EACH OF THE CLASS B AND
CLASS C SHARES. The Class B and Class C Plans provide for the payment to
Prudential Securities of (i) an asset-based sales charge of .75 of 1% of the
average daily net assets of each of the Class B and Class C shares, and (ii) a
service fee of .25 of 1% of the average daily net assets of each of the Class B
and Class C shares. The service fee is used to pay for personal service and/or
the maintenance of shareholder accounts. Prudential Securities also receives
contingent deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide--How to Sell Your Shares-- Contingent Deferred Sales
Charges."
For the fiscal year ended October 31, 1993, Prudential Securities incurred
distribution expenses of approximately $6,693,000 under the Class B Plan and
received $745,906 from the Fund under the Class B Plan. In addition Prudential
Securities received approximately $168,400 in contingent deferred sales charges
from redemptions of Class B shares during this period. No Class C shares were
outstanding for the fiscal year ended October 31, 1993.
For the fiscal year ended October 31, 1993, the Fund paid distribution
expenses of .20% and 1.00% of the average net assets of the Class A and Class B
shares, respectively. The Fund records all payments made under the Plans as
expenses in the calculation of net investment income. No Class C shares were
outstanding during the fiscal year ended October 31, 1993.
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<PAGE>
Distribution expenses attributable to the sale of shares of the Fund will be
allocated to each class based upon the ratio of sales of each class to the sales
of all shares of the Fund other than expenses allocable to a particular class.
The distribution fee and sales charge of one class will not be used to subsidize
the sale of another class.
Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan (the Rule 12b-1 Directors), vote annually to continue the Plan. Each Plan
may be terminated at any time by vote of a majority of the Rule 12b-1 Directors
or of a majority of the outstanding shares of the applicable class of the Fund.
The Fund will not be obligated to pay expenses incurred under any plan if it is
terminated or not continued.
In addition to distribution and service fees paid by the Fund under the Class
A, Class B and Class C Plans, the Manager (or one of its affiliates) may make
payments to dealers and other persons which distribute shares of the Fund. Such
payments may be calculated by reference to the net asset value of shares sold by
such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.
FEE WAIVERS AND SUBSIDY
PMF may from time to time waive all or a portion of its management fee and
subsidize all or a portion of the operating expenses of the Fund. Fee waivers
and expense subsidies will increase the Fund's total return. See "Performance
Information" in the Statement of Additional Information and "Fund Expenses."
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission merchant for
the Fund provided that the commissions, fees or other remuneration it receives
are fair and reasonable. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Its mailing address is P.O. Box
1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc., (PMFS) Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.
HOW THE FUND VALUES ITS SHARES
THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. THE BOARD OF DIRECTORS HAS FIXED THE
SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NAV TO BE AS OF 4:15
P.M., NEW YORK TIME.
Portfolio securities are valued based on market quotations or, if not readily
available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information.
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<PAGE>
The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. See "Net Asset Value" in the Statement of
Additional Information.
Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject. It is
expected, however, that the NAV of the three classes will tend to converge
immediately after the recording of dividends, which will differ by approximately
the amount of the distribution-related expense accrual differential among the
classes.
HOW THE FUND CALCULATES PERFORMANCE
FROM TIME TO TIME THE FUND MAY ADVERTISE ITS TOTAL RETURN (INCLUDING "AVERAGE
ANNUAL" TOTAL RETURN AND "AGGREGATE" TOTAL RETURN) AND YIELD IN ADVERTISEMENTS
OR SALES LITERATURE. TOTAL RETURN AND YIELD ARE CALCULATED SEPARATELY FOR CLASS
A, CLASS B AND CLASS C SHARES. These figures are based on historical earnings
and are not intended to indicate future performance. The "total return" shows
how much an investment in the Fund would have increased (decreased) over a
specified period of time (i.e., one, five, or ten years or since inception of
the Fund) assuming that all distributions and dividends by the Fund were
reinvested on the reinvestment dates during the period and less all recurring
fees. The "aggregate" total return reflects actual performance over a stated
period of time. "Average annual" total return is a hypothetical rate of return
that, if achieved annually, would have produced the same aggregate total return
if performance had been constant over the entire period. "Average annual" total
return smooths out variations in performance and takes into account any
applicable initial or contingent deferred sales charges. Neither "average
annual" total return nor "aggregate" total return takes into account any federal
or state income taxes which may be payable upon redemption. The "yield" refers
to the income generated by an investment in the Fund over a one-month or 30-day
period. This income is then "annualized;" that is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The Fund may also from time to time
advertise its 30-day yield. See "Performance Information" in the Statement of
Additional Information. The Fund also may include comparative performance
information in advertising or marketing the Fund's shares. Such performance
information may include data from Lipper Analytical Services, Inc., other
industry publications, business periodicals and market Indices. See "Performance
Information" in the Statement of Additional Information. The Fund will include
performance data for each class of shares of the Fund in any advertisement or
information including performance data of the Fund. Further performance
information is contained in the Fund's annual and semi-annual reports to
shareholders, which may be obtained without charge. See "Shareholder
Guide--Shareholder Services--Reports to Shareholders."
TAXES, DIVIDENDS AND DISTRIBUTIONS
TAXATION OF THE FUND
THE FUND HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A
REGULATED INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY THE
FUND WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME
AND CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS.
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<PAGE>
The Fund may, from time to time, invest in Passive Foreign Investment
Companies (PFICs). PFICs are foreign corporations which derive a majority of
their income from passive sources. For tax purposes, the Fund's investments in
PFICs are subject to special tax provisions that may result in the taxation of
certain gains realized by the Fund. See "Taxes" in the Statement of Additional
Information.
In addition, under the Internal Revenue Code, special rules apply to the
treatment of certain options and futures contracts (Section 1256 contracts). At
the end of each year, such investments held by the Fund will be required to be
"marked to market" for federal income tax purposes; that is, treated as having
been sold at market value. Sixty percent of any gain or loss recognized on these
"deemed sales" and on actual dispositions may be treated as long-term capital
gain or loss, and the remainder will be treated as short-term capital gain or
loss. See "Taxes" in the Statement of Additional Information.
TAXATION OF SHAREHOLDERS
All dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholder whether or not reinvested. Any net long-term capital gains
distributed to shareholders will be taxable as such to the shareholder, whether
or not reinvested and regardless of the length of time a shareholder has owned
his or her shares. The maximum long-term capital gains rate for corporate
shareholders is currently the same as the maximum tax rate for ordinary income.
The maximum long-term capital gains rate for individual shareholders is
currently 28% and the maximum tax rate for ordinary income is 39.6%.
The Fund may incur foreign income taxes in connection with some of its
foreign investments. Certain of these taxes may be credited to shareholders. See
"Taxes" in the Statement of Additional Information.
Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any short-term capital loss will
be treated as long-term capital loss to the extent of any capital gain
distributions received by the shareholder regardless of the length of time such
shares were held.
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.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes. See "Taxes" in the Statement of
Additional Information.
WITHHOLDING TAXES
Under U.S. Treasury Regulations, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds, payable on the accounts of those shareholders who fail to furnish
their tax identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of
certain foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law.
DIVIDENDS AND DISTRIBUTIONS
THE FUND EXPECTS TO PAY DIVIDENDS OF NET INVESTMENT INCOME, IF ANY, AND MAKE
DISTRIBUTIONS OF ANY CAPITAL GAINS IN EXCESS OF NET LONG-TERM CAPITAL LOSSES ON
AN ANNUAL BASIS. Dividends paid by the Fund with respect to each class of
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount except
that each class will bear its own distribution charges, generally resulting in
lower dividends
17
<PAGE>
for Class B and Class C shares. Distribution of net capital gains, if any, will
be paid in the same amount for each class of shares. See "How the Fund Values
its Shares."
DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL FUND SHARES, BASED ON
THE NAV OF EACH CLASS ON THE RECORD DATE OR SUCH OTHER DATE AS THE BOARD OF
DIRECTORS MAY DETERMINE, UNLESS THE SHAREHOLDER ELECTS IN WRITING NOT LESS THAN
FIVE BUSINESS DAYS PRIOR TO THE RECORD DATE TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS IN CASH. Such election should be submitted to Prudential Mutual
Fund Services, Inc., Attn: Account Maintenance Unit, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. The Fund will notify each shareholder after
the close of the Fund's taxable year both of the dollar amount and the taxable
status of that year's dividends and distributions on a per share basis. If you
hold shares through Prudential Securities, you should contact your financial
advisor to elect to receive dividends and distributions in cash.
WHEN THE FUND GOES "EX-DIVIDEND," ITS NAV IS REDUCED BY THE AMOUNT OF THE
DIVIDEND OR DISTRIBUTION. IF YOU BUY SHARES JUST PRIOR TO THE EX-DIVIDEND DATE
(WHICH GENERALLY OCCURS FOUR BUSINESS DAYS PRIOR TO THE RECORD DATE), THE PRICE
YOU PAY WILL INCLUDE THE DIVIDEND OR DISTRIBUTION AND A PORTION OF YOUR
INVESTMENT WILL BE RETURNED TO YOU AS A TAXABLE DISTRIBUTION. YOU SHOULD,
THEREFORE, CONSIDER THE TIMING OF DIVIDENDS AND DISTRIBUTIONS WHEN MAKING YOUR
PURCHASES.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
THE FUND WAS INCORPORATED IN MARYLAND ON AUGUST 14, 1991. THE FUND IS
AUTHORIZED TO ISSUE 2 BILLION SHARES OF COMMON STOCK, $.001 PAR VALUE PER SHARE,
DIVIDED INTO THREE CLASSES, DESIGNATED CLASS A, CLASS B AND CLASS C COMMON STOCK
EACH OF WHICH CONSISTS OF 666 2/3 MILLION AUTHORIZED SHARES. Each class of
common stock represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class bears different
distribution expenses, (ii) each class has exclusive voting rights with respect
to its distribution and service plan (except that the Fund has agreed with the
SEC in connection with the offering of a conversion feature on Class B shares to
submit any amendment of the Class A Plan to both Class A and Class B
shareholders), (iii) each class has a different exchange privilege and (iv) only
Class B shares have a conversion feature. See "How the Fund is
Managed--Distributor." Pursuant to an order of the SEC, the Fund is permitted to
issue and sell multiple classes of common stock. Currently, the Fund is offering
three classes, designated Class A, Class B and Class C shares. In accordance
with the Fund's Articles of Incorporation, the Board of Directors may authorize
the creation of additional series of common stock and classes within such
series, with such preferences, privileges, limitations and voting and dividend
rights as the Board may determine.
The Board of Directors may increase or decrease the number of authorized
shares. Shares of the Fund, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances as described
under "Shareholder Guide--How to Sell Your Shares." Each share of each class of
common stock is equal as to earnings, assets and voting privileges, except as
noted above, and each class bears the expenses related to the distribution of
its shares. Except for the conversion feature applicable to the Class B shares,
there are no conversion, preemptive or other subscription rights. In the event
of liquidation, each share of common stock of the Fund is entitled to its
portion of all of the Fund's assets after all debts and expenses of the Fund
have been paid. Since Class B and Class C shares generally bear higher
distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders. The Fund's shares do not have cumulative voting rights for the
election of Directors.
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<PAGE>
THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF DIRECTORS IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OR MORE
OF THE FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE
OR MORE DIRECTORS OR TO TRANSACT ANY OTHER BUSINESS.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the office
of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
YOU MAY PURCHASE SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, PRUSEC OR
DIRECTLY FROM THE FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND
SERVICES, INC. (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES,
P.O. BOX 15020, NEW BRUNSWICK, NEW JERSEY 08966-5020. The minimum initial
investment for Class A and Class B shares is $1,000 per class and $5,000 for
Class C shares. The minimum subsequent investment is $100 for all classes. All
minimum investment requirements are waived for certain retirement and employee
savings plans or custodial accounts for the benefit of minors. For purchases
through the Automatic Savings Accumulation Plan, the minimum initial and
subsequent investment is $50. See "Shareholder Services" below.
THE PURCHASE PRICE IS THE NAV NEXT DETERMINED FOLLOWING RECEIPT OF AN ORDER
BY THE TRANSFER AGENT OR PRUDENTIAL SECURITIES PLUS A SALES CHARGE WHICH, AT
YOUR OPTION, MAY BE IMPOSED EITHER (I) AT THE TIME OF PURCHASE (CLASS A SHARES)
OR (II) ON A DEFERRED BASIS (CLASS B OR CLASS C SHARES). SEE "ALTERNATIVE
PURCHASE PLAN" BELOW. SEE ALSO "HOW THE FUND VALUES ITS SHARES."
Application forms can be obtained from PMFS, Prudential Securities or Prusec.
If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares. Shareholders who hold
their shares through Prudential Securities will not receive stock certificates.
The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares. See
"How to Sell Your Shares."
Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the fifth business day following the investment.
Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.
PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS to receive an account number at (800) 225-1852
(toll-free). The following information will be requested: your name, address,
tax identification number, class election, dividend distribution election,
amount being wired and wiring bank. Instructions should then be given by you to
your bank to transfer funds by wire to State Street Bank and Trust Company
(State Street), Boston, Massachusetts, Custody and Shareholder Services
Division, Attention: Prudential Pacific Growth Fund, Inc., specifying on the
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<PAGE>
wire the account number assigned by PMFS and your name and identifying the sales
charge alternative (Class A, Class B or Class C shares).
If you arrange for receipt by State Street of federal funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Fund as
of that day.
In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Pacific Growth
Fund, Inc., Class A, Class B or Class C shares and your name and individual
account number. It is not necessary to call PMFS to make subsequent purchase
orders utilizing federal funds. The minimum amount which may be invested by wire
is $1,000.
ALTERNATIVE PURCHASE PLAN
THE FUND OFFERS THREE CLASSES OF SHARES (CLASS A, CLASS B AND CLASS C SHARES)
WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES CHARGE STRUCTURE FOR YOUR
INDIVIDUAL CIRCUMSTANCES GIVEN THE AMOUNT OF THE PURCHASE, THE LENGTH OF TIME
YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT CIRCUMSTANCES (ALTERNATIVE
PURCHASE PLAN).
<TABLE><CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
---------------------------------------- ------------------ ----------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 5% of 0.30 of 1% Initial sales charge waived or reduced
the public offering price (Currently being for certain purchases
charged at a rate
of 0.25 of 1%)
CLASS B Maximum contingent deferred sales charge 1% Shares convert to Class A shares
or CDSC of 5% of the lesser of the approximately seven years after purchase
amount invested or the redemption
proceeds; declines to zero after six
years
CLASS C Maximum CDSC of 1% of the lesser of the 1% Shares do not convert to another class
amount invested or the redemption
proceeds on redemptions made within one
year of purchase
</TABLE>
The three classes of shares represent an interest in the same portfolio of
investments of the Fund and have the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan (except as
noted under the heading "General Information--Description of Common Stock"), and
(iii) only Class B shares have a conversion feature. The three classes also have
separate exchange privileges. See "How to Exchange Your Shares" below. The
income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee of each class.
Class B and Class C shares bear the expenses of a higher distribution fee which
will generally cause them to have higher expense ratios and to pay lower
dividends than the Class A shares.
Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B and Class C shares
and will generally receive more compensation initially for selling Class A and
Class B shares than for selling Class C shares.
IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER THINGS,
(1) the length of time you expect to hold your investment, (2) the amount of any
applicable sales charge (whether imposed at the time of purchase or redemption)
and distribution-related fees, as noted above, (3) whether you qualify for any
reduction or waiver of any applicable sales charge, (4) the various exchange
privileges among the different classes of shares (see "How to Exchange Your
Shares"
20
<PAGE>
below) and (5) the fact that Class B shares automatically convert to Class A
shares approximately seven years after purchase (see "Conversion Feature--Class
B Shares" below).
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:
If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to an initial sales charge of 5% and Class B shares are
subject to a CDSC of 5% which declines to zero over a 6 year period, you should
consider purchasing Class C shares over either Class A or Class B shares.
If you intend to hold your investment for 7 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to a
Class A shares approximately 7 years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or Class C shares.
If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money invested
initially because the sales charge on Class A shares is deducted at the time of
purchase.
If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed the
initial sales charge plus cumulative annual distribution-related fee on Class A
shares. This does not take into account the time value of money, which further
reduces the impact of the higher Class B or Class C distribution-related fee on
the investment, fluctuations in net asset value, the effect of the return on the
investment over this period of time or redemptions during which the CDSC is
applicable.
ALL PURCHASES OF $1 MILLION OR MORE EITHER AS PART OF A SINGLE INVESTMENT OR
UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A SHARES.
SEE "REDUCTION AND WAIVER OF INITIAL SALES CHARGES" BELOW.
CLASS A SHARES
The offering price of Class A shares for investors choosing the initial sales
charge alternative is the next determined NAV plus a sales charge (expressed as
a percentage of the offering price and of the amount invested) as shown in the
following table:
<TABLE><CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -------------------------------------------------------------- --------------------- ----------------- -----------------
<S> <C> <C> <C>
$0 to $24,999................................................. 5.00% 5.26 4.75%
$25,000 to $49,999............................................ 4.50 4.71 4.25
$50,000 to $99,999............................................ 4.00 4.17 3.75
$100,000 to $249,000.......................................... 3.25 3.36 3.00
$250,000 to $499,999.......................................... 2.50 2.56 2.40
$500,000 to $999,999.......................................... 2.00 2.04 1.90
$1,000,000 and above.......................................... None None None
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is defined in
the Securities Act.
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<PAGE>
REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through shares of the Fund and shares of other Prudential Mutual Funds
(excluding money market funds other than those acquired pursuant to the exchange
privilege) may be aggregated to determine the applicable reduction. See
"Reduction and Waiver of Initial Sales Charges - Class A Shares" in the
Statement of Additional Information. Class A shares may be purchased
at NAV, without payment of an initial sales charge, by pension,
profit-sharing or other employee benefit plans qualified under Section 401 of
the Internal Revenue Code and deferred compensation and annuity plans under
Sections 457 and 403(b)(7) of the Internal Revenue Code (Benefit Plans),
provided that the plan has existing assets of at least $1 million invested in
shares of Prudential Mutual Funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) or 1,000 eligible employees or
members. In the case of Benefit Plans whose accounts are held directly with the
Transfer Agent and for which the Transfer Agent does individual account record
keeping (Direct Account Benefit Plans) and Benefit Plans sponsored by PSI or its
subsidiaries (PSI or Subsidiary Prototype Benefit Plans), Class A shares may be
purchased at NAV by participants who are repaying loans made from such plans to
the participant. Additional information concerning the reduction and waiver of
initial sales charges is set forth in the Statement of Additional Information.
In addition, Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) Directors and
officers of the Fund and other Prudential Mutual Funds, (b) employees of
Prudential Securities and PMF and their subsidiaries and members of the families
of such persons who maintain an "employee related" account at Prudential
Securities or the Transfer Agent, (c) employees and special agents of Prudential
and its subsidiaries and all persons who have retired directly from active
service with Prudential or one of its subsidiaries, (d) registered
representatives and employees of dealers who have entered into a selected dealer
agreement with Prudential Securities provided that purchases at NAV are
permitted by such person's employer and (e) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 90 days
of the commencement of the financial adviser's employment at Prudential
Securities, (ii) the purchase is made with proceeds of a redemption of shares of
any open-end, non-money market fund sponsored by the financial adviser's
previous employer (other than a fund which imposes a distribution or service fee
of .25 of 1% or less) on which no deferred sales load, fee or other charge was
imposed on redemption and (iii) the financial adviser served as the client's
broker on the previous purchases.
You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec that you are entitled to the reduction or waiver of the
sales charge. The reduction or waiver will be granted subject to confirmation of
your entitlement. No initial sales charges are imposed upon Class A shares
purchased upon the reinvestment of dividends and distributions. See "Purchase
and Redemption of Fund Shares--Reduction and Waiver of Initial Sales
Charges--Class A Shares" in the Statement of Additional Information.
CLASS B AND CLASS C SHARES
The offering price of Class B and Class C shares for investors choosing one
of the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent, Prudential Securities or Prusec.
Although there is no sales charge imposed at the time of purchase, redemption of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges."
HOW TO SELL YOUR SHARES
YOU CAN REDEEM SHARES OF THE FUND AT ANY TIME FOR CASH AT THE NAV PER SHARE
NEXT DETERMINED AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM BY THE
TRANSFER AGENT OR PRUDENTIAL SECURITIES. See "How the Fund Values its Shares."
In certain cases, however, redemption proceeds will be reduced by the amount of
any applicable contingent deferred sales charge, as described below. See
"Contingent Deferred Sales Charges" below.
IF YOU HOLD SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, YOU MUST REDEEM
YOUR SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER. IF YOU
HOLD SHARES IN NON-CERTIFICATE FORM, A WRITTEN REQUEST FOR REDEMPTION
22
<PAGE>
SIGNED BY YOU EXACTLY AS THE ACCOUNT IS REGISTERED IS REQUIRED. IF YOU HOLD
CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE FACE OF THE
CERTIFICATES, MUST BE RECEIVED BY THE TRANSFER AGENT IN ORDER FOR THE REDEMPTION
REQUEST TO BE PROCESSED. IF REDEMPTION IS REQUESTED BY A CORPORATION,
PARTNERSHIP, TRUST OR FIDUCIARY, WRITTEN EVIDENCE OF AUTHORITY ACCEPTABLE TO THE
TRANSFER AGENT MUST BE SUBMITTED BEFORE SUCH REQUEST WILL BE ACCEPTED. All
correspondence and documents concerning redemptions should be sent to the Fund
in care of its Transfer Agent, Prudential Mutual Fund Services, Inc., Attention:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to a
person other than the record owner, (c) are to be sent to an address other than
the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor institution" includes
any bank, broker, dealer or credit union. The Transfer Agent reserves the right
to request additional information from, and make reasonable inquiries of, any
eligible guarantor institution. For clients of Prusec, a signature guarantee may
be obtained from the agency or office manager of most Prudential Insurance and
Financial Services or Prudential Preferred Financial Services offices.
PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR WRITTEN
REQUEST EXCEPT AS INDICATED BELOW. Such payment may be postponed or the right of
redemption suspended at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on such Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or (d) during any other period when the SEC, by order, so permits;
provided that applicable rules and regulations of the SEC shall govern as to
whether the conditions prescribed in (b) (c) or (d) exist.
PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL THE
FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS BEEN
HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE CHECK
BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY WIRE OR
BY CERTIFIED OR OFFICIAL BANK CHECK.
REDEMPTION IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the SEC. Securities will be readily marketable and will be valued in the same
manner as a regular redemption. See "How the Fund Values its Shares." If your
shares are redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Fund has, however, elected to be governed by Rule 18f-1
under the Investment Company Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund during the 90-day period for any one shareholder.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board of
Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Fund will give
any such shareholder 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption. No contingent deferred
sales charge will be imposed on any involuntary redemption.
30-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 30 days after the
date of redemption. No sales charge will apply to such repurchases. You will
receive pro rata credit for any contingent deferred sales charge paid in
connection with the redemption of your shares. You must notify the Fund's
Transfer Agent, either directly or through Prudential Securities or Prusec, at
the time the
23
<PAGE>
repurchase privilege is exercised that you are entitled to credit for the
contingent deferred sales charge previously paid. Exercise of the repurchase
privilege will not affect federal income tax treatment of any gain realized upon
redemption. If the redemption resulted in a loss, some or all of the loss,
depending on the amount reinvested, will not be allowed for federal income tax
purposes.
CONTINGENT DEFERRED SALES CHARGES
Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C shares
redeemed within one year of purchase will be subject to a 1% CDSC. The CDSC will
be deducted from the redemption proceeds and reduce the amount paid to you. The
CDSC will be imposed on any redemption by you which reduces the current value of
your Class B or Class C shares to an amount which is lower than the amount of
all payments by you for shares during the preceding six years, in the case of
Class B shares, and one year, in the case of Class C shares. A CDSC will be
applied on the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or shares purchased
through reinvestment of dividends or distributions are not subject to CDSC. The
amount of any contingent deferred sales charge will be paid to and retained by
the Distributor. See "How the Fund is Managed--Distributor" and "Waiver of the
Contingent Deferred Sales Charges" below.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchase of shares, all payments during a month will
be aggregated and deemed to have been made on the last day of the month.
The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
<TABLE><CAPTION>
CONTINGENT DEFERRED
SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
- ------------------------------------------------------------------------- -----------------------
<S> <C>
First.................................................................... 5.0%
Second................................................................... 4.0%
Third.................................................................... 3.0%
Fourth................................................................... 2.0%
Fifth.................................................................... 1.0%
Sixth.................................................................... 1.0%
Seventh.................................................................. None
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value above the total amount of
payments for the purchase of Fund shares made during the preceding six years
(five years for Class B shares purchased prior to January 22, 1990); then of
amounts representing the cost of shares held beyond the applicable CDSC period;
then of amounts representing shares acquired prior to July 1, 1985, and finally,
of amounts representing the cost of shares held for the longest period of time
within the applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided to
redeem $500 of your investment. Assuming at the time of the redemption the NAV
had appreciated to $12 per share, the value of your Class B shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to the value
of
24
<PAGE>
the reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4% (the applicable rate in the second year after
purchase) for a total CDSC of $9.60.
For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC
will be waived in the case of a redemption following the death or disability of
a shareholder or, in the case of a trust account, following the death or
disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), or a trust, at the time of death or initial
determination of disability, provided that the shares were purchased prior to
death or disability.
The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions include a lump-sum or other distribution
after retirement, or for an IRA or Section 403(b) custodial account, after
attaining age 59 1/2, a tax-free return of an excess contribution or plan
distributions following the death or disability of the shareholder (provided
that the shares were purchased prior to death or disability). The waiver does
not apply in the case of a tax-free rollover or transfer of assets , other than
one following a separation from service. In the case of Direct Account and PSI
or Subsidiary Prototype Benefit Plans, the CDSC will be waived on redemptions
which represent borrowings from such plans. Shares purchased with amounts used
to repay a loan from such plans on which a CDSC was not previously deducted will
thereafter be subject to a CDSC without regard to the time such amounts were
previously invested. In the case of a 401(k) plan, the CDSC will also be waived
upon the redemption of shares purchased with amounts used to repay loans made
from the account to the participant and from which a CDSC was previously
deducted.
In addition, the CDSC will be waived on redemptions of shares held by
Directors of the Fund.
You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec, at the time of redemption, that you are entitled to waiver
of the CDSC. The waiver will be granted subject to confirmation of your
entitlement.
A quantity discount may apply to redemptions of Class B shares purchased
prior to , 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to , 1994" in the Statement
of Additional Information.
CONVERSION FEATURE--CLASS B SHARES
Class B shares will automatically convert to Class A shares approximately
seven years after purchase. Conversions will occur during the month following
each calendar quarter and will be effected at relative net asset value without
the imposition of any additional sales charge. It is currently anticipated that
conversions will occur on the first Friday or next business day of the month
following each calendar quarter or, if not a business day, the next Friday of
the month.
Since the Fund tracks amounts paid rather than the number of shares bought on
each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula; (i)
the ratio of (a) the amounts paid for Class B shares purchased at least seven
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares then in your account. Each time any Eligible Shares in
your account convert
25
<PAGE>
to Class A shares, all shares or amounts representing Class B shares then in
your account that were acquired through the automatic reinvestment of dividends
and other distributions will convert to Class A shares.
For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately seven years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (i.e., $1,000
divided by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.
Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of conversion. Thus, although
the aggregate dollar value will be the same, you may receive fewer Class A
shares than Class B shares converted. See "How the Fund Values its Shares."
For purposes of calculating the applicable holding period for conversions,
all payments for Class B shares during a month will be deemed to have been made
on the last day of the month, or for Class B shares acquired through exchange,
or a series of exchanges, on the last day of the month in which the original
payment for purchases of such Class B shares was made. For Class B shares
previously exchanged for shares of a money market fund, the time period during
which such shares were held in the money market fund will be excluded. For
example, Class B shares held in a money market fund for one year will not
convert to Class A shares until approximately eight years from purchase. For
purposes of measuring the time period during which shares are held in a money
market fund, exchanges will be deemed to have been made on the last day of the
month. Class B shares acquired through exchange will convert to Class A shares
after expiration of the conversion period applicable to the original purchase of
such shares. It is currently anticipated that the first conversion of Class B
shares will occur in or about January, 1995. At that time all amounts
representing Class B shares then outstanding for at least seven years 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 your account.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, and Class C shares
will not constitute "preferential dividends" under the Internal Revenue Code and
(ii) that the conversion of shares does not constitute a taxable event. The
conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended, Class
B shares of the Fund will continue to be subject, possibly indefinitely, to
their higher annual distribution and service fee.
HOW TO EXCHANGE YOUR SHARES
AS A SHAREHOLDER OF THE FUND YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN
OTHER PRUDENTIAL MUTUAL FUNDS, INCLUDING ONE OR MORE SPECIFIED MONEY MARKET
FUNDS, SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS OF SUCH FUNDS. CLASS A,
CLASS B AND CLASS C SHARES MAY BE EXCHANGED FOR CLASS A, CLASS B AND CLASS C
SHARES, RESPECTIVELY, OF ANOTHER FUND ON THE BASIS OF THE RELATIVE NAV. Any
applicable CDSC payable upon the redemption of shares exchanged will be that
imposed by the fund in which shares are initially purchased and will be
calculated from the first day of the month after the initial purchase, excluding
the time shares were held in a money market fund. Class B and Class C shares may
not be exchanged into money market funds other than Prudential Special Money
Market Fund. For purposes of calculating the holding period applicable to the
Class B conversion feature, the time period during which Class B shares were
held in a
26
<PAGE>
money market fund will be excluded. See "Conversion Feature--Class B Shares"
above. If your investment in shares of Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege) reach
$1 million and you then hold Class B and/or Class C shares of the Fund which are
free of CDSC, you will be so notified and offered the opportunity to exchange
those shares for Class A shares of the Fund without the imposition of any sales
charge. In the case of tax-exempt shareholders, if no response is received
within 60 days of the mailing of such notice, eligible Class B and/or Class C
shares will be automatically exchanged for Class A shares. All other
shareholders must affirmatively elect to have their eligible Class B and/or
Class C shares exchanged for Class A shares. An exchange will be treated as a
redemption and purchase for tax purposes. See "Shareholder Investment
Account--Exchange Privilege" in the Statement of Additional Information.
IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE TRANSFER
AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may call the Fund
at (800) 225-1852 to execute a telephone exchange of shares, on weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York time. For your
protection and to prevent fraudulent exchanges, your telephone call will be
recorded and you will be asked to provide your personal identification number. A
written confirmation of the exchange transaction will be sent to you. NEITHER
THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH
RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER
THE FOREGOING PROCEDURES. ALL EXCHANGES WILL BE MADE ON THE BASIS OF THE
RELATIVE NAV OF THE TWO FUNDS NEXT DETERMINED AFTER THE REQUEST IS RECEIVED IN
GOOD ORDER. THE EXCHANGE PRIVILEGE IS AVAILABLE ONLY IN STATES WHERE THE
EXCHANGE MAY LEGALLY BE MADE.
IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.
IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.
You may also exchange shares by mail by writing to Prudential Mutual Fund
Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.
IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS THE TELEPHONE EXCHANGE OF
SHARES MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD MAKE EXCHANGES BY MAIL BY
WRITING TO PRUDENTIAL MUTUAL FUND SERVICES, INC., AT THE ADDRESS NOTED ABOVE.
The Exchange Privilege may be modified or terminated at any time on 60 days'
notice.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Fund, you can
take advantage of the following additional services and privileges:
. AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Fund at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold shares through
Prudential Securities, you should contact your financial adviser.
. AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make regular
purchases of the Fund's shares in amounts as little as $50 via an automatic
debit to a bank account or Prudential Securities account (including a Command
27
<PAGE>
Account). For additional information about this service, you may contact your
Prudential Securities financial adviser, Prusec registered representative or the
Transfer Agent directly.
. TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or the
Transfer Agent. If you are considering adopting such a plan, you should consult
with your own legal or tax adviser with respect to the establishment and
maintenance of such a plan.
. SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares-- Contingent Deferred Sales Charges."
. REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder report
and annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, New York 10292. In addition, monthly unaudited financial data
are available upon request from the Fund.
. SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at One
Seaport Plaza, New York, New York 10292, or by telephone, at (800) 225-1852
(toll-free) or, from outside the U.S.A. at (908) 417-7555 (collect).
For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.
28
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec registered representative or telephone
the Funds at (800) 225-1852 for a free prospectus. Read the prospectus carefully
before you invest or send money.
<TABLE><CAPTION>
TAXABLE BOND FUNDS EQUITY FUNDS
<S> <C>
Prudential Adjustable Rate Securities Fund, Inc. Prudential Equity Fund, Inc.
Prudential GNMA Fund, Inc. Prudential Equity Income Fund
Prudential Government Income Fund, Inc. Prudential Allocation Fund
Prudential Government Securities Trust Conservatively Managed Portfolio
Intermediate Term Series Strategy Portfolio
Prudential High Yield Fund, Inc. Prudential Growth Opportunity Fund, Inc.
Prudential Structured Maturity Fund, Inc. Prudential IncomeVertible(R) Fund, Inc.
Income Portfolio Prudential Multi-Sector Fund, Inc.
Prudential U.S. Government Fund Prudential Strategist Fund, Inc.
The BlackRock Government Income Trust Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
TAX-EXEMPT BOND FUNDS Nicholas-Applegate Growth Equity Fund
Prudential California Municipal Fund
California Series MONEY MARKET FUNDS
California Income Series . Taxable Money Market Funds
Prudential Municipal Bond Fund Prudential Government Securities Trust
High Yield Series Money Market Series
Insured Series U.S. Treasury Money Market Series
Modified Term Series Prudential Special Money Market Fund
Prudential Municipal Series Fund Money Market Series
Arizona Series Prudential MoneyMart Assets
Florida Series . Tax-Free Money Market Funds
Georgia Series Prudential Tax-Free Money Fund
Maryland Series Prudential California Municipal Fund
Massachusetts Series California Money Market Series
Michigan Series Prudential Municipal Series Fund
Minnesota Series Connecticut Money Market Series
New Jersey Series Massachusetts Money Market Series
New York Series New Jersey Money Market Series
North Carolina Series New York Money Market Series
Ohio Series . Command Funds
Pennsylvania Series Command Money Fund
Prudential National Municipals Fund, Inc. Command Government Fund
GLOBAL FUNDS Command Tax-Free Fund
Prudential Global Fund, Inc. . Institutional Money Market Funds
Prudential Global Genesis Fund, Inc. Prudential Institutional Liquidity Portfolio, Inc.
Prudential Global Natural Resources Fund, Inc. Institutional Money Market Series
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
</TABLE>
A-1
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL, OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION.
Prudential
Pacific Growth
Fund, Inc.
- ------------------------------------------------------
TABLE OF CONTENTS
-----------------
PAGE
-----------
FUND HIGHLIGHTS................................ 2
FUND EXPENSES.................................. 4
FINANCIAL HIGHLIGHTS........................... 5
HOW THE FUND INVESTS........................... 6
Investment Objective and Policies............ 6
Special Considerations and Risks of Investing
in Foreign Securities.......................... 7
Hedging and Income Enhancement Strategies.... 8
Other Investments and Policies............... 11
Investment Restrictions...................... 12
HOW THE FUND IS MANAGED........................ 13
Manager...................................... 13
Distributor.................................. 13
Fee Waivers and Subsidy...................... 15
Portfolio Transactions....................... 15
Custodian and Transfer and Dividend
Disbursing Agent............................... 15
HOW THE FUND VALUES ITS SHARES................. 16
HOW THE FUND CALCULATES PERFORMANCE............ 16
TAXES, DIVIDENDS AND DISTRIBUTIONS............. 17
GENERAL INFORMATION............................ 18
Description of Common Stock.................. 18
Additional Information....................... 19
SHAREHOLDER GUIDE.............................. 19
How to Buy Shares of the Fund................ 19
Alternative Purchase Plan.................... 20
How to Sell Your Shares...................... 23
Conversion Feature--Class B Shares........... 26
How to Exchange Your Shares.................. 27
Shareholder Services......................... 28
THE PRUDENTIAL MUTUAL FUND FAMILY.............. A-1
- ------------------------------------------------------
PRUDENTIAL MUTUAL
FUNDS
CUSIP NOS.: CLASS A: 743941-10-6
CLASS B: 743941-20-5
CLASS C:
BUILDING YOUR
FUTURE
ON OUR STRENGTH
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Additional Information
dated , 1994
Prudential Pacific Growth Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
common stocks, common stock equivalents (including warrants and convertible debt
securities) and other equity securities of companies doing business in or
domiciled in the Pacific Basin region. Under normal circumstances, the Fund
intends to invest at least 65% of its total assets in such securities. The Fund
may invest in equity securities of other companies and in non-convertible debt
securities and options on stocks, stock indices, foreign currencies and futures
contracts on foreign currencies and on financial or stock indices and may
purchase and sell futures contracts on foreign currencies and groups of
currencies so as to hedge its portfolio and to attempt to enhance income. See
"Investment Objective and Policies."
The Fund's address is One Seaport Plaza, New York, New York 10292, and its
telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus dated , 1994, a copy
of which may be obtained from the Fund upon request.
TABLE OF CONTENTS
<TABLE><CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
--------- -----------------
<S> <C> <C>
Investment Objective and Policies............................................................ B-2 6
Investment Restrictions...................................................................... B-12 12
Directors and Officers....................................................................... B-14 13
Manager...................................................................................... B-16 13
Distributor.................................................................................. B-18 13
Portfolio Transactions and Brokerage......................................................... B-20 15
Purchase and Redemption of Fund Shares....................................................... B-22 19
Shareholder Investment Account............................................................... B-24 24
Net Asset Value.............................................................................. B-28 16
Taxes........................................................................................ B-29 17
Performance Information...................................................................... B-32 16
Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants................ B-34 15
Description of Security Ratings.............................................................. B-35 --
Independent Auditor's Report................................................................. B-37 --
Financial Statements......................................................................... B-38 --
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in common stocks, common stock
equivalents (including warrants and convertible debt securities) and other
equity securities of companies doing business in or domiciled in the Pacific
Basin region, including but not limited to, Japan, Australia, Hong Kong,
Singapore, South Korea, Malaysia, Thailand, Indonesia, The Philippines and New
Zealand. See "How the Fund Invests-- Investment Objective and Policies" in the
Prospectus.
OPTIONS ON SECURITIES
The Fund may purchase and write (i.e., sell) put and call options on
securities that are traded on U.S. or foreign securities exchanges or that are
traded in the over-the-counter markets. A call option is a short-term contract
pursuant to which the purchaser, in return for a premium paid, has the right to
buy the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation, upon exercise of the option, to deliver the
underlying security against payment of the exercise price. A put option is a
similar contract which gives the purchaser, in return for a premium, the right
to sell the underlying security at a specified price during the term of the
option. The writer of the put, who receives the premium, has the obligation to
buy the underlying security upon exercise at the exercise price. The Fund will
write put options only when the investment adviser desires to invest in the
underlying security. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates.
A call option written by the Fund is "covered" if the Fund owns the security
underlying the option or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds on a share-for-share basis a call on the same security
as the call written where the exercise price of the call held is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Fund in cash,
U.S. Government securities or other liquid high-grade debt obligations in a
segregated account with its Custodian. A put option written by the Fund is
"covered" if the Fund maintains cash, U.S. Government securities or other liquid
high-grade debt obligations with a value equal to the exercise price in a
segregated account with its Custodian, or else holds on a share-for-share basis
a put of the same security as the put written where the exercise price of the
put held is equal to or greater than the exercise price of the put written.
If the writer of an option wishes to terminate the obligation, he or she may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she had been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected. To secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option is generally required to pledge
for the benefit of the broker the underlying security or other assets in
accordance with the rules of the relevant exchange or clearinghouse, such as The
Options Clearing Corporation (OCC), an institution created to interpose itself
between buyers and sellers of options in the United States. Technically, the
clearinghouse assumes the other side of every purchase and sale transaction on
an exchange and, by doing so, guarantees the transaction.
B-2
<PAGE>
The Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the option or is more
than the premium paid to purchase the option; the Fund will realize a loss from
a closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option may be offset in whole or in
part if the Fund holds the underlying security by appreciation of the underlying
security owned by the Fund.
The Fund may also purchase a "protective put," i.e., a put option acquired
for the purpose of protecting a portfolio security from a decline in market
value. In exchange for the premium paid for the put option, the Fund acquires
the right to sell the underlying security at the exercise price of the put
regardless of the extent to which the underlying security declines in value. The
loss to the Fund is limited to the premium paid for, and transaction costs in
connection with, the put plus the initial excess, if any, of the market price of
the underlying security over the exercise price. However, if the market price of
the security underlying the put rises, the profit the Fund realizes on the sale
of the security will be reduced by the premium paid for the put option less any
amount (net of transaction costs) for which the put may be sold. Similar
principles apply to the purchase of puts on stock indices, as described below.
OPTIONS ON SECURITIES INDICES. In addition to options on securities, the Fund
may also purchase and sell put and call options on securities indices traded on
U.S. or foreign securities exchanges or traded in the over-the-counter markets.
Options on securities indices are similar to options on securities except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the multiplier). The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike for
equity securities options, all settlements are in cash, and gain or loss depends
on price movements in the securities market generally (or in a particular
industry or segment of the market) rather than price movements in individual
securities.
The multiplier for an index option performs a function similar to the unit of
trading for a stock option. It determines the total dollar value per contract of
each point in the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers. Because exercises of index options are settled in cash, a
call writer cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding the
underlying securities. In addition, unless the Fund has other liquid assets
which are sufficient to satisfy the exercise of a call, the Fund would be
required to liquidate portfolio securities or borrow in order to satisfy the
exercise.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of security prices in the market generally or in an
industry or market segment rather than movements in the price of a particular
security. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the securities market generally or of a particular industry.
This requires different skills and techniques than predicting changes in the
price of individual stocks. The investment adviser currently uses such
techniques in conjunction with the management of other mutual funds.
RISKS OF TRANSACTIONS IN OPTIONS
An option position may be closed out only on an exchange, board of trade or
other trading facility which provides a secondary market for an option of the
same series. Although the Fund will generally purchase or write only those
options for
B-3
<PAGE>
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
exchange or otherwise may exist. In such event it might not be possible to
effect closing transactions in particular options, with the result that the Fund
would have to exercise its options in order to realize any profit and would
incur brokerage commissions upon the exercise of call options and upon the
subsequent disposition of underlying securities acquired through the exercise of
call options or upon the purchase of underlying securities for the exercise of
put options. If the Fund as a covered call option writer is unable to effect a
closing purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. The Fund intends to purchase and sell only those options which are
cleared by clearinghouses whose facilities are considered to be adequate to
handle the volume of options transactions.
RISKS OF OPTIONS ON INDICES
The Fund's purchase and sale of options on indices will be subject to risks
described above under "Risks of Transactions in Options." In addition, the
distinctive characteristics of options on indices create certain risks that are
not present with stock options.
Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the Fund's policy to purchase or
write options only on indices which include a number of stocks sufficient to
minimize the likelihood of a trading halt in the index.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until, in
the investment adviser's opinion, the market for such options has developed
sufficiently that the risk in connection with such transactions is not
substantially greater than the risk in connection with options on securities in
the index.
SPECIAL RISKS OF WRITING CALLS ON INDICES
Because exercises of index options are settled in cash, a call writer such as
the Fund cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding the
underlying securities. However, the Fund will write call options on
B-4
<PAGE>
indices only under the circumstances described below under "Limitations on
Purchase and Sale of Stock Options and Options on Stock Indices, Foreign
Currencies and Futures Contracts on Foreign Currencies."
Price movements in the Fund's portfolio probably will not correlate precisely
with movements in the level of the index and, therefore, the Fund bears the risk
that the price of the securities held by the Fund may not increase as much as
the index. In such event, the Fund would bear a loss on the call which is not
completely offset by movements in the price of the Fund's portfolio. It is also
possible that the index may rise when the Fund's portfolio of stocks does not
rise. If this occurred, the Fund would experience a loss on the call which is
not offset by an increase in the value of its portfolio and might also
experience a loss in its portfolio. However, because the value of a diversified
portfolio will, over time, tend to move in the same direction as the market,
movements in the value of the Fund in the opposite direction as the market would
be likely to occur for only a short period or to a small degree.
Unless the Fund has other liquid assets which are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio securities
in order to satisfy the exercise. Because an exercise must be settled within
hours after receiving the notice of exercise, if the Fund fails to anticipate an
exercise, it may have to borrow from a bank (in amounts not exceeding 20% of the
Fund's total assets) pending settlement of the sale of securities in its
portfolio and would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a price
which is fixed as of the closing level of the index on the date of exercise, and
the time the Fund is able to sell stocks in its portfolio. As with stock
options, the Fund will not learn that an index option has been exercised until
the day following the exercise date but, unlike a call on stock where the Fund
would be able to deliver the underlying securities in settlement, the Fund may
have to sell part of its investment portfolio in order to make settlement in
cash, and the price of such investments might decline before they can be sold.
This timing risk makes certain strategies involving more than one option
substantially more risky with index options than with stock options. For
example, even if an index call which the Fund has written is "covered" by an
index call held by the Fund with the same strike price, the Fund will bear the
risk that the level of the index may decline between the close of trading on the
date the exercise notice is filed with the clearing corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call which, in either case, would occur no earlier than the day
following the day the exercise notice was filed.
If the Fund holds an index option and exercises it before final determination
of the closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall out-of-the-money, the Fund will be required to pay the
difference between the closing index value and the exercise price of the option
(times the applicable multiplier) to the assigned writer. Although the Fund may
be able to minimize this risk by withholding exercise instructions until just
before the daily cutoff time or by selling rather than exercising an option when
the index level is close to the exercise price, it may not be possible to
eliminate this risk entirely because the cutoff times for index options may be
earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
RISKS OF OPTIONS ON FOREIGN CURRENCIES
Options on foreign currencies involve the currencies of two nations and
therefore, developments in either or both countries affect the values of options
on foreign currencies. Risks include those described in the Prospectus under
"How the Fund Invests--Special Considerations and Risks of Investing in Foreign
Securities," including government actions affecting currency valuation and the
movements of currencies from one country to another. The quantity of currency
underlying option contracts represent odd lots in a market dominated by
transactions between banks; this can mean extra transaction costs upon exercise.
Option markets may be closed while round-the-clock interbank currency markets
are open, and this can create price and rate discrepancies.
B-5
<PAGE>
RISKS RELATED TO FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
several circumstances. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund may be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when the investment adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. The Fund does not intend to
enter into such forward contracts to protect the value of its portfolio
securities on a regular or continuous basis. The Fund does not intend to enter
into such forward contracts or maintain a net exposure to such contracts where
the consummation of the contracts would obligate the Fund to deliver an amount
of foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. However, the Fund believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Fund will thereby be served. The
Fund's Custodian will place cash or liquid securities into a segregated account
of the Fund in an amount equal to the value of the Fund's total assets committed
to the consummation of forward foreign currency exchange contracts. If the value
of the securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.
The Fund generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the forward contract.
Accordingly, if a decision is made to sell the security and make delivery of the
foreign currency and if the market value of the security is less than the amount
of foreign currency that the Fund is obligated to deliver, then it would be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase).
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Should forward contract prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent that the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward contract prices increase,
the Fund will suffer a loss to the extent that the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
B-6
<PAGE>
The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. Of course, the Fund is
not required to enter into such transactions with regard to its foreign
currency-dominated securities. It also should be recognized that this method of
protecting the value of the Fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities which are unrelated to exchange rates. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend physically to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures contracts as a
hedging device. Due to the imperfect correlation between the price of futures
contracts and movements in the currency or group of currencies, the price of a
futures contract may move more or less than the price of the currencies being
hedged. In the case of futures contracts on securities indices, the correlation
between the price of the futures contract and the movements in the index may not
be perfect. Therefore, a correct forecast of currency rates, market trends or
international political trends by the investment adviser may still not result in
a successful hedging transaction.
Although the Fund will purchase or sell futures contracts only on exchanges
where there appears to be an adequate secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
contract or at any particular time. Accordingly, there can be no assurance that
it will be possible, at any particular time, to close a futures position. In the
event the Fund could not close a futures position and the value of such position
declined, the Fund would be required to continue to make daily cash payments of
variation margin. There is no guarantee that the price movements of the
portfolio securities denominated in foreign currencies will, in fact, correlate
with the price movements in the futures contract and thus provide an offset to
losses on a futures contract. Currently, currency futures contracts are
available on various foreign currencies including the Australian Dollar, British
Pound, Canadian Dollar, Japanese Yen, Swiss Franc, West German Mark and
Eurodollars. Index futures contracts are available on various U.S. and foreign
securities indices.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the Investment
Company Act), are exempt from the definition of "commodity pool operator,"
subject to compliance with certain conditions. The exemption is conditioned upon
a requirement that all of the Fund's futures or options transactions constitute
bona fide hedging transactions within the meaning of the regulations of the
Commodity Futures Trading Commission (CFTC). The Fund will use currency futures
and options on futures or commodity options contracts in a manner consistent
with this requirement. The Fund may also enter into futures or related options
contracts for income enhancement and risk management purposes if the aggregate
initial margin and option premiums do not exceed 5% of the liquidation value of
the Fund's total assets, after taking into account unrealized profits and
unrealized losses on any such contracts, provided, however, that in the case of
an option that is in-the-money, the in-the-money amount may be excluded in
computing such 5%. The above restriction does not apply to the purchase and sale
of futures and related options contracts for bona fide hedging purchases.
B-7
<PAGE>
Successful use of futures contracts by the Fund is also subject to the
ability of the Fund's investment adviser to predict correctly movements in the
direction of markets and other factors affecting currencies or the securities
market generally. For example, if the Fund had hedged against the possibility of
an increase in currency rates which would adversely affect the price of
securities in its portfolio and the price of such securities increases instead,
the Fund will lose part or all of the benefit of the increased value of its
securities because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash to meet daily
variation margin requirements, it may need to sell securities to meet such
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it is disadvantageous to do so.
The hours of trading of futures contracts may not conform to the hours during
which the Fund may trade the underlying securities. To the extent that the
futures markets close before the securities markets, significant price and rate
movements can take place in the securities markets that cannot be reflected in
the futures markets.
OPTIONS ON FUTURES CONTRACTS
An option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. Currently options can
be purchased or written with respect to futures contracts on various foreign
currencies, including the Australian Dollar, British Pound, Canadian Dollar,
Japanese Yen, Swiss Franc, West German Mark and Eurodollars. With respect to
stock indices, options are traded on futures contracts for various U.S. and
foreign stock indicies including the S&P 500 Stock Index and the NYSE Composite
Index.
The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such closing
transactions can be effected.
LIMITATIONS ON PURCHASE AND SALE OF STOCK OPTIONS AND OPTIONS ON STOCK INDICES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS ON FOREIGN CURRENCIES
The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund will write put options on stock indices and foreign currencies
and futures contracts on foreign currencies only if they are covered by
segregating with the Fund's Custodian an amount of cash, U.S. Government
securities, or liquid assets equal to the aggregate exercise price of the puts.
The Fund has undertaken with certain state securities commissions that, so long
as shares of the Fund are registered in those states, it will not (a) write puts
having aggregate exercise prices greater than 25% of total net assets; or (b)
purchase (i) put options on stocks not held in the Fund's portfolio, (ii) put
options on stock indices, foreign currencies or futures contracts on foreign
currencies or (iii) call options on stocks, stock indices or foreign currencies
if, after any such purchase, the aggregate premiums paid for such options would
exceed 10% of the Fund's total net assets; provided, however, that the Fund may
purchase put options on stocks held by the Fund if after such purchase the
aggregate premiums paid for such options do not exceed 20% of the Fund's total
assets. In addition, the Fund will not enter into futures contracts or related
options if the aggregate initial margin and premiums exceed 5% of the
liquidation value of the Fund's total assets, taking into account unrealized
profits and losses on such contracts, provided, however, that in the case of an
option that is in-the-money, the in-the-money amount may be excluded in
computing such 5%. The above restriction does not apply to the purchase or sale
of futures contracts and related options for bona fide hedging purposes. The
Fund does not intend to purchase options on equity securities or securities
indices if the aggregate premiums paid for such outstanding options would exceed
10% of the Fund's total assets.
B-8
<PAGE>
Except as described below, the Fund will write call options on indices only
if on such date it holds a portfolio of stocks at least equal to the value of
the index times the multiplier times the number of contracts. When the Fund
writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, cash, U.S. Government securities, liquid high-grade
debt securities or at least one "qualified security" with a market value at the
time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts.
If the Fund has written an option on an industry or market segment index, it
will segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, at least ten "qualified securities," all of which are
stocks of issuers in such industry or market segment, with a market value at the
time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. Such stocks will include
stocks which represent at least 50% of the weighting of the industry or market
segment index and will represent at least 50% of the Fund's holdings in that
industry or market segment. No individual security will represent more than 15%
of the amount so segregated, pledged or escrowed in the case of broadly-based
stock market index options or 25% of such amount in the case of industry or
market segment index options. If at the close of business on any day the market
value of such qualified securities so segregated, escrowed or pledged falls
below 100% of the current index value times the multiplier times the number of
contracts, the Fund will so segregate, escrow or pledge an amount in cash, U.S.
Government securities or other high-grade short-term debt obligations equal in
value to the difference. In addition, when the Fund writes a call on an index
which is in-the-money at the time the call is written, the Fund will segregate
with its Custodian or pledge to the broker as collateral cash, U.S. Government
securities or other high-grade short-term debt obligations equal in value to the
amount by which the call is in-the-money times the multiplier times the number
of contracts. Any amount segregated pursuant to the foregoing sentence may be
applied to the Fund's obligation to segregate additional amounts in the event
that the market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of contracts. A
"qualified security" is an equity security which is listed on a national
securities exchange or listed on NASDAQ against which the Fund has not written a
stock call option and which has not been hedged by the Fund by the sale of stock
index futures. However, if the Fund holds a call on the same index as the call
written where the exercise price of the call held is equal to or less than the
exercise price of the call written or greater than the exercise price of the
call written if the difference is maintained by the Fund in cash, Treasury bills
or other high-grade short-term obligations in a segregated account with its
Custodian, it will not be subject to the requirements described in this
paragraph.
The Fund may engage in futures contracts and options on futures transactions
as a hedge against changes, resulting from market or political conditions, in
the value of the currencies to which the Fund is subject or to which the Fund
expects to be subject in connection with future purchases. The Fund may engage
in such transactions when they are economically appropriate for the reduction of
risks inherent in the ongoing management of the Fund. The Fund may write options
on futures contracts to realize through the receipt of premium income a greater
return than would be realized in the Fund's portfolio securities alone.
POSITION LIMITS. Transactions by the Fund in futures contracts and options
will be subject to limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ) governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges, boards of trade or
other trading facilities or are held or written in one or more accounts or
through one or more brokers. Thus, the number of futures contracts and options
which the Fund may write or purchase may be affected by the futures contracts
and options written or purchased by other investment advisory clients of the
investment adviser. An exchange, board of trade or other trading facility may
order the liquidations of positions found to be in excess of these limits, and
it may impose certain other sanctions.
B-9
<PAGE>
DEFENSIVE STRATEGY AND SHORT-TERM INVESTMENTS
When conditions dictate a defensive strategy, the Fund may invest in money
market instruments, including commercial paper of corporations, certificates of
deposit, bankers' acceptances and other obligations of domestic and foreign
banks, obligations issued or guaranteed by the U.S. Government, its agencies or
its instrumentalities and repurchase agreements (described more fully below).
Such investments may be subject to certain risks, including future political and
economic developments, the possible imposition of withholding taxes on interest
income, the seizure or nationalization of foreign deposits and foreign exchange
controls or other restrictions.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time, in the ordinary course of business, the Fund may purchase
or sell securities on a when-issued or delayed delivery basis, that is, delivery
and payment can take place a month or more after the date of the transaction.
The Fund will limit such purchases to those in which the date for delivery and
payment falls within 120 days of the date of the commitment. The Fund will make
commitments for such when-issued transactions only with the intention of
actually acquiring the securities. The Fund's Custodian will maintain, in a
separate account of the Fund, cash, U.S. Government securities or other liquid
high-grade debt obligations having a value equal to or greater than such
commitments. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could, as with the disposition
of any other portfolio security, incur a gain or loss due to market
fluctuations. The Fund does not intend to have more than 5% of its net assets
(determined at the time of entering into the transaction) involved in
transactions on a when-issued or delayed delivery basis during the coming year.
SHORT SALES AGAINST-THE-BOX
The Fund may make short sales of securities or maintain a short position,
provided that at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for an equal amount of the
securities of the same issuer as the securities sold short (a short sale
against-the-box), and that not more than 25% of the Fund's net assets
(determined at the time of the short sale) may be subject to such sales. Short
sales will be made primarily to defer realization of gain or loss for federal
tax purposes. As a matter of current operating policy, the Fund will not engage
in short-sales other than short-sales against-the-box. The Fund does not intend
to have more than 5% of its net assets (determined at the time of the short
sale) subject to short sales against-the-box during the coming year.
REPURCHASE AGREEMENTS
The Fund's repurchase agreements will be collateralized by U.S. Government
obligations. The Fund will enter into repurchase transactions only with parties
meeting creditworthiness standards approved by the Fund's Board of Directors.
The Fund's investment adviser will monitor the creditworthiness of such parties,
under the general supervision of the Board of Directors. In the event of a
default or bankruptcy by a seller, the Fund will promptly seek to liquidate the
collateral. To the extent that the proceeds from any sale of such collateral
upon a default in the obligation to repurchase are less than the repurchase
price, the Fund will suffer a loss.
The Fund participates in a joint repurchase agreement account with other
investment companies managed by Prudential Mutual Fund Management, Inc. (PMF)
pursuant to an order of the Securities and Exchange Commission (SEC). On a daily
basis, any uninvested cash balances of the Fund may be aggregated with those of
such investment companies and invested in one or more repurchase agreements.
Each fund participates in the income earned or accrued in the joint account
based on the percentage of its investment.
B-10
<PAGE>
LENDING OF SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 30% of the value of the
Fund's total assets and provided that such loans are callable at any time by the
Fund and are at all times secured by cash or equivalent collateral that is equal
to at least the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to receive payments in lieu
of the interest and dividends of the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations.
A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors of the
Fund. On termination of the loan, the borrower is required to return the
securities to the Fund, and any gain or loss in the market price during the loan
would inure to the Fund.
Since voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan. The Fund will pay reasonable finders',
administrative and custodial fees in connection with a loan of its securities or
may share the interest earned on collateral with the borrower.
ILLIQUID SECURITIES
The Fund may not invest more than 5% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market (either within or outside of the United States) or
legal or contractual restrictions on resale. Historically, illiquid securities
have included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (Securities Act), securities which are otherwise not readily marketable
and repurchase agreements having a maturity of longer than seven days.
Securities which have not been registered under the Securities Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Rule 144A of the Securities Act allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. The investment adviser anticipates that the market for
certain restricted securities such as institutional commercial paper and foreign
securities will expand further as a
B-11
<PAGE>
result of this new regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the NASD.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act for which there is a readily available market will not be deemed
to be illiquid. The investment adviser will monitor the liquidity of such
restricted securities subject to the supervision of the Board of Directors. In
reaching liquidity decisions, the investment adviser will consider, inter alia,
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to make a market
in the security; and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer). Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest up to 10% of its total assets in securities of other
investment companies. Generally, the Fund does not intend to invest in such
securities, except as set forth in the Prospectus with respect to certain
countries which do not permit direct foreign equity investments. If the Fund
does invest in securities of other investment companies, shareholders of the
Fund may be subject to duplicate management and advisory fees.
PORTFOLIO TURNOVER
As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions, but the Fund's portfolio
turnover rate is not expected to exceed 200%. The portfolio turnover rate is
generally the percentage computed by dividing the lesser of portfolio purchases
or sales (excluding all securities, including options, whose maturities or
expiration date at acquisition were one year or less) by the monthly average
value of the portfolio. High portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs, which are borne directly by
the Fund. In addition, high portfolio turnover may also mean that a
proportionately greater amount of distributions to shareholders will be taxed as
ordinary income rather than long-term capital gains compared to investment
companies with lower portfolio turnover. See "Portfolio Transactions and
Brokerage" and "Taxes."
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies are
those which cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities. A "majority of the Fund's
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are present in person or
represented by proxy or (ii) more than 50% of the outstanding shares.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
provided that the deposit or payment by the Fund of initial or maintenance
margin in connection with futures or options is not considered the purchase
of a security on margin.
2. Make short sales of securities or maintain a short position if, when
added together, more than 25% of the value of the Fund's net assets would be
(i) deposited as collateral for the obligation to replace securities
borrowed to effect short sales and (ii) allocated to segregated accounts in
connection with short sales. Short sales "against-the-box" are not subject
to this limitation.
B-12
<PAGE>
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow from banks up to 20% of the value of its total
assets (calculated when the loan is made) for temporary, extraordinary or
emergency purposes or for the clearance of transactions. The Fund may pledge
up to 20% of the value of its total assets to secure such borrowings. For
purposes of this restriction, the purchase or sale of securities on a
when-issued or delayed delivery basis, forward foreign currency exchange
contracts and collateral and collateral arrangements relating thereto, and
collateral arrangements with respect to futures contracts and options
thereon and with respect to the writing of options and obligations of the
Fund to Directors pursuant to deferred compensation arrangements are not
deemed to be a pledge of assets or the issuance of a senior security.
4. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result: (i) with
respect to 75% of the Fund's total assets, more than 5% of the Fund's total
assets (determined at the time of investment) would then be invested in
securities of a single issuer, or (ii) 25% or more of the Fund's total
assets (determined at the time of the investment) would be invested in a
single industry.
5. 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, except that the Fund may invest in the securities of any U.S.
Government agency or instrumentality, and in any security guaranteed by such
an agency or instrumentality.
6. Buy or sell real estate or interests in real estate, except that the
Fund may purchase and sell securities which are secured by real estate,
securities of companies which invest or deal in real estate and publicly
traded securities of real estate investment trusts. The Fund may not
purchase interests in real estate limited partnerships which are not readily
marketable.
7. Buy or sell commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts and options thereon. (For
purposes of this restriction, futures contracts on currencies and on
securities indices and forward foreign currency exchange contracts are not
deemed to be commodities or commodity contracts.)
8. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws. The Fund has not adopted a
fundamental investment policy with respect to investments in restricted
securities. See "Illiquid Securities."
9. Make investments for the purpose of exercising control or
management.
10. Invest in securities of other investment companies, except by
purchases in the open market involving only customary brokerage commissions
and as a result of which the Fund will not hold more than 3% of the
outstanding voting securities of any one investment company, will not have
invested more than 5% of its total assets in any one investment company and
will not have invested more than 10% of its total assets (determined at the
time of investment) in such securities of one or more investment companies,
or except as part of a merger, consolidation or other acquisition.
11. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the securities of
companies which invest in or sponsor such programs.
12. Make loans, except through (i) repurchase agreements and (ii) loans
of portfolio securities limited to 30% of the Fund's total assets.
13. Purchase more than 10% of all outstanding voting securities of any
one issuer.
The foregoing restrictions are fundamental policies that may not be changed
without the approval of a majority of the Fund's voting securities.
B-13
<PAGE>
In order to comply with certain "blue sky" restrictions, the Fund will not as
a matter of operating policy:
1. Invest in oil, gas and mineral leases.
2. 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.
3. Purchase warrants if as a result the Fund would then have more than
5% of its assets (determined at the time of investment) invested in
warrants. Warrants will be valued at the lower of cost or market and
investment in warrants which are not listed on the New York Stock Exchange
or American Stock Exchange or a major foreign exchange will be limited to 2%
of the Fund's net assets (determined at the time of investment). For
purposes of this limitation, warrants acquired in units or attached to
securities are deemed to be without value.
Whenever any fundamental investment policy or investment restriction states a
maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take prompt action
to reduce its borrowings, as required by applicable law.
DIRECTORS AND OFFICERS
<TABLE><CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST 5 YEARS
- -------------------------- ------------------------ ----------------------------------------------------------------
<S> <C> <C>
Stephen C. Eyre Director Executive Director, The John A. Hartford Foundation, Inc.
c/o Prudential Mutual (charitable foundation) (since May 1985); Director of Faircom,
Fund Inc..
Management, Inc.
One Seaport Plaza
New York, NY
Delayne Dedrick Gold Director Marketing and Management Consultant.
c/o Prudential Mutual
Fund
Management, Inc.
One Seaport Plaza
New York, NY
Don G. Hoff Director Chairman and Chief Executive Officer of Intertec, Inc.
c/o Prudential Mutual (Investments) since 1980; formerly Chairman and Chief
Fund Executive Officer of AT&E Corporation (telecommunications)
Management, Inc. (1984-1990); Director of Innovative Capital Management, Inc.,
One Seaport Plaza The Asia Pacific Fund, Inc. and The Greater China Fund, Inc..
New York, NY
*Harry A. Jacobs, Jr. Director Senior Director (since January 1986) of Prudential Securities
One Seaport Plaza Incorporated (Prudential Securities); formerly Interim
New York, NY Chairman and Chief Executive Officer of Prudential Mutual Fund
Management, Inc. (PMF) (June-September 1993); formerly
Chairman of the Board of Prudential Securities (1982-1985) and
Chairman and Chief Executive Officer of Bache Group Inc.
(1977-1982); Trustee of The Trudeau Institute; Director of The
First Australia Fund, Inc., The First Australia Prime Income
Fund, Inc., The Global Government Plus Fund, Inc., The Global
Yield Fund, Inc. and the Center for National Policy.
</TABLE>
B-14
<PAGE>
<TABLE><CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST 5 YEARS
- -------------------------- ------------------------ ----------------------------------------------------------------
<S> <C> <C>
Sidney R. Knafel Director Managing Partner of SRK Management Company (investments) since
c/o Prudential Mutual 1981; Chairman of Insight Communications Company, L.P.,
Fund Microbiological Associates, Inc.; Director of Cellular
Management, Inc. Communications, Inc., Cellular Communications International,
One Seaport Plaza Inc., Cellular Communications of Puerto Rico, Inc., IGENE
New York, NY Biotechnology, Inc., International CabelTel Incorporated,
Medical Imaging Centers of America, Inc. and a number of
private companies.
Robert E. LaBlanc Director President of Robert E. LaBlanc Associates, Inc.
c/o Prudential Mutual (telecommunications) since 1981; Director of Contel Cellular,
Fund Inc., M/A-COM, Inc., Storage Technology Corporation,
Management, Inc. TIE/communications, Inc. and Tribune Company; Trustee of
One Seaport Plaza Manhattan College.
New York, NY
*Lawrence C. McQuade President and Director Vice Chairman of PMF (since 1988) and Managing Director,
One Seaport Plaza Investment Banking of Prudential Securities (1988-1991);
New York, NY Director of Quixote Corporation (since February 1992);
Director, BUNZL, P.L.C. (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
& Co. (1975-1987); President and Director of The High Yield
Income Fund, Inc., The Global Yield Fund, Inc. and The Global
Government Plus Fund, Inc.
Thomas A. Owens, Jr. Director Consultant
c/o Prudential Mutual
Fund
Management, Inc.
One Seaport Plaza
New York, NY
*Richard A. Redeker Director President, Chief Executive Officer and Director (since October
One Seaport Plaza 1993); PMF; Executive Vice President, Director and Member of
New York, NY 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 The Global
Government Plus Fund, Inc. ,The Global Yield Fund, Inc. and
The High Yield Income Fund, Inc.
Clay T. Whitehead Director President of National Exchange Inc. (since May 1983).
c/o Prudential Mutual
Fund
Management, Inc.
One Seaport Plaza
New York, NY
Robert F. Gunia Vice President Director (since January 1989), Chief Administrative Officer
One Seaport Plaza (since July 1990) and Executive Vice President, Treasurer and
New York, NY Chief Financial Officer (since June 1987) of PMF; Senior Vice
President (since March 1987) of Prudential Securities; Vice
President and Director of The Asia Pacific Fund, Inc. (since
May 1989).
S. Jane Rose Secretary Senior Vice President (since January 1991), Senior Counsel
One Seaport Plaza (since June 1987) and First Vice President (June 1987-December
New York, NY 1990) of PMF; Senior Vice President and Senior Counsel of
Prudential Securities (since July 1992); formerly Vice
President and Associate General Counsel of Prudential
Securities.
Susan C. Cote Treasurer and Principal Senior Vice President (since January 1989) of PMF; Senior Vice
One Seaport Plaza Financial and Accounting President (since January 1992) and Vice President (January
New York, NY Officer 1986-December 1991) of Prudential Securities.
Domenick Pugliese Assistant Secretary Vice President (since June 1992) and Associate General Counsel
One Seaport Plaza (since March 1992) of PMF; Vice President and Associate
New York, NY General Counsel of Prudential Securities (since July 1992);
prior thereto, associated with the law firm of Battle Fowler.
</TABLE>
- ---------------
* "Interested" director, as defined in the Investment Company Act, by reason of
his affiliation with Prudential Securities or PMF.
B-15
<PAGE>
Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities or PMFD.
The officers conduct and supervise the daily business operations of the Fund,
while the Directors, in addition to their functions set forth under "Manager"
and "Distributor," oversee such actions and decide on general policy.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the Manager.
The Fund pays each of its Directors who is not an affiliated person of PMF or
The Prudential Investment Corporation (PIC) annual compensation of $6,000, in
addition to certain out-of-pocket expenses.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Directors' fees which accrue interest at a rate equivalent
to the prevailing rate applicable to 90-day U.S. Treasury bills at the beginning
of each calendar quarter or, pursuant to an SEC exemptive order, at the daily
rate of return of the Fund (the Fund rate). Payment of the interest so accrued
is also deferred and accruals become payable at the option of the Director. The
Fund's obligation to make payments of deferred Directors' fees, together with
interest thereon, is a general obligation of the Fund.
As of March 31, 1994, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.
As of March 31, 1994, The Prudential Insurance Company of America was
beneficial owner of 508,851 Class A shares (8.8% of the outstanding Class A
shares). As of March 31, 1994, Prudential Securities was the record holder for
other beneficial owners of 3,661,011 Class A shares (or 63.3% of the outstanding
Class A shares) and 21,536,430 Class B shares (or 85.6% of the outstanding Class
B shares) of the Fund. In the event of any meetings of shareholders, Prudential
Securities will forward, or cause the forwarding of, proxy materials to the
beneficial owners for which it is the record holder.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF or
the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as manager
to all of the other investment companies that, together with the Fund, comprise
the Prudential Mutual Funds. See "How the Fund is Managed--Manager" in the
Prospectus. As of March 31, 1994, PMF managed and/or administered open-end and
closed-end management investment companies with assets of approximately $[49]
billion. According to the Investment Company Institute, as of December 31, 1993,
the Prudential Mutual Funds were the 12th largest family of mutual funds in the
United States.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors and
in conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, PMF is obligated to keep certain books and records of the Fund. PMF
also administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary clerical
and bookkeeping services which are not being furnished by State Street Bank and
Trust Company, the Fund's custodian, and Prudential Mutual Fund Services, Inc.
(PMFS or the Transfer Agent), the Fund's transfer and dividend disbursing agent.
The management services of PMF for the Fund are not exclusive under the terms of
the Management Agreement and PMF is free to, and does, render management
services to others.
B-16
<PAGE>
For its services, PMF receives, pursuant to the Management Agreement, a fee
at an annual rate of .75 of 1% of the Fund's average daily net assets. The fee
is computed daily and payable monthly. The Management Agreement also provides
that, in the event the expenses of the Fund (including the fees of PMF, but
excluding interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the Fund's
shares are qualified for offer and sale, the compensation due to PMF will be
reduced by the amount of such excess. Reductions in excess of the total
compensation payable to PMF will be paid by PMF to the Fund. No such reductions
were required during the fiscal year ended October 31, 1993. Currently, the Fund
believes that the most restrictive expense limitation of state securities
commissions is 2 1/2% of the Fund's average daily net assets up to $30 million,
2% of the next $70 million of such assets and 1 1/2% of such assets in excess of
$100 million. Because the expenses incurred by the Fund are anticipated to be
higher than those of funds that invest only in U.S. securities, the Fund has
received waivers from applicable state expense limitations to exclude certain
foreign transactional expenses subject to the limitation.
In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel
except the fees and expenses of Directors who are not affiliated persons of
PMF or the Fund's investment adviser;
(b) all expenses incurred, by PMF or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund as described below; and
(c) the costs and expenses payable to PIC pursuant to the Subadvisory
Agreement between PMF and PIC (the Subadvisory Agreement).
Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses: (a) the fees payable to the Manager, (b) the
fees and expenses of Directors who are not affiliated persons of the Manager or
the Fund's investment adviser, (c) the fees and certain expenses of the
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of legal counsel and independent accountants for the
Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Fund to governmental agencies, (g) the fees of any
trade associations of which the Fund may be a member, (h) the cost of stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) 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, registering the Fund and qualifying its shares
under state securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
reports, proxy statements and prospectuses to shareholders in the amount
necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (m) distribution fees.
The Management Agreement provides that PMF will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the matters
to which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Management Agreement provides that it will terminate automatically if assigned,
and that it may be terminated without penalty by either party upon not more than
60 days' nor less than 30 days' written notice. The Management Agreement will
continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act. The Management Agreement
was approved by the Board of Directors of the Fund, including all of
B-17
<PAGE>
the Directors who are not parties to the contract or interested persons of any
such party, as defined in the Investment Company Act, on June 3, 1993, and by
the initial shareholder of the Fund on June 25, 1992.
For the fiscal year ended October 31, 1993 and for the period July 24, 1992
(commencement of investment operations) to October 31, 1992, PMF received
management fees of $756,412 (.75% of the average daily net assets) and $59,403
(.75% of the average net assets of the Fund), respectively.
PMF has entered into the Subadvisory Agreement with PIC (the Subadviser), a
wholly-owned subsidiary of Prudential. The Subadvisory Agreement provides that
PIC will furnish investment advisory services in connection with the management
of the Fund. In connection therewith, PIC is obligated to keep certain books and
records of the Fund. PMF continues to have responsibility for all investment
advisory services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable costs
and expenses incurred by PIC in furnishing those services.
The Subadvisory Agreement was approved by the Board of Directors, including a
majority of the Directors who are not parties to the contract or interested
persons of any such party, as defined in the Investment Company Act, on June 3,
1993, and by the initial shareholder of the Fund on June 25, 1992.
The Subadvisory Agreement provides that it will terminate in the event of its
assignment (as defined in the Investment Company Act) or upon the termination of
the Management Agreement. The Subadvisory Agreement may be terminated by the
Fund, PMF or PIC upon not more than 60 days', nor less than 30 days', written
notice. The Subadvisory Agreement provides that it will continue in effect for a
period of more than two years from its execution only so long as such
continuance is specifically approved at least annually in accordance with the
requirements of the Investment Company Act.
The Manager and the Subadviser (The Prudential Investment Corporation) are
subsidiaries of The Prudential which, as of December 31, 1993, was the largest
insurance company in North America. Prudential has been engaged in the insurance
business since 1875. [In July 1993, Institutional Investor ranked The Prudential
the third largest institutional money manager of the 300 largest money
management organizations in the United States as of December 31, 1992].
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Class A shares of the Fund.
Prudential Securities Incorporated (Prudential Securities), One Seaport Plaza,
New York, New York 10292, acts as the distributor of the Class B and Class C
shares of the Fund.
Pursuant to separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively, the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. See "How the Fund is Managed--Distributor"
in the Prospectus.
On June 4, 1992, the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A or Class B Plan or
in any agreement related to either Plan (the Rule 12b-1 Directors), at a meeting
called for the purpose of voting on each Plan, adopted a plan of distribution
for the Class A shares and Class B shares of the Fund (the Class A Plan and
Class B Plan, respectively). On June 3, 1993, the Board of Directors, including
a majority of the Rule 12b-1 Directors, at a meeting called for the purpose of
voting on each Plan, approved the continuance of the Plans and Distribution
Agreements and approved modifications of the Fund's Class A and Class B Plans
and Distribution Agreements to conform them with recent amendments to the
National
B-18
<PAGE>
Association of Securities Dealers, Inc. (NASD) maximum sales charge rule
described below. As so modified, the Class A Plan provides that (i) up to .25 of
1% of the average daily net assets of the Class A shares may be used to pay for
personal service and the maintenance of shareholder accounts (service fee) and
(ii) total distribution fees (including the service fee of .25 of 1%) may not
exceed .30 of 1%. As so modified, the Class B Plan provides that (i) up to .25
of 1% of the average daily net assets of the Class B shares may be paid as a
service fee and (ii) up to .75 of 1% (not including the service fee) of the
average daily net assets of the Class B shares (asset-based sales charge) may be
used as reimbursement for distribution-related expenses with respect to the
Class B shares. On June 3, 1993, the Board of Directors, including a majority of
the Rule 12b-1 Directors, at a meeting called for the purpose of voting on each
Plan, adopted a plan of distribution for the Class C shares of the Fund and
approved further amendments to the plans of distribution for the Fund's Class A
and Class B shares changing them from reimbursement type plans to compensation
type plans. The Class A Plan, as amended, was approved by Class A and Class B
shareholders, and the Class B Plan, as amended, was approved by Class B
shareholders on , 1994. The Class C Plan was approved by the sole
shareholder of Class C shares on , 1994.
CLASS A PLAN. For the fiscal year ended October 31, 1993, PMFD received
payments of $52,529, under the Class A Plan as reimbursement of expenses related
to the distribution of Class A shares. This amount was expended on commission
credits to Prudential Securities and Pruco Securities Corporation, an affiliated
broker-dealer (Prusec), for payments of commissions and account servicing fees
to financial advisers and other persons who sell Class A shares. For the fiscal
year ended October 31, 1993, PMFD also received approximately $1,305,500 in
initial sales charges.
CLASS B PLAN. For the fiscal year ended October 31, 1993, Prudential
Securities received $745,906 from the Fund under the Class B Plan and spent
approximately $6,693,000 in distributing the Class B shares of the Fund. It is
estimated that of the latter amount approximately $74,000 (1.1%) was spent on
interest and/or carrying costs; $44,400 (0.7%) on printing and mailing of
prospectuses to other than current shareholders; $324,300 (4.8%) on compensation
to Prusec for commissions to its sales representatives and other expenses,
including an allocation on account of overhead and other branch office
distribution-related expenses incurred by it for distribution of Class B shares;
and $6,250,300 (93.4%) on the aggregate of (i) payments of commissions and
account servicing fees to its financial advisers ($2,511,200 or 37.5%) and (ii)
an allocation on account of overhead and other branch office
distribution-related expenses ($3,739,100 or 55.9%); The term "overhead and
other branch office distribution-related expenses" represents (a) the expenses
of operating Prusec's and 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. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the Prospectus. For the fiscal year ended October 31, 1993,
Prudential Securities received approximately $168,400 in contingent deferred
sales charges.
CLASS C PLAN. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class C
shares. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the Prospectus. Prior to the date of this Statement of
Additional Information, no distribution expenses were incurred under the Class C
Plan.
The Class A, Class B and Class C Plans will continue in effect from year to
year, provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class on not more than
30 days' written notice to any other party to the Plans. The Plans
B-19
<PAGE>
may not be amended to increase materially the amounts to be spent for the
services described therein without approval by the shareholders of the
applicable class (by both Class A and Class B shareholders, voting separately,
in the case of material amendments to the Class A Plan), and all material
amendments are required to be approved by the Board of Directors in the manner
described above. Each Plan will automatically terminate in the event of its
assignment. The Fund will not be contractually obligated to pay expenses
incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least quarterly
a written report of the distribution expenses incurred on behalf of each class
of shares of the Fund by the Distributor. The report 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 approved by the Board of Directors, including a majority of the Rule 12b-1
Directors, on June 3, 1993.
NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of each
class of shares. In the case of Class B shares, interest charges on unreimbursed
distribution expenses equal to the prime rate plus one percent per annum may be
added to the 6.25% limitation. Sales from the reinvestment of dividends and
distributions are not required to be included in the calculation of the 6.25%
limitation. The annual asset-based sales charge on shares of the Fund may not
exceed .75 of 1% per class. The 6.25% limitation applies to the Fund rather than
on a per shareholder basis. If aggregate sales charges were to exceed 6.25% of
total gross sales of any class, all sales charges on shares of that class would
be suspended.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities, futures
and options on securities and futures for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. The term "Manager" as used in this
section includes the Subadviser. On a national securities exchange,
broker-dealers may receive negotiated brokerage commissions on Fund portfolio
transactions, including options and the purchase and sale of underlying
securities upon the exercise of options. On foreign securities exchanges,
commissions may be fixed. Orders may be directed to any broker or futures
commission merchant including, to the extent and in the manner permitted by
applicable law, Prudential Securities and its affiliates.
Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in which
case no commissions or discounts are paid. The Fund will not deal with
Prudential Securities or any affiliate in any transaction in which Prudential
Securities or any affiliate acts as principal. Thus, it will not deal with
Prudential Securities acting as market maker, and it will not execute a
negotiated trade with Prudential Securities if execution involves Prudential
Securities' acting as principal with respect to any part of the Fund's order.
In placing orders for portfolio securities 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
B-20
<PAGE>
investment services provided by brokers, dealers or futures commission merchants
who effect or are parties to portfolio transactions of the Fund, the Manager or
the Manager's other clients. Such research and investment services are those
which brokerage houses customarily provide to institutional investors and
include statistical and economic data and research reports on particular
companies and industries. Such services are used by the Manager in connection
with all of its investment activities, and some of such services obtained in
connection with the execution of transactions for the Fund may be used in
managing other investment accounts. Conversely, brokers, dealers or futures
commission merchants furnishing such services may be selected for the execution
of transactions of such other accounts, whose aggregate assets are far larger
than the Fund's, and the services furnished by such brokers, dealers or futures
commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker in the light
of generally prevailing rates. The Manager's policy is to pay higher commissions
to brokers, other than Prudential Securities, for particular transactions than
might be charged if a different broker had been selected, on occasions when, in
the Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers other than
Prudential Securities in order to secure research and investment services
described above, subject to review by the Fund's Board of Directors from time to
time as to the extent and continuation of this practice. The allocation or
orders among brokers and the commission rates paid are reviewed periodically by
the Fund's Board of Directors. The Fund will not pay up for research in
principal transactions.
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, Prudential Securities may act as a
securities broker or futures commission merchant for the Fund. In order for
Prudential Securities (or any affiliate) to effect any portfolio transactions
for the Fund, the commissions, fees or other remuneration received by Prudential
Securities (or any affiliate) must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures being purchased or sold on an exchange during a
comparable period of time. This standard would allow Prudential Securities (or
any affiliate) to receive no more than the remuneration which would be expected
to be received by an unaffiliated broker or futures commission merchant in a
commensurate arm's-length transaction. Furthermore, the Board of Directors of
the Fund, including a majority of the Rule 12b-1 Directors, has adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to Prudential Securities (or any affiliate) are
consistent with the foregoing standard. In accordance with Section 11(a) under
the Securities Exchange Act of 1934, Prudential Securities may not retain
compensation for effecting transactions on a national securities exchange for
the Fund unless the Fund has expressly authorized the retention of such
compensation. Prudential Securities must furnish to the Fund at least annually a
statement setting forth the total amount of all compensation retained by
Prudential Securities from transactions effected for the Fund during the
applicable period. Brokerage and futures transactions with Prudential Securities
(or any affiliate) are also subject to such fiduciary standards as may be
imposed upon Prudential Securities (or such affiliate) by applicable law.
For the fiscal year ended October 31, 1993 and for the period July 24, 1992
(commencement of investment operations) to October 31, 1992 the Fund paid
brokerage commissions of $6,500 and $115,652, respectively, none of which were
paid to Prudential Securities.
B-21
<PAGE>
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares), or
(ii) on a deferred basis (Class B or Class C shares). See "Shareholder
Guide--Alternative Purchase Plan" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan, (except
that the Fund has agreed with the SEC in connection with the offering of a
conversion feature on Class B shares to submit any amendment of the Class A
distribution and service plan to both Class A and Class B shareholders) and
(iii) only Class B shares have a conversion feature. See "Distributor." Each
class also has separate exchange privileges. See "Shareholder Investment
Account--Exchange Privilege."
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class
B* and Class C* shares are sold at net asset value. Using the Fund's net asset
value at October 31, 1993, the maximum offering price of the Fund's shares is as
follows:
<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A share........................................ $ 16.10
Maximum sales charge (5% of offering price)................................................... .85
---------
Offering price to public...................................................................... $ 16.95
---------
---------
CLASS B
Net asset value, redemption price and offering price to public per Class B share*............. $ 15.94
---------
---------
CLASS C
Net asset value, offering price and redemption price per Class C share........................ $ 15.94
---------
---------
</TABLE>
------------------------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell
Your Shares--Contingent Deferred Sales Charges" in the Prospectus.
REDUCTION OR WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES
COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of breakpoints under "Shareholder
Guide--Alternative Purchase Plan" in the Prospectus.
An eligible group of related Fund investors includes any combination of the
following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's and spouse's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a company
will be deemed to control the company, and a partnership will be deemed to
be controlled by each of its general partners);
B-22
<PAGE>
(e) a trust created by the individual, the beneficiaries of which are
the individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by an
individual.
In addition, an eligible group of related Fund investors may include an
employer (or group of related employers) and one or more qualified retirement
plans of such employer or employers (an employer controlling, controlled by or
under common control with another employer is deemed related to that employer).
The Distributor must be notified at the time of purchase that the investor is
entitled to a reduced sales charge. The reduced sales charge will be granted
subject to confirmation of the investor's holdings. The Combined Purchase and
Cumulative Purchase Privilege does not apply to individual participants in the
retirement and group plans described above under "Retirement and Group Plans."
RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of shares of the
Fund and other than shares of other Prudential Mutual Funds (excluding money
market funds other than pursuant to the exchange privilege) to determine the
reduced sales charge. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be aggregated to
determine the reduced sales charge. All shares must be held either directly
with the Transfer Agent or through Prudential Securities. The value of
existing holdings for purposes of determining the reduced sales charge is
calculated using the maximum offering or price (net asset value plus maximum
sales charge) as of the previous business day. See "How the Fund Values its
Shares" in the Prospectus. The Distributor must be notified at the time of
purchase that the investor is entitled to a reduced sales charge. The reduced
sales charges will be granted subject to confirmation of the investor's
holdings. Rights of Accumulation are not available to individual participants
in any retirement or group plans.
LETTERS OF INTENT. Reduced sales charges are available to investors or an
eligible group of related investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of shares of the
Fund and shares of other Prudential Mutual Funds. All shares of the Fund and
shares of other Prudential Mutual Funds (excluding money market funds other than
those aquired pursuant to the exchange privilege) which were previously
purchased and are still owned are also included in determining the applicable
reduction. However, the value of shares held directly with the Transfer Agent
and through Prudential Securities will not be aggregated to determine the
reduced sales charge. All shares must be held either directly with the
Transfer Agent or through Prudential Securities. The Distributor must be
notified at the time of purchase that the investor is entitled to a reduced
sales charge. The reduced sales charges will be granted subject to
confirmation of the investor's holdings. Letters of Intent are not available
to individual participants in any retirement or group plans.
A Letter of Intent permits a purchaser to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Escrowed Class A shares totaling 5% of the dollar amount of the
Letter of Intent will be held by the Transfer Agent in the name of the
purchaser. The effective date of a Letter of Intent may be back-dated up to
90 days, in order that any investments made during this 90-day period, valued
at the purchaser's cost, can be applied to the fulfillment of the Letter of
Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor the Fund
to sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the thirteen-month period, the purchaser is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. Such payment may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain such difference. If the goal is exceeded in
an amount which qualified for a lower sales charge, a price adjustment is
B-23
<PAGE>
made by refunding to the purchaser the amount of excess sales charge, if any,
paid during the thirteen-month period. Investors electing to purchase Class A
shares of the Fund pursuant to a Letter of Intent should carefully read such
Letter of Intent.
QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO ,
1994. The CDSC is reduced on redemptions of Class B shares of the Fund purchased
prior to , 1994 if immediately after a purchase of such
shares, the aggregate cost of all Class B shares of the Fund owned by you in a
single account exceeds $500,000. For example, if you purchased $100,000 of Class
B shares of the Fund and the following year purchase an additional $450,000 of
Class B shares with the result that the aggregate cost of your Class B shares of
the Fund following the second purchase was $550,000, the quantity discount would
be available for the second purchase of $450,000 but not for the first purchase
of $100,000. The quantity discount will be imposed at the following rates
depending on whether the aggregate value exceeded $500,000 or $1 million:
<TABLE><CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
OR REDEMPTION PROCEEDS
----------------------------------------
YEAR SINCE PURCHASE $500,001 TO $1
PAYMENT MADE MILLION OVER $1 MILLION
- ----------------------------------------------------------------- --------------------- -----------------
<S> <C> <C>
First............................................................ 3.0% 2.0%
Second........................................................... 2.0% 1.0%
Third............................................................ 1.0% 0%
Fourth and thereafter............................................ 0% 0%
</TABLE>
You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to the reduced CDSC. The reduced CDSC will be granted subject to
confirmation of your holdings.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account
established for each investor under which a record of the shares held is
maintained by the Transfer Agent. If a stock certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for full
shares and may be redeposited in the Account at any time. There is no charge to
the investor for issuance of a certificate. The Fund makes available to its
shareholders the following privileges and plans.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. For the convenience of
investors, all dividends and distributions are automatically reinvested in full
and fractional shares of the Fund. An investor may direct the Transfer Agent in
writing not less than five full business days prior to the record date to have
subsequent dividends or distributions sent in cash rather than reinvested. In
the case of recently purchased shares for which registration instructions have
not been received on the record date, cash payment will be made directly to the
dealer. Any shareholder who receives a cash payment representing a dividend or
distribution may reinvest such dividend or distribution at net asset value by
returning the check or the proceeds to the Transfer Agent within 30 days after
the payment date. Such investment will be made at the net asset value per share
next determined after receipt of the check or proceeds by the Transfer Agent.
EXCHANGE PRIVILEGE. The Fund makes available to its shareholders the
privilege of exchanging their shares of the Fund for shares of certain other
Prudential Mutual Funds, including one or more specified money market funds,
subject in each case to the minimum investment requirements of such funds.
Shares of such other Prudential Mutual Funds may also be exchanged for shares of
the Fund. All exchanges are made on the basis of relative net asset value next
determined after receipt of an order in proper form. An exchange will be treated
as a redemption and purchase for tax purposes. Shares may be exchanged
B-24
<PAGE>
for shares of another fund only if shares of such fund may legally be sold under
applicable state laws. For retirement and group plans having a limited menu of
Prudential Mutual Funds, the Exchange Privilege is available for those funds
eligible for investment in the particular program.
It is contemplated that the Exchange Privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
CLASS A. Shareholders of the Fund may exchange their Class A shares for Class
A shares of certain other Prudential Mutual Funds, shares of Prudential
Structured Maturity Fund and Prudential Government Securities Trust
(Intermediate Term Series) and shares of the money market funds specified below.
No fee or sales load will be imposed upon the exchange. Shareholders of money
market funds who acquired such shares upon exchange of Class A shares may use
the Exchange Privilege only to acquire Class A shares of the Prudential Mutual
Funds participating in the Exchange Privilege.
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund
CLASS B AND CLASS C. Shareholders of the Fund may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds and shares of Prudential Special Money Market Fund, a
money market fund. No CDSC will be payable upon such exchange, but a CDSC may be
payable upon the redemption of Class B and Class C shares acquired as a result
of the exchange. The applicable sales charge will be that imposed by the fund in
which shares were initially purchased and the purchase date will be deemed to be
the date of the initial purchase, rather than the date of the exchange.
Class B and Class C shares of the Fund may also be exchanged for shares of an
eligible money market fund without imposition of any CDSC at the time of
exchange. Upon subsequent redemption from such money market fund or after re-
exchange into the Fund, such shares will be subject to the CDSC calculated
without regard to the time such shares were held in the money market fund. In
order to minimize the period of time in which shares are subject to a CDSC,
shares exchanged out of the money market fund will be exchanged on the basis of
their remaining holding periods, with the longest remaining holding periods
being transferred first. [In measuring the time period shares are held in a
money market fund and "tolled" for purposes of calculating the CDSC holding
period, exchanges are deemed to have been made on the last day of the month.]
Thus, if shares are exchanged into the Fund from a money market fund during the
month (and are held in the Fund at the end of the month), the entire month will
be included in the CDSC holding period. Conversely, if shares are exchanged into
a money market fund prior to the last day of the month (and are held in the
money market fund on the last day of the month), the entire month will be
excluded from the CDSC holding period. For purposes of calculating the seven
year holding period applicable to the Class B conversion feature, the time
period during which Class B shares were held in a money market fund will be
excluded.
B-25
<PAGE>
At any time after acquiring shares of other funds participating in the Class
B or Class C exchange privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B or Class C shares
of the Fund, respectively, without subjecting such shares to any CDSC. Shares of
any fund participating in the Class B or Class C exchange privilege that were
acquired through reinvestment of dividends or distributions may be exchanged for
Class B or Class C shares of other funds, respectively, without being subject to
any CDSC.
Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on 60 days' notice, and any fund, including the Fund, or
the Distributor, has the right to reject any exchange application relating to
such fund's shares.
DOLLAR COST AVERAGING
Dollar cost averaging is a method of accumulating shares by investing a fixed
amount of dollars in shares at set intervals. An investor buys more shares when
the price is low and fewer shares when the price is high. The average cost per
share is lower than it would be if a constant number of shares were bought at
set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $4,800 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2007, the cost of four years at a private
college could reach $163,000 and over $97,000 at a public university.1
The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals.2
<TABLE><CAPTION>
PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
- ----------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
25 Years................................................... $ 110 $ 165 $ 220 $ 275
20 Years................................................... 176 264 352 440
15 Years................................................... 296 444 592 740
10 Years................................................... 555 833 1,110 1,388
5 Years.................................................... 1,371 2,057 2,742 3,428
</TABLE>
See "Automatic Savings Accumulation Plan."
- ---------------
1 Source information concerning the costs of education at public universities is
available from The College Board Annual Survey of Colleges, 1992. Information
about the costs of private colleges is from the Digest of Education
Statistics, 1992; The National Center for Educational Statistics; and the U.S.
Department of Education. Average costs for private institutions include
tuition, fees, room and board.
2 The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of the Fund.
The investment return and principal value of an investment will fluctuate so
that an investor's shares when redeemed may be worth more or less than their
original cost.
AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP, an investor may
arrange to have a fixed amount automatically invested in shares of the Fund
monthly by authorizing his or her bank account or Prudential Securities Account
(including a Command Account) to be debited to invest specified dollar amounts
in shares of the Fund. The investor's bank must be a member of the Automatic
Clearing House System. Stock certificates are not issued to ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders through Prudential Securities or the Transfer Agent. Such
withdrawal plan provides for monthly or quarterly checks in any amount, except
as provided below, up to the value of the shares in the shareholder's account.
Withdrawals of Class B or Class C shares may be subject to a CDSC. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges"
in the Prospectus.
B-26
<PAGE>
In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and (iii)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See "Shareholder Investment
Account--Automatic Reinvestment of Dividends and/or Distributions."
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may be
terminated at any time, and the Distributor reserves the right to initiate a fee
of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any gain
or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the sales charges applicable to (i) the purchase of Class
A shares and (ii) the withdrawal of Class B and Class C shares. Each shareholder
should consult his or her own tax adviser with regard to the tax consequences of
the plan, particularly if used in connection with a retirement plan.
TAX-DEFERRED RETIREMENT PLANS. Various qualified retirement plans, including
a 401(k) plan, self-directed individual retirement accounts and "tax-deferred
accounts" under Section 403(b)(7) of the Internal Revenue Code are available
through the Distributor. These plans are for use by both self-employed
individuals and corporate employers. These plans permit either self-direction of
accounts by participants, or a pooled account arrangement. Information regarding
the establishment of these plans, and the administration, custodial fees and
other details are available fom Prudential Securities or the Transfer Agent.
Investors who are considering the adoption of such a plan should consult with
their own legal counsel or tax adviser with respect to the establishment and
maintenance of any such plan.
TAX-DEFERRED RETIREMENT ACCOUNTS
INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, an 8% rate of return and a 39.6% federal income tax bracket
and shows how much more retirement income can accumulate within an IRA as
opposed to a taxable individual savings account.
TAX-DEFERRED COMPOUNDING1
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
- ----------- --------- ---------
10 years $ 26,165 $ 31,291
15 years 44,676 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
- ---------------
1 The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings
in the IRA account will be subject to tax when withdrawn from the account.
B-27
<PAGE>
NET ASSET VALUE
Under the Investment Company Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Fund. The net
asset value per share is the net worth of the Fund (assets, including securities
at value, minus liabilities) divided by the number of shares outstanding. Net
asset value is calculated separately for each class. In accordance with
procedures adopted by the Board of Directors, the value of investments listed on
a securities exchange is provided by a pricing service and is based on the last
sales prices on that exchange prior to the time assets are valued or, if there
was no sale on such day, the mean between the last bid and asked prices quoted
on such day. Should an extraordinary event, which is likely to affect the value
of the security, occur after the close of an exchange on which a portfolio
security is traded, such security will be valued at fair value considering
factors determined in good faith by the investment adviser under procedures
established by and under the general supervision of the Fund's Board of
Directors.
Unlisted securities are valued at the average of the quoted bid and asked
prices in the over-the-counter market. Securities or other assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith by the investment adviser under procedures described
above. Short-term debt securities are valued at cost, with interest accrued or
discount amortized to the date of maturity, if their original maturity was 60
days or less, unless this is determined by the Board of Directors not to
represent fair value. Short-term securities with remaining maturities of 60 days
or more, for which market quotations are readily available, are valued at their
current market quotations as supplied by an independent pricing agent or
principal market maker. The Fund will compute its net asset value at 4:15 P.M.,
New York time on each day the New York Stock Exchange is open for trading except
on days on which no orders to purchase, sell or redeem Fund shares have been
received or days on which changes in the value of the Fund's portfolio
securities do not affect net asset value.
In the event that the New York Stock Exchange or the national securities
exchange on which stock options are traded adopt different trading hours on
either a permanent or temporary basis, the Board of Directors of the Fund will
consider the time at which net asset value is computed. In addition, the Fund
may compute its net asset value as of any time permitted pursuant to any
exemption, order or statement of the Securities and Exchange Commission or its
staff.
The net asset value of Class B and Class C shares will generally be lower
than the net asset value of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject.
B-28
<PAGE>
TAXES
The Fund intends to qualify and to remain qualified as a regulated investment
company under Subchapter M of the Internal Revenue Code. This relieves the Fund
(but not its shareholders) from paying federal income tax on income which is
distributed to shareholders and permits net long-term capital gains of the Fund
(i.e., the excess of net long-term capital gains over net short-term capital
losses) to be treated as long-term capital gains of the shareholders, regardless
of how long shareholders have held their shares in the Fund.
Qualification as a regulated investment company requires, among other things,
that (a) at least 90% of the Fund's annual gross income (without reduction for
losses from the sale or other disposition of securities) be derived from
interest, dividends, payments with respect to securities loans, and gains from
the sale or other disposition of securities or options thereon or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such securities or currencies; (b) the Fund derive less than 30% of its gross
income from gains (without reduction for losses) from the sale or other
disposition of securities, options thereon, futures contracts, options thereon,
forward contracts and foreign currencies held for less than three months (except
for foreign currencies directly related to the Fund's business of investing in
foreign securities) (the short-short rule); (c) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year (i) at least 50% of the
market value of the Fund's assets is represented by cash, U.S. Government
securities and other securities limited in respect of any one issuer to an
amount not greater than 5% of the market value of the Fund's assets and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities); and (d) the Fund distribute to its
shareholders at least 90% of its net investment income (including short-term
capital gains) other than long-term capital gains in each year.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where the Fund acquires a put or
writes a call thereon or makes a short sale against-the-box. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as Section 1256 contracts). If an
option written by the Fund on securities lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will generally realize capital gain or loss. If securities are
sold by the Fund pursuant to the exercise of a call option written by it, the
Fund will include the premium received in the sale proceeds of the securities
delivered in determining the amount of gain or loss on the sale. Certain of the
Fund's transactions may be subject to wash sale, short sale and straddle
provisions of the Internal Revenue Code. In addition, debt securities acquired
by the Fund may be subject to original issue discount and market discount rules.
Special rules apply to most options on stock indices, futures contracts and
options thereon, and forward foreign currency exchange contracts in which the
Fund may invest. See "Investment Objective and Policies." These investments will
generally constitute Section 1256 contracts and will be required to be "marked
to market" for federal income tax purposes at the end of the Fund's taxable
year; that is, treated as having been sold at market value. Except with respect
to forward foreign currency exchange contracts, 60% of any gain or loss
recognized on such deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss.
B-29
<PAGE>
Gain or loss on the sale, lapse or other termination of options on stock and
on narrowly-based stock indices will be capital gain or loss and will be
long-term or short-term depending upon the holding period of the option. In
addition, positions which are part of a straddle will be subject to certain wash
sale and short sale provisions of the Internal Revenue Code. In the case of a
straddle, the Fund may be required to defer the recognition of losses on
positions it holds to the extent of any unrecognized gain on offsetting
positions held by the Fund.
The Fund's ability to hold foreign currencies or engage in hedging activities
may be limited by the 30%-of-income qualification test discussed above.
A "passive foreign investment company" (PFIC) is a foreign corporation that,
in general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If the Fund acquires and holds
stock in a PFIC beyond the end of the year of its acquisition, the Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock or of any gain from disposition of the stock (collectively PFIC
Income), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders. Proposed Treasury regulations provide that the Fund may make a
"mark-to-market" election with respect to any stock it holds of a PFIC. If the
election is in effect, at the end of the Fund's taxable year, the Fund will
recognize the amount of gains, if any, with respect to PFIC stock. No loss will
be recognized on PFIC stock. Alternatively, the Fund may elect to treat any PFIC
in which it invests as a "qualified electing fund," in which case, in lieu of
the foregoing tax and interest obligation, the Fund will be required to include
in income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, even if they are not distributed to the
Fund; those amounts would be subject to the distribution requirements applicable
to the Fund described above. It may be very difficult, if not impossible, to
make this election because of certain requirements thereof. Proposed legislation
in Congress could dramatically change the manner in which U.S. shareholders of
foreign corporations are taxed. There can be no assurance that any such
legislation will become law, or if so, what its impact on U.S. shareholders of
foreign corporations will be.
Under the Internal Revenue Code, gains or losses attributable to fluctuations
in exchange rates which occur between the time the Fund accrues interest or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities are treated as ordinary income or ordinary loss.
Similarly, gains or losses on forward foreign currency exchange contracts or
dispositions of debt securities denominated in a foreign currency attributable
to fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition also are treated as
ordinary gain or loss. These gains, referred to under the Internal Revenue Code
as "Section 988" gains or losses, increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. If Section 988 losses exceed other investment
company taxable income during a taxable year, the Fund would not be able to make
any ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as a return of capital to shareholders,
rather than as an ordinary dividend, reducing each shareholder's basis in his or
her Fund shares.
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
12 months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements,
the Fund will be subject to a nondeductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which the Fund pays income
tax is treated as distributed.
B-30
<PAGE>
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
Any loss realized on a sale, redemption or exchange of shares of the Fund by
a shareholder will be disallowed to the extent the shares are replaced within a
61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
A shareholder who acquires shares of the Fund and sells or otherwise disposes
of such shares within 90 days of acquisition may not be allowed to include
certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the Fund.
The per share dividends on Class B and Class C shares will generally be lower
than the per share dividends on Class A shares as a result of the higher
distribution-related fee applicable to the Class B and Class C shares. The per
share distributions of net capital gains will be paid in the same amounts for
Class A, Class B and Class C shares. See "Net Asset Value."
Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a nominee
or fiduciary) who is a nonresident alien individual, a foreign corporation or a
foreign partnership (foreign shareholder) are subject to a 30% (or lower treaty
rate) withholding tax upon the gross amount of the dividends unless the
dividends are effectively connected with a U.S. trade or business conducted by
the foreign shareholder. Capital gain dividends paid to a foreign shareholder
are generally not subject to withholding tax. A foreign shareholder will,
however, be required to pay U.S. income tax on any dividends and capital gain
distributions which are effectively connected with a U.S. trade or business of
the foreign shareholder.
Dividends received by corporate shareholders are eligible for a
dividends-received deduction of 70% to the extent the Fund's income is derived
from qualified dividends received by the Fund from domestic corporations.
Interest income, capital gain net income, gain or loss from Section 1256
contracts (described above), dividend income from foreign corporations and
income from other sources will not constitute qualified dividends. Since the
Fund is likely to have a substantial portion of its assets invested in
securities of foreign issuers, the amount of the Fund's dividends eligible for
the corporate dividends-received deduction will be minimal. Individual
shareholders are not eligible for the dividends-received deduction.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries will vary.
If the Fund is liable for foreign income taxes, the Fund expects to meet the
requirements of the Internal Revenue Code for "passing-through" to its
shareholders foreign income taxes paid, but there can be no assurance that the
Fund will be able to, or will elect to do so. Shareholders would be required to:
(i) include in gross income (in addition to taxable dividends actually received)
their pro rata share of the foreign income taxes paid by the Fund; and (ii)
treat their pro rata share of foreign income taxes as paid by them. Shareholders
are then permitted either to deduct their pro rata share of foreign income taxes
in computing their taxable income or use it as a foreign tax credit against U.S.
income taxes. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Foreign shareholders may not deduct or claim a
credit for foreign tax unless the dividends paid to them by the Fund are
effectively connected with a U.S. trade or business.
B-31
<PAGE>
Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year and, if so, such notification will designate (a) the
shareholder's portion of the foreign taxes paid by the Fund and (b) the portion
of the dividend which represents income derived from foreign sources. The tax
consequences to a foreign shareholder entitled to claim the benefits of an
applicable tax treaty may be different from those described herein. Foreign
shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund.
The amount of foreign taxes for which a shareholder may claim a credit in any
year will generally be subject to a separate limitation for "passive income,"
which includes, among other things, dividends, interest and certain foreign
currency gains. Gain or loss from the sale of a security or from a Section 988
transaction which is treated as ordinary income or loss (or would have been so
treated absent an election by the Fund) will be treated as derived from sources
within the United States, potentially reducing the amount allowable as a credit
under the limitation.
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURN. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B and Class C shares. See "How the Fund Calculates
Performance" in the Prospectus.
Average annual total return is computed according to the following formula:
P (1+T) n = ERV
Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of
a hypothetical $1000 payment made at the beginning of the
1, 5 or 10 year periods.
Average annual total return takes into account any applicable initial or
deferred sales charges but does not take into account any federal or state
income taxes that may be payable upon redemption.
The average annual total return of the Class A shares for the one year period
ended October 31, 1993 and for the period from July 24, 1992 (commencement of
investment operations) through October 31, 1993 was 43.4% and 39.6%,
respectively, and for the Class B shares, was 45.2% and 41.6% for Class B
shares, respectively, for the same period. During these periods, no Class C
shares were outstanding.
YIELD. The Fund may from time to time advertise its yield as calculated over
a 30-day period. Yield is calculated separately for Class A, Class B and Class C
shares. This yield will be computed by dividing the Fund's net investment income
per share earned during this 30-day period by the maximum offering price per
share on the last day of this period. Yield is calculated according to the
following formula:
YIELD = 2[(__a-b__+1)6-1]
cd
B-32
<PAGE>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive
dividends.
d = the maximum offering price per share on the last day of
the period.
Yield fluctuates and an annualized yield quotation is not a representation by
the Fund as to what an investment in the Fund will actually yield for any given
period. Yields for the Fund will vary based on a number of factors including
changes in net asset value, market conditions, the level of interest rates and
the level of Fund income and expenses.
AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B and
Class C shares. See "How the Fund Calculates Performance" in the Prospectus.
Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:
ERV-P
P
Where: P = a hypothetical initial payment of $1000.
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof)
of a hypothetical $1000 payment made at the beginning of the
1, 5 or 10 year periods.
Aggregate total return does not take into account any federal or state income
taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.
The aggregate total return for Class A shares for the one year period ended
on October 31, 1993 and for the period from July 24, 1992 (commencement of
operations) to October 31, 1993 was 51.4% and 61.2%, respectively, and for Class
B shares was 50.2% and 59.6%, respectively, for the same period. During these
periods, no Class C shares were outstanding.
B-33
<PAGE>
PERFORMANCE CHART. From time to time, the performance of the Fund may be
measured against various indices. Set forth below is a chart which compares the
performance of different types of investments over the long-term and the rate of
inflation.1
[GRAPHIC]
- ---------------
1 Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1993
Yearbook" (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Common stock returns are based on the Standard & Poor's 500 Stock
Index, a market-weighted, unmanaged index of 500 common stocks in a variety of
industry sectors. It is a commonly used indicator of broad stock price
movements. This chart is for illustrative purposes only, and is not intended to
represent the performance of any particular investment or fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and in that capacity maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Subcustodians provide custodial
services for the Fund's foreign assets held outside the United States. See "How
the Fund is Managed--Custodian and Transfer and Dividend Disbursing Agent" in
the Prospectus.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the Fund.
PMFS is a wholly-owned subsidiary of PMF. PMFS provides customary transfer
agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the
B-34
<PAGE>
maintenance of shareholder account records, payment of dividends and
distributions and related functions. For these services, PMFS receives an annual
fee per shareholder account, a new account set-up fee for each manually
established account and a monthly inactive zero balance account fee per
shareholder account. PMFS is also reimbursed for its out-of-pocket expenses,
including, but not limited to, postage, stationery, printing, allocable
communication expenses and other costs. For the fiscal year ended October 31,
1993, the Fund incurred fees of approximately $128,000 for such services.
Deloitte & Touche, 1633 Broadway, New York, New York 10019, serves as the
Fund's independent accountants, and in that capacity audits the Fund's annual
reports.
DESCRIPTION OF SECURITY RATINGS
MOODY'S INVESTORS SERVICE
AAA: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
COMMERCIAL PAPER
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months.
P-1: The designation "Prime-1" or "P-1" indicates the highest quality
repayment capacity of the rated issue.
P-2: The designation "Prime-2" or "P-2" indicates a strong capacity for
repayment.
B-35
<PAGE>
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rate BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
COMMERCIAL PAPER
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more than
270 days.
A-1: The A-1 designation indicates that the degree of safety regarding timely
payment is very strong.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as
overwhelming as for issues designated A-1.
B-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
PRUDENTIAL PACIFIC GROWTH FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Prudential Pacific Growth Fund, Inc., including the portfolio of investments, as
of October 31, 1993, the related statements of operations for the year then
ended and of changes in net assets for the year ended October 31, 1993 and the
period May 7, 1992 (commencement of operations) to October 31, 1992 and the
financial highlights for the year ended October 31, 1993 and the period July 24,
1992 (commencement of investment operations) to October 31, 1992. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
October 31, 1993 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. 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 financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential Pacific
Growth Fund, Inc. as of October 31, 1993, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
NEW YORK, NEW YORK
DECEMBER 15, 1993
B-37
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC. PORTFOLIO OF
INVESTMENTS
OCTOBER 31, 1993
VALUE
SHARES DESCRIPTION (NOTE 1)
LONG-TERM INVESTMENTS--91.2%
COMMON STOCKS--84.6%
AUSTRALIA--5.8%
2,746,000 AAPC, Ltd.*................... $ 1,499,077
(Lodging)
426,000 Broken Hill Proprietary
Company, Ltd................ 5,025,545
(Energy sources)
1,915,447 BTR Nylex, Ltd................ 4,004,142
(Industrial components)
350,000 Coca Cola Amatil, Ltd......... 2,400,021
(Food & household products)
2,855,400 Sea World Property Trust,
Ltd........................... 1,748,898
(Leisure & tourism)
1,238,500 West Australia Newspaper...... 3,487,757
(General business)
18,165,440
HONG KONG--12.7%
2,290,000 Amoy Properties, Ltd.......... 2,963,441
(Real estate)
4,598,000 Giordano Holdings, Ltd........ 2,945,336
(Merchandising)
1,122,600 Guoco Group, Ltd.............. 4,902,976
(Financial services)
1,270,000 Hopewell Holdings, Ltd........ 1,273,697
(Real estate)
10,055,000 Hung Hing Printing Group,
Ltd........................... 3,545,755
(General manufacturing)
1,324,000 Hutchison Whampoa, Ltd........ 4,985,881
(Multi-industry)
832,000 Hysan Development Co., Ltd.... 2,411,750
(Property related)
532,000 Jardine Matheson Holdings,
Ltd........................... 5,094,532
(General trading)
2,790,000 JCG Holdings, Ltd............. 2,148,236
(Financial services)
1,548,000 Lamex Holdings, Ltd........... 610,986
(Furniture)
2,639,000 Liu Chong Hing Investment,
Ltd........................... 2,902,813
(Real estate)
13,787,000 Techtronic Industries, Ltd.... 2,587,006
(Machinery)
11,636,000 UDL Holdings, Ltd............. 3,124,510
(Construction)
VALUE
SHARES DESCRIPTION (NOTE 1)
HONG KONG--(CONT'D.)
1,548,000 Yips Hang Cheung Holdings,
Ltd........................... $ 465,751
(Chemicals)
39,962,670
INDIA--0.3%
53,000 Reliance Industries Ltd.*..... 907,625
(Miscellaneous basic
industry)
INDONESIA--0.8%
769,800 Kabel Metal Industries,
Ltd.*......................... 2,564,107
(Wire & cable)
JAPAN--35.8%
263,000 Aiwa Co....................... 4,294,373
(Consumer electronics)
80,000 Aoyama Trading Co............. 5,992,620
(Merchandising)
30,000 Autobacs Seven Co............. 3,653,136
(Merchandising)
42,400 Capcom Co., Ltd............... 3,610,258
(Recreation & other consumer
goods)
97,000 Higashi Nihon House........... 5,413,745
(Housing)
27,000 Japan Associates Finance
Co.*.......................... 2,964,022
(Financial services)
46,000 Juntendo Co................... 534,686
(Merchandising)
378,000 Kamigumi Co., Ltd............. 4,289,114
(Transportation &
warehousing)
79,000 Koei Co....................... 4,656,919
(Recreation & other consumer
goods)
86,000 Kyocera Corp.................. 4,879,151
(Public works - electronics)
112,000 Maezawa Industries............ 4,577,122
(Public works -
construction)
157,000 Maruichi Steel Tube, Ltd...... 2,853,229
(Steel)
297,000 Mitsui Fudosan Co............. 3,589,206
(Real estate)
149,000 Mitsui Home Co................ 2,941,513
(Housing)
136,000 Mr. Max Corp.................. 3,763,838
(Merchandising)
249,000 Murata Manufacturing Co.,
Ltd........................... 8,751,753
(Electronic components)
B-38 See
Notes to Financial Statements
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND,
INC.
VALUE
SHARES DESCRIPTION (NOTE 1)
JAPAN--(CONT'D.)
92,000 Namco......................... $ 2,333,948
(Recreation & other consumer
goods)
212,000 National House Industrial..... 4,185,240
(Housing)
50,000 Nichiei Co.................... 4,658,672
(Financial services)
125,000 Nissen Co., Ltd............... 5,362,085
(Merchandising)
109,000 P.S. Corp..................... 2,202,122
(Public works -
construction)
576,000 Ricoh Co...................... 3,804,576
(Data processing &
reproduction)
63,000 Secom Co., Ltd................ 3,928,782
(Security/investigation
services)
86,000 Sega Enterprises, Ltd......... 7,187,823
(Recreation & other consumer
goods)
126,000 Sho-Bond Construction Co.,
Ltd........................... 3,463,837
(Public works -
construction)
138,000 Taihei Dengyo Co., Ltd........ 3,233,579
(Energy equipment &
services)
67,000 Tsutsumi Jewelry Co., Ltd..... 5,748,155
(Merchandising)
112,873,504
KOREA--3.6%
21,200 Daewoo Securities Co., Ltd.... 543,152
(Financial services)
1,060 Daishin Securities Co......... 22,828
(Financial services)
47,470 Dong Ah Construction Industry
Co., Ltd.................... 1,286,704
(Housing)
9,195 Dong Ah Construction Industry
Co., Ltd.................... 163,881
(New shares)
(Housing)
40,539 Dong Shin Construction Co.*... 687,399
(Construction)
1,756 Dong Shin Construction Co.*... 22,386
(New shares)
(Construction)
119,814 Hanjin Heavy Industries*...... 1,542,256
(Ship building)
VALUE
SHARES DESCRIPTION (NOTE 1)
KOREA--(CONT'D.)
72,960 Kun Young Construction
Corp.......................... $ 1,210,055
(Housing)
54,350 Pusan Steel Pipe.............. 1,674,998
(Steel)
57,880 Samsung Electronic Co......... 2,951,489
(Electronics)
873 Samsung Electronic Co.*....... 28,309
(New shares)
(Electronics)
44,540 Shinwon Corp.*................ 1,356,128
(Merchandising)
11,489,585
MALAYSIA--14.2%
624,000 Arab-Malaysian Finance*....... 2,429,012
(Banking)
1,000,000 Bedford Berhad................ 2,073,471
(Real estate)
862,000 Golden Plus Holdings Berhad... 3,102,539
(Building materials)
921,000 Granite Industries Berhad*.... 5,188,529
(Leisure & tourism)
1,134,000 Kedah Cement Holdings
Berhad........................ 1,854,434
(Building materials &
components)
1,587,500 Magnum Corp. Berhad*.......... 3,912,699
(Leisure)
491,000 MGR Corp. Berhad*............. 1,479,089
(Forest products)
850,000 Multi-Purpose Holdings
Berhad........................ 1,745,824
(Consumer goods)
2,342,500 Pilecon Engineering Berhad.... 4,178,943
(Machinery & engineering)
3,484,000 Renong Berhad*................ 4,879,589
(Infrastructure)
1,003,000 Resorts World................. 5,493,525
(Leisure & tourism)
1,440,000 RJ Reynolds Berhad............ 2,309,769
(Tobacco)
300,000 Tanjong Plc................... 1,995,227
(Leisure & tourism)
B-39 See
Notes to Financial Statements
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND,
INC.
VALUE
SHARES DESCRIPTION (NOTE 1)
MALAYSIA--(CONT'D.)
902,000 Technology Resources
Industries Berhad*.......... $ 3,987,559
(Telecommunication)
44,630,209
SINGAPORE--9.9%
750,000 First Capital Corp.*.......... 3,190,986
(Construction)
114,750 First Capital Corp.*.......... 459,289
(New shares)
(Construction)
1,193,000 Hong Leong Finance............ 3,579,376
(Financial services)
276,000 Jurong Shipyard, Ltd.......... 2,348,566
(Capital goods)
1,499,000 Kim Eng Holdings.............. 3,193,582
(Financial services)
1,012,750 Sembawang Maritime, Ltd....... 4,787,661
(Transportation/shipping)
435,000 Sembawang Shipyards, Ltd...... 3,619,287
(Machinery & engineering)
502,000 Singapore Airlines, Ltd....... 3,923,605
(Transportation)
2,486,000 Wing Tai Holdings............. 6,205,206
(Multi-industry)
31,307,558
THAILAND--1.5%
265,800 Land & House, Ltd.*........... 4,825,099
(Housing)
Total common stocks (cost
$228,615,463)................. 266,725,797
WARRANTS WARRANTS*--1.4%
JAPAN--0.7%
Autobacs Seven Co.
150 expiring Feb. '95 @
y8,089...................... 579,375
100 expiring Mar. '96 @
y8,231...................... 368,750
(Merchandising)
300 Kamigumi Co., Ltd.
expiring Sept. '96 @ y902... 86,350
(Transportation &
warehousing)
1,600 Mr. Max Corp.
expiring July '95 @
y2,194.40..................... 398,813
(Merchandising)
VALUE
SHARES DESCRIPTION (NOTE 1)
JAPAN--(CONT'D.)
493 Nissen Co., Ltd.
expiring Nov. '96 @
y1,681........................ $ 614,421
(Merchandising)
2,047,709
SINGAPORE--0.7%
190,200 Hong Leong Finance
expiring Nov. '98 @
SGD3.25....................... 238,095
(Financial services)
616,000 United Overseas Bank, Ltd.
expiring Nov. '94 @
SGD3.16....................... 2,096,691
(Banking)
2,334,786
Total warrants
(cost $3,058,123)........... 4,382,495
SHARES PREFERRED STOCKS--1.1%
KOREA
64,330 Daewoo Securities Co., Ltd.... 1,552,615
(Financial services)
58,200 Daishin Securities Co......... 1,217,377
(Financial services)
22,750 Mando Machinery Corp.......... 825,020
(Automobile parts)
Total preferred stocks
(cost $3,806,891)........... 3,595,012
RIGHTS RIGHTS--1.1%
AUSTRALIA
763,631 Bank of Melbourne, Ltd.*......
(Banking)
(cost $3,126,593)........... 3,558,700
CONVERTIBLE LOAN STOCKS--1.3%
MALAYSIA--1.0%
1,593 IJM Corp. Berhad.............. 3,053,752
(Building related)
SINGAPORE--0.3%
631 Sembawang Maritime, Ltd....... 994,327
(Transportation/shipping)
Total convertible loan stocks
(cost $2,585,118)........... 4,048,079
B-40 See
Notes to Financial Statements
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND,
INC.
VALUE
SHARES DESCRIPTION (NOTE 1)
PRINCIPAL
AMOUNT
(000) CONVERTIBLE BONDS--1.7%
JAPAN--0.6%
y122,000 Capcom Co., Ltd.
3.90%, 9/30/96.............. $ 1,744,465
(Recreation & other consumer
goods)
KOREA--0.7%
US$ 1,120 Samsung Electronic Co.
3.75%, 12/31/07............. 2,105,600
(Electronics)
THAILAND--0.4%
US$ 1,000 Land & House, Ltd.
5.00%, 4/29/03.............. 1,405,000
(Housing)
Total convertible bonds
(cost $4,425,654)........... 5,255,065
Total long-term investments
(cost $245,617,842)......... 287,565,148
SHORT-TERM INVESTMENTS--4.6%
US$ 14,519 Joint Repurchase Agreement
Account,
2.93%, 11/1/93 (Note 5)..... 14,519,000
TOTAL INVESTMENTS--95.8%
(cost $260,136,842; Note
4)............................ 302,084,148
Other assets in excess of
liabilities--4.2%........... 13,266,329
NET ASSETS--100%.............. $315,350,477
- ------------
* Non-income producing security.
B-41 See
Notes to Financial Statements
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE><CAPTION>
OCTOBER 31,
1993
------------
<S> <C>
ASSETS
Investments, at value (cost $260,136,842)........................................................... $302,084,148
Foreign currency (cost $4,605,134).................................................................. 4,562,732
Cash................................................................................................ 401,282
Receivable for Fund shares sold..................................................................... 14,900,259
Forward contracts-net amount receivable from counterparties......................................... 668,149
Dividends and interest receivable................................................................... 366,840
Deferred expenses and other assets.................................................................. 149,436
------------
Total assets.................................................................................. 323,132,846
------------
LIABILITIES
Payable for investments purchased................................................................... 6,560,076
Payable for Fund shares reacquired.................................................................. 703,435
Due to Distributors................................................................................. 194,516
Due to Manager...................................................................................... 175,531
Accrued expenses and other liabilities.............................................................. 148,811
------------
Total liabilities............................................................................. 7,782,369
------------
NET ASSETS.......................................................................................... $315,350,477
------------
------------
Net assets were comprised of:
Common stock, at par.............................................................................. $ 19,744
Paid-in capital in excess of par.................................................................. 267,996,607
------------
268,016,351
Accumulated net realized gain on investment and foreign currency transactions..................... 4,739,794
Net unrealized appreciation on investments and foreign currencies................................. 42,594,332
------------
Net assets, October 31, 1993........................................................................ $315,350,477
------------
------------
Class A:
Net asset value and redemption price per share
($64,353,319 / 3,996,399 shares of common stock issued and outstanding)......................... $16.10
Maximum sales charge (5.25% of offering price).................................................... 89
Maximum offering price to public.................................................................. $16.99
Class B:
Net asset value, offering price and redemption price per share
($250,997,158 / 15,747,841 shares of common stock issued and outstanding)....................... $15.94
</TABLE>
See Notes to Financial Statements.
B-42
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
STATEMENT OF OPERATIONS
<TABLE><CAPTION>
YEAR ENDED
OCTOBER 31,
1993
-----------
<S> <C>
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding
taxes of $142,102).................. $ 1,355,202
Interest (net of foreign withholding
taxes of $1,344).................... 202,936
-----------
Total income...................... 1,558,138
-----------
Expenses
Management fee........................ 756,412
Distribution fee--Class A............. 52,529
Distribution fee--Class B............. 745,906
Custodian's fees and expenses......... 238,000
Transfer agent's fees and expenses.... 147,000
Registration fees..................... 81,000
Directors' fees....................... 42,000
Amortization of organization
expense.................................. 40,000
Reports to shareholders............... 35,000
Legal fees............................ 30,000
Audit fee............................. 20,000
Miscellaneous......................... 3,315
-----------
Total expenses.................... 2,191,162
Net investment loss..................... (633,024)
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain on
Investment transactions............... 4,980,679
Foreign currency transactions......... 436,108
-----------
5,416,787
-----------
Net change in unrealized appreciation on
Investments........................... 40,048,426
Foreign currencies.................... 646,832
-----------
40,695,258
-----------
Net gain on investments and foreign
currencies............................... 46,112,045
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............... $45,479,021
-----------
-----------
See Notes to Financial Statements
</TABLE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
MAY 7,
1992*
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31,
1993 1992
------------ -----------
<S> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
Operations
Net investment loss......... $ (633,024) $ (94,650)
Net realized gain on
investment and foreign
currency transactions..... 5,416,787 101,942
Net change in unrealized
appreciation on
investments and foreign
currencies..................... 40,695,258 1,899,074
------------ -----------
Net increase in net assets
resulting from operations...... 45,479,021 1,906,366
------------ -----------
Dividends to shareholders from
foreign currency gains (Note
1)
Class A..................... (19,787) --
Class B..................... (31,474) --
------------ -----------
(51,261) --
------------ -----------
Fund share transactions (Note
6)
Net proceeds from shares
subscribed..................... 270,394,550 32,829,326
Net asset value of shares
issued to shareholders in
reinvestment of
distributions.................. 47,105 --
Cost of shares reacquired... (34,486,434) (868,196)
------------ -----------
Net increase in net assets
from Fund share
transactions................... 235,955,221 31,961,130
------------ -----------
Total increase.......... 281,382,981 33,867,496
NET ASSETS
Beginning of period........... 33,967,496 100,000
------------ -----------
End of period................. $315,350,477 $33,967,496
------------ -----------
------------ -----------
----------------
* Commencement of operations.
See Notes to Financial Statements
</TABLE>
B-43
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Prudential Pacific Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund was incorporated in Maryland on August 14, 1991 and had no
operations other than the issuance of 5,000 shares each of Class A and Class B
common stock for $100,000 on May 6, 1992 to Prudential Mutual Fund Management,
Inc. ("PMF"). The Fund commenced investment operations on July 24, 1992. The
investment objective of the Fund is to seek long-term capital growth by
investing primarily in common stocks, common stock equivalents and other
securities of companies doing business in or domiciled in the Pacific Basin
region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITIES VALUATION: Securities traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Any securities or other assets for which current market quotations are not
readily available are valued at fair value as determined in good faith under
procedures established by and under the general supervision and responsibility
of the Fund's Board of Directors. No such securities were held by the Fund at
October 31, 1993.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian takes possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction including accrued interest. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing rates of exchange;
(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the year, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at the end of the fiscal year.
Net realized gains on foreign currency transactions of $436,108 represent net
foreign exchange gains from forward currency contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
interest, dividends and foreign taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net currency gains and
losses from valuing foreign currency denominated assets and liabilities, other
than investments, at fiscal year end exchange rates are reflected as a component
of unrealized appreciation on foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
FORWARD CURRENCY CONTRACTS: The Fund enters into forward currency contracts in
order to hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings. A forward contract is a commitment to
B-44
<PAGE>
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the settlement value
of the original and renegotiated forward contracts, if any, is isolated and is
included in net realized gains from foreign currency transactions. Risks may
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses from investment and
foreign currency transactions are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Net investment income or loss (other than distribution fees) and unrealized
and realized gains or losses are allocated daily to each class of shares of the
Fund based upon the relative proportion of net assets of each class at the
beginning of the day.
DIVIDENDS AND DISTRIBUTIONS: The Fund expects to pay dividends of net investment
income and distributions of net realized capital and currency gains, if any,
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
TAXES: It is the Fund's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no federal income tax provision is
required.
Withholding taxes on foreign dividends and interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
DEFERRED ORGANIZATION EXPENSES: Approximately $200,000 of organization and
initial registration costs have been deferred and are being amortized over the
period of benefit not to exceed 60 months from the date the Fund commenced
investment operations.
RECLASSIFICATION OF CAPITAL ACCOUNTS: Effective November 1, 1992, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. As a result of this statement, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. The effect caused by adopting this
statement was to decrease accumulated net investment loss and decrease
accumulated net realized gains on investments and foreign currency transactions
by $727,674 with respect to amounts reported through October 31, 1993. Net
investment income, net realized gains and net assets were not affected by this
change.
NOTE 2. AGREEMENTS
The Fund has a management agreement with PMF. Pursuant to this agreement, PMF
has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation ("PIC"); PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the cost of the subadviser's services, the compensation of officers of
the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The
Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly at an annual
rate of .75 of 1% of the average daily net assets of the Fund.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. ("PMFD"), which acts as the distributor of the Class A shares of the Fund,
and Prudential Securities Incorporated ("PSI"), which acts as distributor of the
Class B shares of the Fund (collectively the "Distributors"). To reimburse the
Distributors for their expenses incurred in distributing and servicing the
Fund's Class A and B shares, the Fund, pursuant to plans of distribution, pays
the Distributors a reimbursement, accrued daily and payable monthly.
Pursuant to 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. Such
expenses under the Class A Plan were .20 of 1% of the average daily
B-45
<PAGE>
net assets of the Class A shares for the fiscal year ended October 31, 1993.
PMFD pays various broker-dealers, including PSI and Pruco Securities Corporation
("Prusec"), affiliated broker-dealers, for account servicing fees and other
expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to the Class B shares at an annual
rate of up to 1% of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for payment of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other branch office distribution-related expenses, interest
and/or carrying charges, the cost of printing and mailing prospectuses to
potential investors and of advertising incurred in connection with the
distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Fund under the plans and
the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $1,305,500 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended October 31, 1993. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons and
incurred other distribution costs.
With respect to the Class B Plan, at any given time, the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant to
the Plan. For the fiscal year ended October 31, 1993, PSI advised the Fund that
it received approximately $168,400 in contingent deferred sales charges imposed
upon certain redemptions by investors. PSI, as distributor, has also advised the
Fund that as of October 31, 1993, the amount of distribution expenses incurred
by PSI and not yet reimbursed by the Fund or recovered through contingent
deferred sales charges approximated $6,322,200. This amount may be recovered
through future payments under the Class B Plan or contingent deferred sales
charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America
("Prudential").
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services, Inc. ("PMFS"), a wholly owned subsidiary of
PMF, serves as the Fund's transfer agent. During the year ended October 31,
1993, the Fund incurred fees of approximately $128,000 for the services of PMFS.
As of October 31, 1993, approximately $29,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the statement of operations include certain
out-of-pocket expenses paid to non-affiliates.
For the fiscal year ended October 31, 1993, PSI received approximately $6,500
in brokerage commissions from portfolio transactions executed on behalf of the
Fund.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments, for the year ended October 31, 1993 were $258,325,430 and
$43,659,682, respectively.
The United States federal income tax basis of the Fund's investments at
October 31, 1993 was $260,405,940 and accordingly, net unrealized appreciation
for federal income tax purposes was $41,678,208 (gross unrealized
appreciation--$45,195,586; gross unrealized depreciation-- $3,517,378).
At October 31, 1993, the Fund had outstanding forward currency contracts to
sell foreign currencies as follows:
FOREIGN VALUE AT
CURRENCY SETTLEMENT
SALE DATE CURRENT
CONTRACTS RECEIVABLE VALUE APPRECIATION
- ---------------------- ----------- ----------- -----------
Japanese Yen, expiring
8/1/94-8/25/94........ $22,000,000 $21,331,851 $ 668,149
----------- ----------- -----------
NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, along with other affiliated registered investment companies,
transfers uninvested cash balances into a single joint account, the daily
aggregate balance of which is
B-46
<PAGE>
invested in one or more repurchase agreements collateralized by U.S. Treasury or
federal agency obligations. At October 31, 1993, the Fund had a 1.1% undivided
interest in the repurchase agreements in the joint account. The undivided
interest for the Fund represented $14,519,000 in principal amount. As of such
date, each repurchase agreement in the joint account and the collateral therefor
were as follows:
CS First Boston Corp., 2.93%, in the principal amount of $360,000,000,
repurchase price $360,087,900, due 11/1/93, collateralized by $47,400,000 U.S.
Treasury Notes, 6.75%, due 2/28/97; $40,000,000 U.S. Treasury Notes, 11.25%, due
2/15/95; $100,000,000 U.S. Treasury Bonds, 7.50%, due 11/15/16; $50,000,000 U.S.
Treasury Bonds, 10.375%, due 11/15/12 and $50,000,000 U.S. Treasury Bonds,
12.00%, due 5/15/05; aggregate value including accrued interest--$368,368,052.
Goldman Sachs & Co., 2.93%, in the principal amount of $450,154,000,
repurchase price $450,263,909, due 11/1/93, collateralized by $104,915,000 U.S.
Treasury Bonds, 12.00%, due 8/15/13 and $200,000,000 U.S. Treasury Bonds,
10.75%, due 8/15/05; aggregate value including accrued interest--$462,739,932.
Kidder Peabody & Co. Inc., 2.95%, in the principal amount of $305,000,000,
repurchase price $305,074,979, due 11/1/93, collateralized by $210,030,000 U.S.
Treasury Bonds, 9.875%, due 11/15/15; value including accrued
interest--$311,527,136.
Nomura Securities International, Inc., 2.90%, in the principal amount of
$60,889,000, repurchase price $60,903,715, due 11/1/93, collateralized by
$8,280,000 U.S. Treasury Notes, 7.75%, due 2/15/95; $25,000,000 U.S. Treasury
Notes, 7.375%, due 5/15/96 and $22,775,000 U.S. Treasury Notes, 8.875%, due
2/15/96; aggregate value including accrued interest--$62,140,276.
Smith Barney Shearson, Inc., 2.94%, in the principal amount of $175,000,000,
repurchase price $175,042,875, due 11/1/93, collateralized by $4,465,000 U.S.
Treasury Bonds, 12.00%, due 5/15/05; $11,435,000 U.S. Treasury Notes, 9.125%,
due 5/15/99; $75,000,000 U.S. Treasury Bonds, 8.125%, due 8/15/19 and
$50,000,000 U.S. Treasury Bonds, 8.00%, due 11/15/21; aggregate value including
accrued interest--$178,771,706.
NOTE 6. CAPITAL
The Fund offers both Class A and Class B shares. Class A shares are sold with
a front-end sales charge of up to 5.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Both classes of shares have equal rights as
to earnings, assets and voting privileges except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan.
The Fund has authorized 2 billion shares of common stock at $.001 par value
per share equally divided into two classes, designated Class A and Class B
common stock. Of the 19,744,240 shares of common stock issued and outstanding at
October 31, 1993, PMF owned 5,000 Class A shares and 5,000 Class B shares and
Prudential owned 500,722 Class A shares.
Transactions in shares of common stock for the fiscal year ended October 31,
1993 and for the period ended October 31, 1992 were as follows:
CLASS A SHARES AMOUNT
- -------------------------------- ---------- ------------
Year ended October 31, 1993:
Shares sold..................... 3,564,128 $ 51,357,221
Shares issued in reinvestment of
distributions................... 1,727 17,942
Shares reacquired............... (876,093) (12,582,153)
---------- ------------
Net increase in shares
outstanding..................... 2,689,762 $ 38,793,010
---------- ------------
---------- ------------
Period ended October 31, 1992:
Shares sold..................... 1,345,525 $ 13,479,169
Shares reacquired............... (43,888) (458,071)
---------- ------------
Net increase in shares
outstanding..................... 1,301,637 $ 13,021,098
---------- ------------
---------- ------------
CLASS B
- --------------------------------
Year ended October 31, 1993:
Shares sold..................... 15,458,343 $219,037,329
Shares issued in reinvestment of
distributions................. 2,818 29,163
Shares reacquired............... (1,599,655) (21,904,281)
---------- ------------
Net increase in shares
outstanding..................... 13,861,506 $197,162,211
---------- ------------
---------- ------------
Period ended October 31, 1992:
Shares sold..................... 1,921,607 $ 19,350,157
Shares reacquired............... (40,272) (410,125)
---------- ------------
Net increase in shares
outstanding..................... 1,881,335 $ 18,940,032
---------- ------------
---------- ------------
B-47
<PAGE>
NOTE 7. DIVIDENDS AND DISTRIBUTIONS
Subsequent to October 31, 1993, the Board of Directors of the Fund declared
dividends from net investment income to Class A shareholders of $.064 per share
and to Class B shareholders of $.034 per share and both short-term and long-term
capital gain distributions to both Class A and Class B shareholders of $.174 and
$.032 per share, respectively, payable on December 29, 1993 to shareholders of
record on December 22, 1993.
B-48
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
CLASS A CLASS B
------------------------ ------------------------
JULY 24, JULY 24,
YEAR 1992* YEAR 1992*
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1993 1992 1993+ 1992
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................... $ 10.65 $ 10.00 $ 10.63 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss................................................ (.01) (.02) (.10) (.04)
Net realized and unrealized gains on investment and foreign
currency transactions............................................ 5.48 .67 5.43 .67
----------- ----------- ----------- -----------
Total from investment operations............................... 5.47 .65 5.33 .63
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Distributions from foreign currency gains.......................... (.02) -- (.02) --
----------- ----------- ----------- -----------
Net asset value, end of period..................................... $ 16.10 $ 10.65 $ 15.94 $ 10.63
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN#...................................................... 51.39% 6.50% 50.17% 6.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................... $ 64,353 $ 13,918 $ 250,997 $ 20,050
Average net assets (000)........................................... $ 26,264 $ 12,884 $ 74,590 $ 16,025
Ratios to average net assets:
Expenses, including distribution fees............................ 1.63% 2.72%** 2.37% 3.52%**
Expenses, excluding distribution fees............................ 1.43% 2.52%** 1.37% 2.52%**
Net investment loss.............................................. (.04)% (.75 %** (.83 )% (1.55 )%**
Portfolio turnover................................................. 44% 0% 44% 0%
</TABLE>
----------------
* Commencement of investment operations.
** Annualized.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
+ Calculated based upon average shares outstanding during the year.
See Notes to Financial Statements.
B-49
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
(1) Financial Statements included in the Prospectus constituting Part
A of this Registration Statement:
Financial Highlights
(2) Financial Statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:
Portfolio of Investments at October 31, 1993.
Statement of Assets and Liabilities at October 31, 1993.
Statement of Operations for the year ended October 31, 1993.
Statement of Changes in Net Assets for the October 31, 1993 and
October 31, 1992.
Notes to Financial Statements (Part B).
Financial Highlights
Independent Auditors' Report.
(B) EXHIBITS
1. (a) Articles of Incorporation, as amended on May 12, 1992,
incorporated by reference to Exhibit No. 1 to Amendment No. 2 to the
Registration Statement on Form N-1A (file No. 33-42391) filed on June
4, 1992.
(b) Form of Amended and Restated Articles of Incorporation.*
2. By-Laws of the Registrant.*
3. Not Applicable.
4. (a) Specimen stock certificate (Class A Shares), incorporated by
reference to Exhibit No. 4(a) to the Registration Statement on Form
N-1A (file No. 33-42391) filed on August 20, 1991.
(b) Specimen stock certificate (Class B Shares), incorporated by
reference to Exhibit No. 4(b) to the Registration Statement on Form
N-1A (file No. 33-42391) filed on August 20, 1991.
(c) Instruments defining rights of shareholders, incorporated by
reference to Exhibit 4(c) to Post-Effective Amendment No. 2 to the
Registration Statement on form N-1A filed via EDGAR on December 30,
1993 (file No. 33-42391).
5. (a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc., incorporated by reference to Exhibit No. 5(a)
to Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (file No. 33-42391) filed on December 31, 1992.
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, incorporated by
reference to Exhibit No. 5(b) to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-1A (file No. 33-42391) filed on
December 31, 1992.
C-1
<PAGE>
6. (a)(i) Distribution Agreement between the Registrant and Prudential
Mutual Fund Distributors, Inc. for the Class A shares dated July 1,
1993, incorporated by reference to Exhibit 6(a)(ii) to Post-Effective
Amendment No. 2 to the Registration Statement on form N-1A filed via
EDGAR on December 30, 1993 (file No. 33-42391).
(b)(i) ]Distribution Agreement between the Registrant and Prudential
Securities Incorporated for the Class B shares dated July 1, 1993,
incorporated by reference to Exhibit 6(b)(ii) to Post-Effective
Amendment No. 2 to the Registration Statement on form N-1A filed via
EDGAR on December 30, 1993 (file No. 33-42391).
(c) Selected Dealer Agreement, incorporated by reference to Exhibit
No. 6(c) to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (file No. 33-42391) filed on December 31,
1992.
(d) Form of Distribution and Service Agreement for Class A shares.*
(e) Form of Distribution and Service Agreement for Class B shares.*
(f) Form of Distribution and Service Agreement for Class C shares.*
7. Not Applicable.
8. Custodian Contract between the Registrant and State Street Bank and
Trust Company, incorporated by reference to Exhibit No. 8 to
Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (file No. 33-42391) filed on December 31, 1992.
9. Transfer Agency and Service Agreement between Registrant and
Prudential Mutual Fund Services, Inc., incorporated by reference to
Exhibit No. 9 to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (file No. 33-42391) filed on December 31,
1992.
10. Opinion of Shereff, Friedman, Hoffman & Goodman, incorporated by
reference to Exhibit No. 10 to Amendment No. 1 to the Registration
Statement on Form N-1A (file No. 33-42391) filed on May 8, 1992.
11. Consent of Independent Accountants.*
12. Not Applicable.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares dated July
1, 1993, incorporated by reference to Exhibit 15(a)(ii) to
Post-Effective Amendment No. 2 to the Registration Statement on form
N-1A filed via EDGAR on December 30, 1993 (file No. 33-42391).
(b)(i) Distribution and Service Plan for Class B shares dated July
1, 1993, incorporated by reference to Exhibit 15(b)(ii) to
Post-Effective Amendment No. 2 to the Registration Statement on form
N-1A filed via EDGAR on December 30, 1993 (file No. 33-42391)..
(c) Form of Distribution and Service Plan for Class A shares.*
(d) Form of Distribution and Service Plan for Class B shares.*
(e) Form of Distribution and Service Plan for Class C shares.*
16. (a) Schedule of Computation of Performance Quotations, incorporated
by reference to Exhibit No 16 to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-1A (file No. 33-42391) filed on
December 31, 1992.
- ---------------
* Filed herewith.
C-2
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1994, there were 4,949 and 11,162 record holders of Class A
and Class B shares, respectively, of common stock, $.001 par value per share, of
the Registrant.
ITEM 27. INDEMNIFICATION
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Article VII of the Fund's By-Laws (Exhibit 2 to
the Registration Statement), officers, directors, employees and agents of the
Registrant will not be liable to the Registrant, any stockholder, officer,
director, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 2-418 of Maryland General Corporation Law permits indemnification of
directors who acted in good faith and reasonably believed that the conduct was
in the best interest of the Registrant. As permitted by Section 17(i) of the
1940 Act, pursuant to Section 10 of each Distribution Agreement (Exhibits 6(a)
and 6(b) to the Registration Statement), the Distributor of the Registrant may
be indemnified against liabilities which may incur, except liabilities arising
from bad faith, gross negligence, willful misfeasance or reckless disregard of
duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and each Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
C-3
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Prudential Mutual Fund Management, Inc.
See "How the Fund is Managed--Manager" in the Prospectus constituting Part
A of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed in October 1993).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE><CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- --------------------------- ------------------------ ----------------------------------------------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice President Executive Vice President and Director of Marketing, PMF
and Director of
Marketing
John D. Brookmeyer, Jr. Two Director Senior Vice President, The Prudential Insurance Company of
Gateway Center Newark, NJ America (Prudential); Senior Vice President, PIC
07102
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities
Fred A. Fiandaca Raritan Executive Vice Executive Vice President, Chief Operating Officer and
Plaza One Edison, NJ 08847 President, Chief Director, PMF; Chairman, Chief Operating Officer and
Operating Officer and Director, Prudential Mutual Fund Services, Inc.
Director
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and Secretary,
President, General PMF; Senior Vice President, Prudential Securities
Counsel and Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Administrative Officer,
President, Chief Chief Financial Officer and Director, PMF; Senior Vice
Administrative Officer, President, Prudential Securities
Chief Financial Officer,
and Director
Eugene B. Heimberg Director Senior Vice President, Prudential, President, Director and
Prudential Plaza Newark, NJ Chief Investment Officer, PIC
07101
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President and Director, Prudential
Securities; Director, Prudential Securities Group (PSG)
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF;
Executive Officer and Executive Vice President, Director and Member of
Director Operating Committee, Prudential Securities; Director,
PSG
</TABLE>
C-4
<PAGE>
<TABLE><CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- --------------------------- ------------------------ ----------------------------------------------------------
<S> <C> <C>
S. Jane Rose Senior Vice President, Senior Vice President, Senior Counsel and Assistant
Senior Counsel and Secretary, PMF; Senior Vice President and Senior
Assistant Secretary Counsel, Prudential Securities
Donald G. Southwell 213 Director Senior Vice President, Prudential; Director, PSG
Washington Street Newark,
NJ 07102
</TABLE>
(b) Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Subadviser" in the Prospectus constituting
Part A of this Registration Statement and "Subadviser" in the Statement of
Additional Information constituting Part B of this Registration Statement.
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, NJ 07101.
<TABLE><CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- --------------------------- ------------------------ ----------------------------------------------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President Senior Vice President, Chief Financial Officer and Chief
Chief Financial Officer Compliance Officer, PIC; Vice President, Prudential
and Chief Compliance
Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice President,
Two Gateway Center PIC
Newark NJ 07102
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice President,
Two Gateway Center PIC
Newark, NJ 07102
Eugene B. Heimberg President, Director and Senior Vice President, Prudential; President, Director and
Chief Investment Officer Chief Investment Officer, PIC
Garnett L. Keith, Jr. Director Vice Chairman and Director, Prudential; Director, PIC
Harry E. Knapp, Jr. Vice President Vice President, Prudential; Vice President, PIC
Four Gateway Center
Newark, NJ 07102
William P. Link Senior Vice President Executive Vice President, Prudential; Senior Vice
Four Gateway Center President, PIC
Newark, NJ 07102
Robert E. Riley Executive Vice President Executive Vice President, Prudential; Executive Vice
800 Boylston Ave President, PIC; Director, PSG
Boston, MA 02199
James W. Stevens Executive Vice Executive Vice President, Prudential; Executive Vice
Four Gateway Center President President, PIC; Director, PSG
Newark, NJ 07102
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 President Vice President, Prudential; Executive Vice President, PIC
</TABLE>
C-5
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a)(i) Prudential Securities
Prudential Securities is distributor for Prudential Government Securities
Trust (Intermediate Term Series), The Target Portfolio Trust and for Class B
shares of Prudential Adjustable Rate Securities Fund, Inc., The BlackRock
Government Income Trust, Prudential California Municipal Fund and (California
Series), 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
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 Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund,
Inc., Prudential Municipal Bond Fund, Prudential Municipal Series Fund (except
Connecticut Money Market Series, Massachusetts Money Market Series, New York
Money Market Series, New Jersey Money Market Series and Florida Series),
Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential National
Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential Short-Term
Global Income Fund, Inc., Prudential U.S. Government Fund, Prudential-Bache
Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global Utility Fund, Inc.
and Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund).
Prudential Securities is also a depositor for the following unit investment
trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Inc. is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series and California Income
Series and Class A shares of the California Series), Prudential Government
Securities Trust (Money Market Series and U.S. Treasury Money Market Series),
Prudential-Bache MoneyMart Assets (d/b/a Prudential MoneyMart Assets),
Prudential Municipal Series Fund (Connecticut Money Market Series, Massachusetts
Money Market Series, New York Money Market Series, New Jersey Money Market
Series and Florida Series), Prudential Institutional Liquidity Portfolio, Inc.,
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), and for Class A shares of Prudential Adjustable
Rate Securities Fund, Inc., The BlackRock Government Income Trust, Prudential
California Municipal Fund (California Series), 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 Growth
C-6
<PAGE>
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
Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series Fund (Arizona
Series, Georgia Series, Maryland Series, Massachusetts Series, Michigan Series,
Minnesota Series, New Jersey Series, North Carolina Series, Ohio Series and
Pennsylvania Series), Prudential-Bache National Municipals Fund, Inc. (d/b/a
Prudential National Municipals Fund), Prudential Pacific Growth Fund, Inc.,
Prudential Short-Term Global Income Fund, Inc., Prudential U.S. Government Fund
and Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc., and Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund).
(b)(i) Information concerning the directors and officers of Prudential
Securities Incorporated is set forth below.
<TABLE><CAPTION>
POSITIONS AND
OFFICES WITH
NAME(1) POSITIONS AND OFFICES WITH UNDERWRITER REGISTRANT
- ---------------------------------------------- ---------------------------------------------- -----------------
<S> <C> <C>
Alan D. Hogan................................. Executive Vice President, Chief Administrative None
Officer and Director
Howard A. Knight.............................. Executive Vice President, Director, Corporate None
Strategy and New Business Development
George A. Murray.............................. Executive Vice President and Director None
John P. Murray................................ Executive Vice President and Director of Risk None
Management
Leland B. Paton............................... Executive Vice President and Director None
Richard A. Redeker............................ Director Director
Hardwick Simmons.............................. Chief Executive Officer, President and None
Director
Lee Spencer................................... Interim General Counsel None
</TABLE>
(ii) Information concerning the directors and officers of Prudential Mutual
Fund Distributors, Inc., is set forth below.
<TABLE>
<S> <C> <C>
Joanne Accurso-Soto........................... Vice President None
Dennis Annarumma.............................. Vice President, Assistant Treasurer and None
Assistant Comptroller
Phyllis J. Berman............................. Vice President None
Fred A. Fiandaca.............................. President, Chief Executive Officer and None
Raritan Plaza One Director
Edison, NJ 08847
Stephen P. Fisher............................. Vice President None
Frank W. Giordano............................. Executive Vice President, General Counsel, None
Secretary and Director
Robert F. Gunia............................... Executive Vice President, Treasurer, Vice President
Comptroller and Director
Andrew J. Varley.............................. Vice President None
Anita L. Whelan............................... Vice President and Assistant Secretary None
</TABLE>
- ---------------
(1) The address of each person named is One Seaport Plaza, New York, NY 10292
unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
C-7
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and Trust Company, One Heritage Drive, North
Quincy, Massachusetts, The Prudential Investment Corporation, Prudential Plaza,
745 Broad Street, Newark, New Jersey, the Registrant, One Seaport Plaza, New
York, New York, and Prudential Mutual Fund Services, Inc., Raritan Plaza One,
Edison, New Jersey. Documents required by Rules 31a-1(b)(5), (6), (7), (9), (10)
and (11) and 31a-1(f) will be kept at Three Gateway Center, documents required
by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One Seaport Plaza and the
remaining accounts, books and other documents required by such other pertinent
provisions of Section 31(a) and the Rules promulgated thereunder will be kept by
State Street Bank and Trust Company and Prudential Mutual Fund Services, Inc.
ITEM 31. MANAGEMENT SERVICES
Other than as set forth under the captions "How the Fund is
Managed--Manager" and "How the Fund is Managed--Distributor" in the Prospectus
and the captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 5th day of May, 1994.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
/s/ LAWRENCE C. MCQUADE
......................................
(Lawrence C. McQuade, President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE><CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ------------------------------------------- ---------------
<S> <C> <C>
/s/ LAWRENCE C. MCQUADE President and Director
.................................................
Lawrence C. McQuade May 5, 1994
/s/ STEPHEN C. EYRE Director
.................................................
Stephen C. Eyre May 5, 1994
/s/ DELAYNE D. GOLD Director
.................................................
Delayne D. Gold May 5, 1994
/s/ DAN G. HOFF Director
.................................................
Dan G. Hoff May 5, 1994
/s/ HARRY A. JACOBS, JR. Director
.................................................
Harry A. Jacobs, Jr. May 5, 1994
/s/ SIDNEY R. KNAFEL Director
.................................................
Sidney R. Knafel May 5, 1994
/s/ ROBERT E. LABLANC Director
.................................................
Robert E. LaBlanc May 5, 1994
/s/ THOMAS A. OWENS, JR. Director
.................................................
Thomas A. Owens, Jr. May 5, 1994
/s/ RICHARD A. REDEKER Director
.................................................
Richard A. Redeker May 5, 1994
/s/ CLAY T. WHITEHEAD Director
.................................................
Clay T. Whitehead May 5, 1994
/s/ SUSAN C. COTE Treasurer, Principal Financial and
................................................. Accounting Officer
Susan C. Cote May 5, 1994
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
1. (a) Articles of Incorporation, as amended on May 12, 1992, incorporated by reference to Exhibit
No. 1 to Amendment No. 2 to the Registration Statement on Form N-1A (file No. 33-42391) filed
on June 4, 1992.
(b) Form of Amended and Restated Articles of Incorporation.*
2. By-Laws of the Registrant.*
3. Not Applicable.
4. (a) Specimen stock certificate (Class A Shares), incorporated by reference to Exhibit No. 4(a)
to the Registration Statement on Form N-1A (file No. 33-42391) filed on August 20, 1991.
(b) Specimen stock certificate (Class B Shares), incorporated by reference to Exhibit No. 4(b)
to the Registration Statement on Form N-1A (file No. 33-42391) filed on August 20, 1991.
(c) Instruments defining rights of shareholders, incorporated by reference to Exhibit 4(c) to
Post-Effective Amendment No. 2 to the Registration Statement on form N-1A filed via EDGAR on
December 30, 1993 (file No. 33-42391).
5. (a) Management Agreement between the Registrant and Prudential Mutual Fund Management, Inc.,
incorporated by reference to Exhibit No. 5(a) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (file No. 33-42391) filed on December 31, 1992.
(b) Subadvisory Agreement between Prudential Mutual Fund Management, Inc. and The Prudential
Investment Corporation, incorporated by reference to Exhibit No. 5(b) to Post-Effective
Amendment No. 1 to the Registration Statement on Form N-1A (file No. 33-42391) filed on
December 31, 1992.
6. (a)(i) Distribution Agreement between the Registrant and Prudential Mutual Fund Distributors,
Inc. for the Class A shares dated July 1, 1993, incorporated by reference to Exhibit 6(a)(ii)
to Post-Effective Amendment No. 2 to the Registration Statement on form N-1A filed via EDGAR on
December 30, 1993 (file No. 33-42391).
(b)(i) ]Distribution Agreement between the Registrant and Prudential Securities Incorporated
for the Class B shares dated July 1, 1993, incorporated by reference to Exhibit 6(b)(ii) to
Post-Effective Amendment No. 2 to the Registration Statement on form N-1A filed via EDGAR on
December 30, 1993 (file No. 33-42391).
(c) Selected Dealer Agreement, incorporated by reference to Exhibit No. 6(c) to Post-Effective
Amendment No. 1 to the Registration Statement on Form N-1A (file No. 33-42391) filed on
December 31, 1992.
(d) Form of Distribution and Service Agreement for Class A shares.*
(e) Form of Distribution and Service Agreement for Class B shares.*
(f) Form of Distribution and Service Agreement for Class C shares.*
7. Not Applicable.
8. Custodian Contract between the Registrant and State Street Bank and Trust Company, incorporated
by reference to Exhibit No. 8 to Post-Effective Amendment No. 1 to the Registration Statement
on Form N-1A (file No. 33-42391) filed on December 31, 1992.
9. Transfer Agency and Service Agreement between Registrant and Prudential Mutual Fund Services,
Inc., incorporated by reference to Exhibit No. 9 to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (file No. 33-42391) filed on December 31, 1992.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10. Opinion of Shereff, Friedman, Hoffman & Goodman, incorporated by reference to Exhibit No. 10 to
Amendment No. 1 to the Registration Statement on Form N-1A (file No. 33-42391) filed on May 8,
1992.
11. Consent of Independent Accountants.*
12. Not Applicable.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares, dated July 1, 1993 incorporated by
reference to Exhibit 15(a)(ii) to Post-Effective Amendment No. 2 to the Registration Statement
on form N-1A filed via EDGAR on December 30, 1993 (file No. 33-42391).
(b)(i) Amended and Restated Distribution and Service Plan for Class B shares dated July 1,
1993, incorporated by reference to Exhibit 15(b)(ii) to Post-Effective Amendment No. 2 to the
Registration Statement on form N-1A filed via EDGAR on December 30, 1993 (file No. 33-42391).
(c) Form of Distribution and Service Plan for Class A shares.*
(d) Form of Distribution and Service Plan for Class B shares.*
(e) Form of Distribution and Service Plan for Class C shares.*
16. (a) Schedule of Computation of Performance Quotations, incorporated by reference to Exhibit No
16 to Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A (file No.
33-42391) filed on December 31, 1992.
</TABLE>
- ---------------
* Filed herewith.
EXHIBIT 99.1(b)
PRUDENTIAL PACIFIC GROWTH FUND, INC.
FORM OF
ARTICLES OF AMENDMENT AND RESTATEMENT
Prudential Pacific Growth Fund, Inc., a Maryland
corporation, having its principal office in the city of
Baltimore, (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of
Maryland, that:
FIRST: The Corporation desires to amend and restate its
charter as currently in effect, such amendment and restatement to
be effective on [ ], 1994, and the charter of the
Corporation is amended by deleting Articles I through VIII in
their entirety and substituting new Articles I through VIII, and,
as so amended, is restated as follows:
"ARTICLE I.
The name of the corporation (hereinafter called the
"Corporation") is Prudential Pacific Growth Fund, Inc.
ARTICLE II.
Purposes
--------
The purpose for which the Corporation is formed is to act as
an open-end investment company of the management type registered
as such with the Securities and Exchange Commission pursuant to
the Investment Company Act of 1940, as amended (the "Investment
Company Act") and to exercise and generally to enjoy all of the
powers, rights and privileges granted to, or conferred upon,
corporations by the General Laws of the State of Maryland now or
hereinafter in force.
<PAGE>
ARTICLE III.
Address in Maryland
-------------------
The post office address of the place at which the principal
office of the Corporation in the State of Maryland is located is
c/o CT Corporation System, 32 South Street Baltimore, Maryland
21202.
The name of the Corporation's resident agent is The
Corporation Trust Incorporated, and its post office address is 32
South Street, Baltimore Maryland 21202. Said resident agent is a
corporation of the State of Maryland.
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 666,666,666 2/3 shares of Class A Common
Stock, 666,666,666 2/3 shares of Class B Common Stock and
666,666,666 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
<PAGE>
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
purchased 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
<PAGE>
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.
(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 the 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 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
<PAGE>
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.
Section 2. The Board of Directors may, in its discretion,
classify and reclassify any unissued shares of the capital stock
of the Corporation into one or more additional or other classes
or series by setting or changing in any one or more respects the
designations, conversion or other rights, restrictions,
limitations as to dividends, qualifications or terms or
conditions of redemption of such shares and pursuant to such
classification or reclassification to increase or decrease the
number of authorized shares of any existing class or series. If
designated by the Board of Directors, particular classes or
series of capital stock may relate to separate portfolios of
investments.
Section 3. Unless otherwise expressly provided in the
charter of the Corporation, including any Articles Supplementary
creating any class or series of capital stock, the holders of
each class and series of capital stock of the Corporation shall
be entitled to dividends and distributions in such amounts and at
such times as may be determined by the Board of Directors, and
the dividends and
<PAGE>
distributions paid with respect to the various classes or series
of capital stock may vary among such classes or series. Expenses
related to the distribution of, and other identified expenses
that should properly be allocated to, the shares of a particular
class or series of capital stock may be charged to and borne
solely by such class or series and the bearing of expenses solely
by a class or series may be appropriately reflected (in a manner
determined by the Board of Directors) and cause differences in
the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the shares of each such class or
series of capital stock.
Section 4. Unless otherwise expressly provided in the
charter of the Corporation, including any Articles Supplementary
creating any class or series of capital stock, on each matter
submitted to a vote of stockholders, each holder of a share of
capital stock of the Corporation shall be entitled to one vote
for each share standing in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all
shares of all classes and series shall vote together as a single
class; provided, however, that (a) as to any matter with respect
to which a separate vote of any class or series is required by
the Investment Company Act of 1940, as amended, and in effect
from time to time, or any rules, regulations or orders issued
thereunder, or by the Maryland General Corporation Law, such
requirement as to a separate vote by that class or series shall
apply in lieu of a general vote of all classes and series as
described above; (b) in the event that the separate vote
requirements referred to in (a)
<PAGE>
above apply with respect to one or more classes or series, then
subject to paragraph (c) below, the shares of all other classes
and series not entitled to a separate vote shall vote together as
a single class; and (c) as to any matter which in the judgment of
the Board of Directors (which shall be conclusive) does not
affect the interest of a particular class or series, such class
or series shall not be entitled to any vote and only the holders
of shares of the one or more affected classes and series shall be
entitled to vote.
Section 5. Unless otherwise expressly provided in the
charter of the Corporation, including any Articles Supplementary
creating any class or series of capital stock, in the event of
any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, holders of shares of capital
stock of the Corporation shall be entitled, after payment or
provision for payment of the debts and other liabilities of the
Corporation (as such liabilities may affect one or more of the
classes of shares of capital stock of the Corporation), to share
ratably in the remaining net assets of the Corporation; provided,
however, that in the event the capital stock of the Corporation
shall be classified or reclassified into series, holders of any
shares of capital stock within such series shall be entitled to
share ratably out of assets belonging to such series pursuant to
the provisions of Section 7(c) of this Article IV.
Section 6. Each share of any class of the capital stock of
the Corporation, and in the event the capital stock of the
Corporation shall be classified or reclassified into series, each
<PAGE>
share of any class of capital stock of the Corporation within
such series shall be subject to the following provisions:
(a) The net asset value of each outstanding share
of capital stock of the Corporation (or of a class or
series, in the event the capital stock of the
Corporation shall be so classified or reclassified into
series), subject to subsection (b) of this Section 6,
shall be the quotient obtained by dividing the value of
the net assets of the Corporation (or the net assets of
the Corporation attributable or belonging to that class
or series as designated by the Board of Directors
pursuant to Articles Supplementary) by the total number
of outstanding shares of capital stock of the
Corporation (or of such class or series, in the event
the capital stock of the Corporation shall be
classified or reclassified into series). Subject to
subsection (b) of this Section 6, the value of the net
assets of the Corporation (or of such class or series,
in the event the capital stock of the Corporation shall
be classified or reclassified into series) shall be
determined pursuant to the procedures or methods (which
procedures or methods, in the event the capital stock
of the Corporation shall be classified or reclassified
into series, may differ from class to class or from
series to series) prescribed or approved by the Board
of Directors in its discretion, and shall be determined
at the time or times (which time or times may, in the
event the capital stock of the Corporation shall be
classified into classes
<PAGE>
or series, differ from series to series) prescribed or approved
by the Board of Directors in its discretion. In addition,
subject to subsection (b) of this Section 6, the Board of
Directors, in its discretion, may suspend the daily determination
of net asset value of any share of any series or class of capital
stock of the Corporation.
(b) The net asset value of each share of the
capital stock of the Corporation or any class or series
thereof shall be determined in accordance with any
applicable provision of the Investment Company Act, any
applicable rule, regulation or order of the Securities
and Exchange Commission thereunder, and any applicable
rule or regulation made or adopted by any securities
association registered under the Securities Exchange
Act of 1934.
(c) All shares now or hereafter authorized shall
be subject to redemption and redeemable at the option
of the stockholder pursuant to the applicable
provisions of the Investment Company Act and laws of
the State of Maryland, including any applicable rules
and regulations thereunder. Each holder of a share of
any class or series, upon request to the Corporation
(if such holder's shares are certificated, such request
being accompanied by surrender of the appropriate stock
certificate or certificates in proper form for
transfer), shall be entitled to require the Corporation
to redeem all or any
<PAGE>
part of such shares outstanding in the name of such
holder on the books of the Corporation (or as represented by
share certificates surrendered to the Corporation by such
redeeming holder) at a redemption price per share determined in
accordance with subsection (a) of this Section 6.
(d) Notwithstanding subsection (c) of this
Section 6, the Board of Directors of the Corporation
may suspend the right of the holders of shares of any
or all classes or series of capital stock to require
the Corporation to redeem such shares or may suspend
any purchase of such shares:
(i) for any period (A) during which the New York
Stock Exchange is closed, other than customary weekend
and holiday closings, or (B) during which trading on
the New York Stock Exchange is restricted;
(ii) for any period during which an emergency, as
defined by the rules of the Securities and Exchange
Commission or any successor thereto, exists as a result
of which (A) disposal by the Corporation of securities
owned by it and belonging to the affected series of
capital stock (or the Corporation, if the shares of
capital stock of the Corporation have not been
classified or reclassified into series) is not
reasonably practicable, or (B) it is not reasonably
practicable for the Corporation fairly to determine the
value of the net assets of the affected series of
capital stock; or
<PAGE>
(iii) for such other periods as the Securities
and Exchange Commission or any successor thereto may by
order permit for the protection of the holders of
shares of capital stock of the Corporation.
(e) All shares of the capital stock of the
Corporation now or hereafter authorized shall be
subject to redemption and redeemable at the option of
the Corporation. The Board of Directors may by
resolution from time to time authorize the Corporation
to require the redemption of all or any part of the
outstanding shares of any class or series upon the
sending of written notice thereof to each holder whose
shares are to be redeemed and upon such terms and
conditions as the Board of Directors, in its
discretion, shall deem advisable, out of funds legally
available therefor, at the net asset value per share of
that class or series determined in accordance with
subsections (a) and (b) of this Section 6 and take all
other steps deemed necessary or advisable in connection
therewith.
(f) The Board of Directors may by resolution from
time to time authorize the purchase by the Corporation,
either directly or through an agent, of shares of any
class or series of the capital stock of the Corporation
upon such terms and conditions and for such
consideration as the Board of Directors, in its
discretion, shall deem advisable out of funds legally
available therefor at prices per share not in excess of
the net asset value per
<PAGE>
share of that class or series determined in accordance with
subsections (a) and (b) of this Section 6 and to take all other
steps deemed necessary or advisable in connection therewith.
(g) Except as otherwise permitted by the
Investment Company Act, payment of the redemption price
of shares of any class or series of the capital stock
of the Corporation surrendered to the Corporation for
redemption pursuant to the provisions of subsection (c)
of this Section 6 or for purchase by the Corporation
pursuant to the provisions of subsection (e) or (f) of
this Section 6 shall be made by the Corporation within
seven days after surrender of such shares to the
Corporation for such purpose. Any such payment may be
made in whole or in part in portfolio securities or in
cash, as the Board of Directors, in its discretion,
shall deem advisable, and no stockholder shall have the
right, other than as determined by the Board of
Directors, to have his or her shares redeemed in
portfolio securities.
(h) In the absence of any specification as to the
purposes for which shares are redeemed or repurchased
by the Corporation, all shares so redeemed or
repurchased shall be deemed to be acquired for
retirement in the sense contemplated by the laws of the
State of Maryland. Shares of any class or series
retired by repurchase or redemption shall thereafter
have the status of authorized but unissued shares of
such class or series.
<PAGE>
Section 7. In the event the Board of Directors shall
authorize the classification or reclassification of shares into
classes or series, the Board of Directors may (but shall not be
obligated to) provide that each class or series shall have the
following powers, preferences and voting or other special rights,
and the qualifications, restrictions and limitations thereof
shall be as follows:
(a) All consideration received by the Corporation
for the issue or sale of shares of capital stock of
each series, together with all income, earnings,
profits, and proceeds received thereon, including any
proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the series with
respect to which such assets, payments or funds were
received by the Corporation for all purposes, subject
only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation.
Such assets, payments and funds, including any proceeds
derived from the sale, exchange or liquidation thereof,
and any assets derived from any reinvestment of such
proceeds in whatever form the same may be, are herein
referred to as "assets belonging to" such series.
(b) The Board of Directors may from time to time
declare and pay dividends or distributions, in
additional shares of capital stock of such series or in
cash, on any
<PAGE>
or all series of capital stock, the amount of such dividends and
the means of payment being wholly in the discretion of the Board
of Directors.
(i) Dividends or distributions on shares of any
series shall be paid only out of earned surplus or
other lawfully available assets belonging to such
series.
(ii) Inasmuch as one goal of the Corporation is
to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended, or any
successor or comparable statute thereto, and
Regulations promulgated thereunder, and inasmuch as the
computation of net income and gains for federal income
tax purposes may vary from the computation thereof on
the books of the Corporation, the Board of Directors
shall have the power, in its discretion, to distribute
in any fiscal year as dividends, including dividends
designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of
the Board of Directors, to enable the Corporation to
qualify as a regulated investment company and to avoid
liability for the Corporation for federal income tax in
respect of that year. In furtherance, and not in
limitation of the foregoing, in the event that a series
has a net capital loss for a fiscal year, and to the
extent that the net capital loss offsets net capital
gains from such series, the amount to be deemed
available for distribution to that series with the net
capital gain may be reduced by the amount offset.
<PAGE>
(c) In the event of the liquidation or
dissolution of the Corporation, holders of shares of
capital stock of each series shall be entitled to
receive, as a series, out of the assets of the
Corporation available for distribution to such holders,
but other than general assets not belonging to any
particular series, the assets belonging to such series;
and the assets so distributable to the holders of
shares of capital stock of any series shall be
distributed, subject to the provisions of subsection
(d) of this Section 7, among such stockholders in
proportion to the number of shares of such series held
by them and recorded on the books of the Corporation.
In the event that there are any general assets not
belonging to any particular series and available for
distribution, such distribution shall be made to the
holders of all series in proportion to the net asset
value of the respective series determined in accordance
with the charter of the Corporation.
(d) The assets belonging to any series shall be
charged with the liabilities in respect to such series,
and shall also be charged with its share of the general
liabilities of the Corporation, in proportion to the
asset value of the respective series determined in
accordance with the charter of the Corporation. The
determination of the Board of Directors shall be
conclusive as to the amount of liabilities, including
accrued expenses and reserves, as to the allocation of
<PAGE>
the same as to a given series, and as to whether the same or
general assets of the Corporation are allocable to one or more
classes.
Section 8. Any fractional shares shall carry
proportionately all the rights of a whole share, excepting any
right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the
right to receive dividends.
Section 9. No holder of shares of Common Stock of the
Corporation shall, as such holder, have any pre-emptive right to
purchase or subscribe for any shares of the Common Stock of the
Corporation of any class or series which it may issue or sell
(whether out of the number of shares authorized by the Articles
of Incorporation, or out of any shares of the Common Stock of the
Corporation acquired by it after the issue thereof, or
otherwise).
Section 10. All persons who shall acquire any shares of
capital stock of the Corporation shall acquire the same subject
to the provisions of the charter and By-Laws of the Corporation.
Section 11. Notwithstanding any provisions of law requiring
action to be taken or authorized by the affirmative vote of the
holders of a designated proportion greater than a majority of the
outstanding shares of all classes or of the outstanding shares of
a particular class or classes, as the case may be, such action
shall be valid and effective if taken or authorized by the
affirmative vote of the holders of a majority of the total number
of shares of all classes or series or of the total number of
shares of such class or classes or series, as the case may be,
outstanding
<PAGE>
and entitled to vote thereupon pursuant to the provisions of
these Articles of Incorporation.
ARTICLE V.
Directors
---------
The initial number of directors of the Corporation shall be
three, and the names of those who shall act as such until the
first meeting of stockholders and until their successors are duly
elected and qualify are as follows:
Frank W. Giordano
S. Jane Rose
Deborah A. Docs
The By-Laws of the Corporation may fix the number of directors at
no less than three and may authorize the Board of Directors, by
the vote of a majority of the entire Board of Directors, to
increase or decrease the number of directors within a limit
specified in the By-Laws (provided that, if there are no shares
outstanding, the number of directors may be less than three but
not less than one), and to fill the vacancies created by any such
increase in the number of directors. Unless otherwise provided
by the By-Laws of the Corporation, the directors of the
Corporation need not be stockholders.
The By-Laws of the Corporation may divide the directors of
the Corporation into classes and prescribe the tenure of office
of the several classes; but no class shall be elected for a
period shorter than one year or for a period longer than five
years, and the term of office of at least one class shall expire
each year.
<PAGE>
ARTICLE VI.
Indemnification of Directors and Officers
-----------------------------------------
The Corporation shall indemnify to the fullest extent
permitted by law (including the Investment Company Act, as
currently in effect or as the same may hereafter be amended, any
person made or threatened to be made a party to any action, suit
or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director or officer of
the Corporation or serves or served at the request of the
Corporation any other enterprise as a director or officer. To
the fullest extent permitted by law (including the Investment
Company Act), as currently in effect or as the same may hereafter
be amended, expenses incurred by any such person in defending any
such action, suit or proceeding shall be paid or reimbursed by
the Corporation promptly upon receipt by it of an undertaking of
such person to repay such expenses if it shall ultimately be
determined that such person is not entitled to be indemnified by
the Corporation. The rights provided to any person by this
Article II shall be enforceable against the Corporation by such
person who shall be presumed to have relied upon it in serving or
continuing to serve as a director or officer as provided above.
No amendment of this Article VI shall impair the rights of any
person arising at any time with respect to events occurring prior
to such amendment. For purposes of this Article VI, the term
"Corporation" shall include any predecessor of the Corporation
and any constituent corporation (including any constituent of a
constituent) absorbed
<PAGE>
by the Corporation in a consolidation or merger; the term "other
enterprise" shall include any corporation, partnership, joint
venture, trust or employee benefit plan; service "at the request
of the Corporation" shall include service as a director or
officer of the Corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan
shall be deemed to be indemnifiable expenses; and action by a
person with respect to any employee benefit plan which such
person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be
action not opposed to the best interests of the Corporation.
ARTICLE VII.
Miscellaneous
-------------
The following provisions are inserted for the management of
the business and for the conduct of the affairs of the
Corporation, and for creating, defining, limiting and regulating
the powers of the Corporation, the directors and the
stockholders.
Section 1. The Board of Directors shall have the management
and control of the property, business and affairs of the
Corporation and is hereby vested with all the powers possessed by
the Corporation itself so far as is not inconsistent with law or
these Articles of Incorporation. In furtherance and without
limitation of the foregoing provisions, it is expressly declared
that, subject to these Articles of Incorporation, the Board of
Directors shall have power:
<PAGE>
(a) To make, alter, amend or repeal from time to time
the By-Laws of the Corporation except as such power may
otherwise be limited in the By-Laws.
(b) To issue shares of any class or series of the
capital stock of the Corporation.
(c) To authorize the purchase of shares of any class
or series in the open market or otherwise, at prices not in
excess of their net asset value for shares of that class,
series or class within such series determined in accordance
with subsections (a) and (b) of Section 6 of Article IV
hereof, provided that the Corporation has assets legally
available for such purpose, and to pay for such shares in
cash, securities or other assets then held or owned by the
Corporation.
(d) To declare and pay dividends and distributions
from funds legally available therefor on shares of such
class or series, in such amounts, if any, and in such manner
(including declaration by means of a formula or other
similar method of determination whether or not the amount of
the dividend or distribution so declared can be calculated
at the time of such declaration) and to the holders of
record as of such date, as the Board of Directors may
determine.
(e) To take any and all action necessary or
appropriate to maintain a constant net asset value per share
for shares of any class, series or class within such series.
Section 2. Any determination made in good faith and, so far
as accounting matters are involved, in accordance with generally
<PAGE>
accepted accounting principles applied by or pursuant to the
direction of the Board of Directors or as otherwise required or
permitted by the Securities and Exchange Commission, shall be
final and conclusive, and shall be binding upon the Corporation
and all holders of shares, past, present and future, of each
class or series, and shares are issued and sold on the condition
and undertaking, evidenced by acceptance of certificates for such
shares by, or confirmation of such shares being held for the
account of, any stockholder, that any and all such determinations
shall be binding as aforesaid.
Nothing in this Section 2 shall be construed to protect any
director or officer of the Corporation against liability to the
Corporation or its stockholders to which such director or officer
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Section 3. The directors of the Corporation may receive
compensation for their services, subject, however, to such
limitations with respect thereto as may be determined from time
to time by the holders of shares of capital stock of the
Corporation.
Section 4. Except as required by law, the holders of shares
of capital stock of the Corporation shall have only such right to
inspect the records, documents, accounts and books of the
Corporation as may be granted by the Board of Directors of the
Corporation.
Section 5. Any vote of the holders of shares of capital
stock of the Corporation authorizing liquidation of the
Corporation or
<PAGE>
proceedings for its dissolution may authorize the Board of
Directors to determine, as provided herein, or if provision is
not made herein, in accordance with generally accepted accounting
principles, which assets are the assets belonging to the
Corporation or any series thereof available for distribution to
the holders of shares of capital stock of the Corporation or any
series thereof (pursuant to the provisions of Section 7 of
Article IV hereof) and may divide, or authorize the Board of
Directors to divide, such assets among the stockholders of the
shares of capital stock of the Corporation or any series thereof
in such manner as to ensure that each such holder receives an
amount from the proceeds of such liquidation or dissolution that
such holder is entitled to, as determined pursuant to the
provisions of Sections 3 and 7 of Article IV hereof.
ARTICLE VIII.
Amendments
----------
The Corporation reserves the right from time to time to
amend, alter or repeal any of the provisions of these Articles of
Incorporation (including any amendment that changes the terms of
any of the outstanding shares by classification, reclassification
or otherwise), and to add or insert any other provisions that
may, under the statutes of the State of Maryland at the time in
force, be lawfully contained in articles of incorporation, and
all rights at any time conferred upon the stockholders of the
Corporation by these Articles of Incorporation are subject to the
provisions of this Article VIII."
<PAGE>
SECOND: The provisions set forth in these Articles of
Amendment and Restatement are all of the provisions of the
Charter currently in effect.
THIRD: The Corporation currently has ten directors. The
names of the directors currently in office are as follows:
Stephen C. Eyre
Delayne D. Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. LaBlanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
FOURTH: (a) As of immediately before the Amendment, the
total number of shares of stock of all classes which the
Corporation had authority to issue was 2,000,000,000, consisting
of 1,000,000,000 shares of Class A Common Stock (par value $.01
per share) and 1,000,000,000 shares of Class B Common stock (par
value of $.01 per share).
(b) The aggregate par value of all shares having a
par value which the Corporation was authorized to issue is
$2,000,000 before the Amendment.
(c) A description of the Class A Common Stock and
Class B Common Stock is as set forth above.
FIFTH: The Corporation's principal office in the state of
Maryland is c/o CT Corporation, 32 South Street, Baltimore,
Maryland 21202. The name and address of the Corporation's
resident agent is CT Corporation, 32 South Street, Baltimore,
Maryland 21202.
<PAGE>
SIXTH: The foregoing amendment and restatement of the
Articles of Incorporation have been advised by the Board of
Directors of the Corporation.
IN WITNESS WHEREOF, PRUDENTIAL PACIFIC GROWTH FUND, INC.,
has caused these presents to be signed in its name and on its
behalf by its President and attested by its Secretary on [
], 1994.
PRUDENTIAL PACIFIC GROWTH FUND,
INC.
By
-----------------------------
Lawrence C. McQuade
President
Attest:
--------------------
S. Jane Rose
Secretary
<PAGE>
THE UNDERSIGNED, President of Prudential Pacific Growth
Fund, Inc., who executed on behalf of the Corporation the
foregoing Articles of Amendment and Restatement of which this
certificate is made a part, hereby acknowledges in the name and
on behalf of said Corporation the foregoing Articles of Amendment
and Restatement to be the corporate act of said Corporation and
hereby certifies that to the best of his knowledge, information
and belief the matters and facts set forth therein with respect
to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
------------------------
Lawrence C. McQuade
President
EXHIBIT 99.2
PRUDENTIAL PACIFIC GROWTH FUND, INC.
By-Laws
ARTICLE I.
Stockholders
------------
Section 1. Place of Meeting. All meetings of the
------------------
stockholders shall be held at the principal office of the
Corporation in the State of Maryland or at such other place
within the United States as may from time to time be designated
by the Board of Directors and stated in the notice of such
meeting.
Section 2. Annual Meetings. The annual meeting of the
---------------
stockholders of the Corporation shall be held on a date and at
such hour as may from time to time be designated by the Board of
Directors and stated in the notice of such meeting, within the
month ending four months after the end of the Corporation's
fiscal year, for the transaction of such business as may properly
be brought before the meeting; provided, however, that an annual
--------
meeting shall not be required to be held in any year in which the
election of directors is not required to be acted on by
stockholders under the Investment Company Act of 1940.
Section 3. Meetings. Meetings of the stockholders for any
--------
purpose or purposes, including for purposes of voting on the
removal of one or more Directors, may be called by the Chairman
of the Board, the President or a majority of the Board of
Directors, and shall be called by the Secretary upon receipt of
the request in writing signed by stockholders holding not less
than 10% of the common stock issued and outstanding and entitled
to vote thereat.
<PAGE>
Such request shall state the purpose or purposes of the proposed
meeting. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing such notice
of meeting and upon payment to the Corporation of such costs, the
Secretary shall give notice stating the purpose or purposes of
the meeting as required in this Article and by-law to all
stockholders entitled to notice of such meeting. No meeting need
be called upon the request of the holders of shares entitled to
cast less than a majority of all votes entitled to be cast at
such meeting to consider any matter which is substantially the
same as a matter voted upon at any meeting of stockholders held
during the preceding twelve months.
Section 4. Notice of Meetings of Stockholders. Not
------------------------------------
less than ten days' and not more than ninety days' written or
printed notice of every meeting of stockholders, stating the time
and place thereof and the general nature of the business proposed
to be transacted thereat, shall be given to each stockholder
entitled to vote thereat by leaving the same with such
stockholder or at such stockholder's residence or usual place of
business or by mailing it, postage prepaid, and addressed to such
stockholder at such stockholder's address as it appears upon the
books of the Corporation. If mailed, notice shall be deemed to
be given when deposited in the United States mail addressed to
the stockholder as aforesaid.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in
person or by proxy or to any stockholder who, in writing executed
and
<PAGE>
filed with the records of the meeting, either before or after the
holding thereof, waives such notice.
Section 5. Record Dates. The Board of Directors may fix,
------------
in advance, a date not exceeding ninety days preceding the date
of any meeting of stockholders, any dividend payment date or any
date for the allotment of rights, as a record date for the
determination of the stockholders entitled to notice of and to
vote at such meeting or entitled to receive such dividends or
rights, as the case may be; and only stockholders of record on
such date shall be entitled to notice of and to vote at such
meeting or to receive such dividends or rights, as the case may
be. In the case of a meeting of stockholders, such date shall
not be less than ten days prior to the date fixed for such
meeting.
Section 6. Quorum, Adjournment of Meetings. The presence
--------------------------------
in person or by proxy of the holders of record of one-third of
the shares of the common stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a
quorum at all meetings of the stockholders except as otherwise
provided in the Articles of Incorporation. If, however, such
quorum shall not be present or represented at any meeting of the
stockholders, the holders of a majority of the stock present in
person or by proxy shall have power to adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until stockholders owning the requisite amount of stock
entitled to vote at such meeting shall be present. At such
adjourned meeting at which stockholders owning the requisite
amount of stock entitled to vote thereat shall be represented,
any business may be transacted which
<PAGE>
might have been transacted at the meeting as originally notified.
Section 7. Voting and Inspectors. At all meetings,
-----------------------
stockholders of record entitled to vote thereat shall have one
vote for each share of common stock standing in his name on the
books of the Corporation (and such stockholders of record holding
fractional shares, if any, shall have proportionate voting
rights) on the date for the determination of stockholders
entitled to vote at such meeting, either in person or by proxy
appointed by instrument in writing subscribed by such stockholder
or his duly authorized attorney.
All elections shall be had and all questions decided by a
majority of the votes cast at a duly constituted meeting, except
as otherwise provided by statute or by the Articles of
Incorporation or by these By-Laws.
At any election of directors, the Chairman of the meeting
may, and upon the request of the holders of ten percent (10%) of
the stock entitled to vote at such election shall, appoint two
inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at
such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate
of the result of the vote taken. No candidate for the office of
director shall be appointed such inspector.
Section 8. Conduct of Stockholders' Meetings. The meetings
---------------------------------
of the stockholders shall be presided over by the Chairman of the
Board, or if he or she is not present, by the President, or if he
or she is not present, by a Vice-President, or if none of them is
<PAGE>
present, by a Chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as a
Secretary of such meetings, or if he or she is not present, an
Assistant Secretary shall so act; if neither the Secretary nor
the Assistant Secretary is present, then the meeting shall elect
its Secretary.
Section 9. Concerning Validity of Proxies, Ballots, etc. At
---------------------------------------------
every meeting of the stockholders, all proxies shall be received
and taken in charge of and all ballots shall be received and
canvassed by the Secretary of the meeting, who shall decide all
questions concerning the qualification of voters, the validity of
the proxies and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed by the Chairman
of the meeting, in which event such inspectors of election shall
decide all such questions.
ARTICLE II.
Board of Directors
------------------
Section 1. Number and Tenure of Office. The business and
----------------------------
affairs of the Corporation shall be conducted and managed by a
Board of Directors of not less than three nor more than twelve
directors, as may be determined from time to time by vote of a
majority of the directors then in office, provided that if there
is no stock outstanding the number of directors may be less than
three but not less than one. Directors need not be stockholders.
<PAGE>
Section 2. Vacancies. In case of any vacancy in the Board
---------
of Directors through death, resignation or other cause, other
than an increase in the number of directors, a majority of the
remaining directors, although a majority is less than a quorum,
by an affirmative vote, may elect a successor to hold office
until the next meeting of stockholders or until his successor is
chosen and qualifies.
Section 3. Increase or Decrease in Number of Directors. The
-------------------------------------------
Board of Directors, by the vote of a majority of the entire
Board, may increase the number of directors and may elect
directors to fill the vacancies created by any such increase in
the number of directors until the next meeting of stockholders or
until their successors are duly chosen and qualified. The Board
of Directors, by the vote of a majority of the entire Board, may
likewise decrease the number of directors to a number not less
than three.
Section 4. Place of Meeting. The directors may hold their
----------------
meetings, have one or more offices, and keep the books of the
Corporation, outside the State of Maryland, at any office or
offices of the Corporation or at any other place as they may from
time to time by resolution determine, or in the case of meetings,
as they may from time to time by resolution determine or as shall
be specified or fixed in the respective notices or waivers of
notice thereof.
Section 5. Regular Meetings. Regular meetings of the Board
----------------
of Directors shall be held at such time and on such notice as the
directors may from time to time determine.
Section 6. Special Meetings. Special meetings of the Board
----------------
<PAGE>
of Directors may be held from time to time upon call of the
Chairman of the Board, the President, the Secretary or two or
more of the directors, by oral or telegraphic or written notice
duly served on or sent or mailed to each director not less than
one day before such meeting. No notice need be given to any
director who attends in person or to any director who, in writing
executed and filed with the records of the meeting either before
or after the holding thereof, waives such notice. Such notice or
waiver of notice need not state the purpose or purposes of such
meeting.
Section 7. Quorum. One-third of the directors then in
------
office shall constitute a quorum for the transaction of business,
provided that a quorum shall in no case be less than two
directors. If at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn
the meeting from time to time until a quorum shall have been
obtained. The act of the majority of the directors present at
any meeting at which there is a quorum shall be the act of the
directors, except as may be otherwise specifically provided by
statute or by the Articles of Incorporation or by these By-Laws.
Section 8. Executive Committee. The Board of Directors
--------------------
may, by the affirmative vote of a majority of the whole Board,
appoint from the directors an Executive Committee to consist of
such number of directors (not less than three) as the Board may
from time to time determine. The Chairman of the Committee shall
be elected by the Board of Directors. The Board of Directors by
such affirmative vote shall have power at any time to change the
members of such Committee and may fill vacancies in the Committee
by election from
<PAGE>
the directors. When the Board of Directors is not in session, to
the extent permitted by law, the Executive Committee shall have
and may exercise any or all of the powers of the Board of
Directors in the management of the business and affairs of the
Corporation. The Executive Committee may fix its own rules of
procedure, and may meet when and as provided by such rules or by
resolution of the Board of Directors, but in every case the
presence of a majority shall be necessary to constitute a quorum.
During the absence of a member of the Executive Committee, the
remaining members may appoint a member of the Board of Directors
to act in his place.
Section 9. Other Committees. The Board of Directors, by
----------------
the affirmative vote of a majority of the whole Board, may
appoint from the directors other committees which shall in each
case consist of such number of directors (not less than two) and
shall have and may exercise such powers as the Board may
determine in the resolution appointing them. A majority of all
the members of any such committee may determine its action and
fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall
have power at any time to change the members and powers of any
such committee, to fill vacancies and to discharge any such
committee.
Section 10. Telephone Meetings. Members of the Board of
------------------
Directors or a committee of the Board of Directors may
participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the
<PAGE>
meeting unless otherwise provided by the Investment Company Act
of 1940.
Section 11. Action Without a Meeting. Any action required
-------------------------
or permitted to be taken at any meeting of the Board of Directors
or any committee thereof may be taken without a meeting, if a
written consent to such action is signed by all members of the
Board or of such committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board
or such committee, unless otherwise provided by the Investment
Company Act of 1940.
Section 12. Compensation of Directors. No director shall
-------------------------
receive any stated salary or fees from the Corporation for his
services as such if such director is, other than by reason of
being such director, an interested person (as such term is
defined by the Investment Company Act of 1940) of the Corporation
or of its investment adviser, administrator or principal
underwriter. Except as provided in the preceding sentence,
directors shall be entitled to receive such compensation from the
Corporation for their services as may from time to time be voted
by the Board of Directors.
Section 13. Removal of Directors. No director shall
---------------------
continue to hold office after the holders of record of not less
than two-thirds of the Corporation's outstanding common stock of
all series have declared that that director be removed from
office either by declaration in writing filed with the
Corporation's secretary or by votes cast in person or by proxy at
a meeting called for the purpose. The directors shall promptly
call a
<PAGE>
meeting of stockholders for the purpose of voting upon the
question of removal of any director or directors when requested
in writing to do so by the record holders of not less than 10
percent of the Corporation's outstanding common stock of all
series.
ARTICLE III.
Officers
--------
Section 1. Executive Officers. The executive officers of
------------------
the Corporation shall be chosen by the Board of Directors. These
may include a Chairman of the Board of Directors (who shall be a
director) and shall include a President (who shall be a
director), one or more Vice-Presidents (the number thereof to be
determined by the Board of Directors), a Secretary and a
Treasurer. The Board of Directors or the Executive Committee may
also in its discretion appoint Assistant Secretaries, Assistant
Treasurers and other officers, agents and employees, who shall
have such authority and perform such duties as the Board or the
Executive Committee may determine. The Board of Directors may
fill any vacancy which may occur in any office. Any two offices,
except those of President and Vice-President, may be held by the
same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity, if such instrument is
required by law or these By-Laws to be executed, acknowledged or
verified by two or more officers.
Section 2. Term of Office. The term of office of all
---------------
officers shall be one year and until their respective successors
are chosen and qualified. Any officer may be removed from office
at any time with or without cause by the vote of a majority of
the
<PAGE>
whole Board of Directors.
Section 3. Powers and Duties. The officers of the
-------------------
Corporation shall have such powers and duties as generally
pertain to their respective offices, as well as such powers and
duties as may from time to time be conferred by the Board of
Directors or the Executive Committee.
ARTICLE IV.
Capital Stock
-------------
Section 1. Certificates for Shares. Each stockholder of
-----------------------
the Corporation shall be entitled to a certificate or
certificates for the full shares of stock of the Corporation
owned by him in such form as the Board from time to time
prescribe.
Section 2. Transfer of Shares. Shares of the Corporation
------------------
shall be transferable on the books of the Corporation by the
holder thereof in person or by his duly authorized attorney or
legal representative, upon surrender and cancellation of
certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature as
the Corporation or its agents may reasonably require; in the case
of shares not represented by certificates, the same or similar
requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the
--------------
Corporation, containing the names and addresses of the
stockholders and the number of shares held by them respectively,
shall be kept at the principal office of the Corporation or, if
the Corporation employs a Transfer Agent, at the office of the
Transfer Agent of
<PAGE>
the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. The
----------------------------------------
Board of Directors or the Executive Committee may determine the
conditions upon which a new certificate of stock of the
Corporation of any class may be issued in place of a certificate
which is alleged to have been lost, stolen or destroyed; and may,
in its discretion, require the owner of such certificate or such
owner's legal representative to give bond, with sufficient
surety, to the Corporation and each Transfer Agent, if any, to
indemnify it and each such Transfer Agent against any and all
loss or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost, stolen or destroyed.
ARTICLE V.
Corporate Seal
--------------
The Board of Directors may provide for a suitable corporate
seal, in such form and bearing such inscriptions as it may
determine.
ARTICLE VI.
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed by the
Board of Directors.
ARTICLE VII.
Indemnification
---------------
Directors, officers, employees and agents of the Corporation
shall not be liable to the Corporation, any stockholder, officer,
director, employee or other person for any action or failure to
act except for willful misfeasance, bad faith, gross negligence
or
<PAGE>
reckless disregard of the duties involved in the conduct of their
office. The Corporation shall indemnify directors, officers,
employees and agents of the Corporation against judgments, fines,
settlements and expenses to the fullest extent authorized and in
the manner permitted by applicable federal and state law. The
Corporation may purchase insurance to protect itself and its
directors, officers, employees and agents against judgments,
fines, settlements and expenses to the fullest extent authorized
and in the manner permitted by applicable federal and state law.
Nothing contained in this Article VII shall be construed to
indemnify directors, officers, employees and agents of the
Corporation against, nor to permit the Corporation to purchase
insurance that purports to protect against, any liability to the
Corporation or any stockholder, officer, director, employee,
agent or other person to whom he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office.
ARTICLE VIII.
Custodian
---------
Section 1. The Corporation shall have as custodian or
custodians one or more trust companies or banks of good standing,
each having a capital, surplus and undivided profits aggregating
not less than fifty million dollars ($50,000,000), and, to the
extent required by the Investment Company Act of 1940, the funds
and securities held by the Corporation shall be kept in the
custody of one or more such custodians, provided such custodian
or custodians can be found ready and willing to act, and further
<PAGE>
provided that the Corporation may use as subcustodians, for the
purpose of holding any foreign securities and related funds of
the Corporation, such foreign banks as the Board of Directors may
approve and as shall be permitted by law.
Section 2. The Corporation shall upon the resignation or
inability to serve of its custodian or upon change of the
custodian:
(a) in case of such resignation or inability to serve,
use its best efforts to obtain a successor custodian;
(b) require that the cash and securities owned by the
Corporation be delivered directly to the successor
custodian; and
(c) in the event that no successor custodian can be
found, submit to the stockholders before permitting delivery
of the cash and securities owned by the Corporation
otherwise than to a successor custodian, the question
whether or not this Corporation shall be liquidated or shall
function without a custodian.
ARTICLE IX.
Amendment of By-Laws
--------------------
The By-Laws of the Corporation may be altered, amended,
added to or repealed by the stockholders or by majority vote of
the entire Board of Directors; but any such alteration,
amendment, addition or repeal of the By-Laws by action of the
Board of Directors may be altered or repealed by stockholders.
EXHIBIT 99.6(d)
PRUDENTIAL PACIFIC GROWTH FUND
Form of
Distribution Agreement
(Class A Shares)
----------------
Agreement made as of _____________199_, between
Prudential Pacific Growth Fund, a Maryland Corporation (the Fund)
and Prudential Mutual Fund Distributors, Inc., a Delaware
Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as
a diversified, open-end, management investment company and it is
in the interest of the Fund to offer its Class A shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered
investment companies either directly or through other broker-
dealers;
WHEREAS, the Fund and the Distributor wish to enter
into an agreement with each other, with respect to the continuous
offering of the Fund's Class A shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class A shares; and
<PAGE>
WHEREAS, upon approval by the Class A shareholders of
the Fund it is contemplated that the Fund will adopt a plan of
distribution pursuant to Rule 12b-1 under the Investment Company
Act (the Plan) authorizing payments by the Fund to the
Distributor with respect to the distribution of Class A shares of
the Fund and the maintenance of Class A shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the
principal underwriter and distributor of the Class A shares of
the Fund to sell Class A shares to the public and the Distributor
hereby accepts such appointment and agrees to act hereunder. The
Fund hereby agrees during the term of this Agreement to sell
Class A shares of the Fund to the Distributor on the terms and
conditions set forth below.
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative
of the Fund to act as principal underwriter and distributor of
the Fund's Class A shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class A shares from the Fund shall not apply to Class A
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding
shares of any such company by the Fund.
<PAGE>
2.2 Such exclusive rights shall not apply to Class A
shares issued by the Fund pursuant to reinvestment of dividends
or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class A
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement
of Additional Information may be amended or supplemented from
time to time, and the term "Registration Statement" shall mean
the Registration Statement filed by the Fund with the Securities
and Exchange Commission and effective under the Securities Act of
1933, as amended (Securities Act), and the Investment Company
Act, as such Registration Statement is amended from time to time.
Section 3. Purchase of Class A Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from
the Fund the Class A shares needed, but not more than the Class A
shares needed (except for clerical errors in transmission) to
fill unconditional orders for Class A shares placed with the
Distributor by investors or registered and qualified securities
dealers and other financial institutions (selected dealers). The
price which the Distributor shall pay for the Class A shares so
purchased from the Fund shall be the net asset value, determined
as set forth in
<PAGE>
the Prospectus.
3.2 The Class A shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
3.3 The Fund shall have the right to suspend the sale
of its Class A shares at times when redemption is suspended
pursuant to the conditions in Section 4.3 hereof or at such other
times as may be determined by the Board of Directors. The Fund
shall also have the right to suspend the sale of its Class A
shares if a banking moratorium shall have been declared by
federal or New York authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class A shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund
will not arbitrarily or without reasonable cause refuse to accept
or confirm orders for the purchase of Class A shares. The Fund
(or its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for
such Class A shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York
Clearing House funds or federal funds. The Distributor agrees to
cause such payment and such instructions to be delivered promptly
to the Fund (or its agent).
<PAGE>
Section 4. Repurchase or Redemption of Class A Shares by the
---------------------------------------------------
Fund
----
4.1 Any of the outstanding Class A shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class A shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the
Prospectus. The price to be paid to redeem or repurchase the
Class A shares shall be equal to the net asset value determined
as set forth in the Prospectus. All payments by the Fund
hereunder shall be made in the manner set forth in Section 4.2
below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to
the instructions of the Distributor on or before the seventh
calendar day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of
Class A shares shall be paid by the Fund to or for the account of
the redeeming shareholder, in each case in accordance with
applicable provisions of the Prospectus.
4.3 Redemption of Class A shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
<PAGE>
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of
Class A shares as provided herein, the Fund agrees to sell its
Class A shares so long as it has Class A shares available.
5.2 The Fund shall furnish the Distributor copies of
all information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class A shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor
such number of copies of its Prospectus and annual and interim
reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but
subject to the necessary approval of the Board of Directors and
the shareholders, all necessary action to fix the number of
authorized Class A shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there
will be available for sale such number of Class A shares as the
Distributor reasonably may expect to sell. The Fund agrees to
file from time to time such amendments, reports and other
documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration
Statement, or necessary in order that there will be no omission
to state a material fact in the Registration Statement which
omission would make the statements therein misleading.
<PAGE>
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
A shares for sales under the securities laws of such states as
the Distributor and the Fund may approve; provided that the Fund
shall not be required to amend its Articles of Incorporation or
By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its
Class A shares in any state from the terms set forth in its
Registration Statement, to qualify as a foreign corporation in
any state or to consent to service of process in any state other
than with respect to claims arising out of the offering of its
Class A shares. Any such qualification may be withheld,
terminated or withdrawn by the Fund at any time in its
discretion. As provided in Section 9.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by
the Fund. The Distributor shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class A shares of the Fund, but shall
not be obligated to sell any specific number of Class A shares.
Sales of the Class A shares shall be on the terms described in
the Prospectus. The Distributor may enter into like arrangements
with other investment companies. The Distributor shall
compensate the selected dealers as set forth in the Prospectus.
<PAGE>
6.2 In selling the Class A shares, the Distributor
shall use its best efforts in all respects duly to conform with
the requirements of all federal and state laws relating to the
sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to
give any information or to make any representations, other than
those contained in the Registration Statement or Prospectus and
any sales literature approved by appropriate officers of the
Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected
dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements
of the National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified
securities dealers and other financial institutions of its choice
for the sale of Class A shares, provided that the Fund shall
approve the forms of such agreements. Within the United States,
the Distributor shall offer and sell Class A shares only to such
selected dealers as are members in good standing of the NASD.
Class A shares sold to selected dealers shall be for resale by
such dealers only at the offering price determined as set forth
in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any
portion of any front-end sales charge which is imposed on sales
of Class A shares and not reallocated to selected dealers as set
forth in the
<PAGE>
Prospectus, subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice. Payment of these amounts to
the Distributor is not contingent upon the adoption or
continuation of the Plan.
Section 8. Payment of the Distributor under the Plan
-----------------------------------------
8.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
and this Agreement a fee of .30 of 1% (including an asset-based
sales charge of .05 of 1% and a service fee of .25 of 1%) per
annum of the average daily net assets of the Class A shares of
the Fund. Amounts payable under the Plan shall be accrued daily
and paid monthly or at such other intervals as the 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.
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors 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 dealer
agreements with the Distributor. So long as the Plan (or any
amendment thereto) is in effect, at the request of the Board of
Directors or any agent or representative of the Fund, the
Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
<PAGE>
8.3 Expenses of distribution with respect to the Class
A shares of the Fund 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) sales commissions and 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.
<PAGE>
(d) amounts paid to, or an account of, account
executives of Prudential Securities, Prusec,
or of other broker-dealers or financial
institutions for personal service and/or the
maintenance of shareholder accounts; and
(e) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (a)
and (b) of the foregoing sentence include (i) lease expenses,
(ii) salaries and benefits of personnel including operations and
sales support personnel, (iii) utility expenses, (iv)
communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general
overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class A shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
<PAGE>
materials). The Fund shall also bear the cost of expenses of
qualification of the Class A shares for sale, and, if necessary
or advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5.4 hereof and the cost and
expense payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 5.4 hereof. As set forth in Section 8 above,
the Fund shall also bear the expenses it assumes pursuant to the
Plan with respect to Class A shares, so long as the Plan is in
effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and directors and any person who
controls the Distributor within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling
person may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or
Prospectus or arising out of or based upon any alleged omission
to state a material fact required to be stated in either thereof
or necessary to make the statements in either thereof not
misleading, except insofar as such claims, demands, liabilities
or expenses arise out
<PAGE>
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or
Prospectus; provided, however, that this indemnity agreement
shall not inure to the benefit of any such officer, director,
trustee or controlling person unless a court of competent
jurisdiction shall determine in a final decision on the merits,
that the person to be indemnified was not liable by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard
of its obligations under this Agreement (disabling conduct), or,
in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnified person was
not liable by reason of disabling conduct, by (a) a vote of a
majority of a quorum of directors or trustees who are neither
"interested persons" of the Fund as defined in Section 2(a)(19)
of the Investment Company Act nor parties to the proceeding, or
(b) an independent legal counsel in a written opinion. The Fund's
agreement to indemnify the Distributor, its officers and
directors or trustees and any such controlling person as
aforesaid is expressly conditioned upon the Fund's being promptly
notified of any action brought against the Distributor, its
officers or directors or trustees, or any such controlling
person, such notification to be given by letter or telegram
addressed to the Fund at its principal business office. The Fund
agrees promptly to notify the Distributor of the commencement of
any litigation or proceedings against it or any of
<PAGE>
its officers or directors in connection with the issue and sale
of any Class A shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of
the Securities Act, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost
of investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which the Fund, its officers and Directors or any such
controlling person may incur under the Securities Act or under
common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its Directors or
officers or such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished
in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus or shall arise out of or be
based upon any alleged omission to state a material fact in
connection with such information required to be stated in the
Registration Statement or Prospectus or necessary to make such
information not misleading. The Distributor's agreement to
indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon
the Distributor's being promptly notified of any action brought
against the Fund, its officers and Directors or any such
controlling person, such notification being given to the
Distributor at its principal business office.
<PAGE>
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the
date first above written and shall remain in force for two years
from the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of
the outstanding voting securities of the Class A shares of the
Fund, and (b) by the vote of a majority of those Directors who
are not parties to this Agreement or interested persons of any
such parties and who have no direct or indirect financial
interest in this Agreement or in the operation of the Fund's Plan
or in any agreement related thereto (Rule 12b-1 Directors), cast
in person at a meeting called for the purpose of voting upon such
approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule
12b-1 Directors or by vote of a majority of the outstanding
voting securities of the Class A shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event
of its assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities", when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if
such amendment is specifically approved by (a) the Board of
Directors of
<PAGE>
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Directors cast in person at a
meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: ________________________
_______________________
(Title)
Prudential Pacific Growth Fund
By: _______________________
(Name)
(Title)
EXHIBIT 99.6(e)
PRUDENTIAL PACIFIC GROWTH FUND
Form of
Distribution Agreement
(Class B Shares)
----------------
Agreement made as of ______ __, 199_, between Prudential
Pacific Growth Fund, a Maryland Corporation (the Fund) and Prudential
Securities Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in the
interest of the Fund to offer its Class B shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered under
the Securities Exchange Act of 1934, as amended, and is engaged in the
business of selling shares of registered investment companies either
directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other, with respect to the continuous offering of
the Fund's Class B shares from and after the date hereof in order to
promote the growth of the Fund and facilitate the distribution of its
Class B shares; and
WHEREAS, the Fund has adopted a distribution and service
plan pursuant to Rule 12b-1 under the Investment Company Act (thePlan)
authorizing payments by the Fund to the Distributor with respect
<PAGE>
to the distribution of Class B shares of the Fund and the maintenance
of Class B shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class B shares of the Fund to sell
Class B shares to the public and the Distributor hereby accepts such
appointment and agrees to act hereunder. The Fund hereby agrees
during the term of this Agreement to sell Class B shares of the Fund
to the Distributor on the terms and conditions set forth below.
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the
Fund to act as principal underwriter and distributor of the Fund's
Class B shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class B shares from the Fund shall not apply to Class B
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of
all (or substantially all) the assets or the outstanding shares of any
such company by the Fund.
2.2 Such exclusive rights shall not apply to Class B shares
issued by the Fund pursuant to reinvestment of dividends or capital
gains distributions.
2.3 Such exclusive rights shall not apply to Class Bshares
issued by the Fund pursuant to the reinstatement privilege afforded
redeeming shareholders.
<PAGE>
2.4 Such exclusive rights shall not apply to purchases made
through the Fund's transfer and dividend disbursing agent in the
manner set forth in the currently effective Prospectus of the Fund.
The term "Prospectus" shall mean the Prospectus and Statement of
Additional Information included as part of the Fund's Registration
Statement, as such Prospectus and Statement of Additional Information
may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed
by the Fund with the Securities and Exchange Commission and effective
under the Securities Act of 1933, as amended (the Securities Act), and
the Investment Company Act, as such Registration Statement is amended
from time to time.
Section 3. Purchase of Class B Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the
Fund the Class B shares needed, but not more than the Class B shares
needed (except for clerical errors in transmission) to fill
unconditional orders for Class B shares placed with the Distributor by
investors or registered and qualified securities dealers and other
financial institutions (selected dealers). The price which the
Distributor shall pay for the Class B shares so purchased from the
Fund shall be the net asset value, determined as set forth in the
Prospectus.
3.2 The Class B shares are to be resold by the Distributor
or selected dealers, as described in Section 6.4hereof, to investors
at the offering price as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of
its Class B shares at times when redemption is suspended pursuant to
<PAGE>
the conditions in Section 4.3 hereof or at such other times as may be
determined by the Board of Directors. The Fund shall also have the
right to suspend the sale of its Class B shares if a banking
moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase orders
for Class B shares received by the Distributor. Any order may be
rejected by the Fund; provided, however, that the Fund will not
arbitrarily or without reasonable cause refuse to accept or confirm
orders for the purchase of Class B shares. The Fund (or its agent)
will confirm orders upon their receipt, will make appropriate book
entries and upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts for such Class B shares
pursuant to the instructions of the Distributor. Payment shall be
made to the Fund in New York Clearing House funds or federal funds.
The Distributor agrees to cause such payment and such instructions to
be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class B shares may be tendered
for redemption at any time, and the Fund agrees to repurchase or
redeem the Class B shares so tendered in accordancewith its Articles
of Incorporation as amended from time to time, and in accordance with
the applicable provisions of the Prospectus. The price to be paid to
redeem or repurchase the Class B shares shall be equal to the net
asset value determined as set forth in the Prospectus. All payments
by the Fund hereunder shall be made in the manner set forth in Section
<PAGE>
4.2 below.
4.2 The Fund shall pay the total amount of the redemption
price as defined in the above paragraph pursuant to the instructions
of the Distributor on or before the seventh day subsequent to its
having received the notice of redemption in proper form. The proceeds
of any redemption of Class B shares shall be paid by the Fund as
follows: (a) any applicable contingent deferred sales charge shall be
paid to the Distributor and (b) the balance shall be paid to or for
the account of the redeeming shareholder, in each case in accordance
with applicable provisions of the Prospectus.
4.3 Redemption of Class B shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or during any other period when
the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of Class
B shares as provided herein, the Fund agrees to sell its Class B
shares so long as it has Class B shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class B shares, and this shall include one certified
copy, upon request by the Distributor, of all financial statements
<PAGE>
prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall
reasonably request.
5.3 The Fund shall take, from time to time, but subject to
the necessary approval of the Board of Directors and the shareholders,
all necessary action to fix the number of authorized Class B shares
and such steps as may be necessary to register the same under the
Securities Act, to the end that there will be available for sale such
number of Class B shares as the Distributor reasonably may expect to
sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there
will be no untrue statement of a material fact in the Registration
Statement, or necessary in order that there will be no omission to
state a material fact in the Registration Statement which omission
would make the statements therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class B
shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall not
be required to amend its Articles of Incorporation or By-Laws to
comply with the laws of any state, to maintain an office in any state,
to change the terms of the offering of its Class B shares in any state
from the terms set forth in its Registration Statement, to qualify as
a foreign corporation in any state or to consent to service of process
in any state other than with respect to claims arising out of the
offering of its Class B shares. Any such qualification may be
<PAGE>
withheld, terminated or withdrawn by the Fund at any time in its
discretion. As provided in Section 9.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by
the Fund in connection with such qualifications.
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort
to effect sales of Class B shares of the Fund, but shall not be
obligated to sell any specific number of Class B shares. Sales of the
Class B shares shall be on the terms described in the Prospectus. The
Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as
set forth in the Prospectus.
6.2 In selling the Class B shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer nor
any other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved
by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for
the confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors and selected dealers on
such sales and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association
<PAGE>
of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale of
Class B shares, provided that the Fund shall approve the forms of such
agreements. Within the United States, the Distributor shall offer and
sell Class B shares only to such selected dealers as are members in
good standing of the NASD. Class B shares sold to selected dealers
shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any contingent
deferred sales charge which is imposed with respect to repurchases and
redemptions of Class B shares as set forth in the Prospectus, subject
to the limitations of Article III, Section 26 of the NASD Rules of
Fair Practice. Payment of these amounts to the Distributor is not
contingent upon the adoption or continuation of the Plan.
Section 8. Payment of the Distributor under the Plan
-----------------------------------------
8.1 The Fund shall pay to the Distributor as compensation
for services under the Distribution and Service Plan and this
Agreement a fee of 1% (including an asset-based sales charge of .75 of
1% and a service fee of .25 of 1%) per annum of the average daily net
assets of the Class B shares of the Fund. Amounts payable under the
Plan shall be accrued daily and paid monthly or at such other
intervals as 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.
<PAGE>
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions (including trailer 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. So long as the Plan (or any
amendment thereto) is in effect, at the request of the Board of
Directors or any agent or representative of the Fund, the Distributor
shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and
the costs incurred in performing such activities.
8.3 Expenses of distribution with respect to the Class B
shares of the Fund 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;
<PAGE>
(d) 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;
(e) amounts paid to, or an account of, account
executives of the Distributor or of other broker-
dealers or financial institutions for personal
service and/or the maintenance of shareholder
accounts; and
(f) advertising for the Fund in various forms through
any available medium, including the cost of
printing and mailing Fund Prospectuses, and
periodic financial reports and sales literature to
persons other than current shareholders of the
Fund.
Indirect and overhead costs referred to in clauses (b) and
(c) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class B shares, including fees and
disbursements of its counsel and auditors, in connection with the
<PAGE>
preparation and filing of any required Registration Statements and/or
Prospectuses under the Investment Company Act or the Securities Act,
and preparing and mailing annual and periodic reports and proxy
materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual
or periodic reports or proxy materials). The Fund shall also bear the
cost of expenses of qualification of the Class B shares for sale, and,
if necessary or advisable in connection therewith, of qualifying the
Fund as a broker or dealer, in such states of the United States or
other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5.4 hereof and the cost and expense
payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section
5.4 hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class B
shares, so long as the Plan is in effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and Directors and any person who controls
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Distributor, its officers,
Directors or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or
based upon any untrue statement of a material fact contained in the
<PAGE>
Registration Statement or Prospectus or arising out of or based upon
any alleged omission to state a material fact required to be stated in
either thereof or necessary to make the statements in either thereof
not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or
omission or alleged untrue statement or omission made in reliance upon
and in conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or
Prospectus; provided, however, that this indemnity agreement shall not
inure to the benefit of any such officer, Director or controlling
person unless a court of competent jurisdiction shall determine in a
final decision on the merits, that the person to be indemnified was
not liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement (disabling
conduct), or, in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnified
person was not liable by reason of disabling conduct, by (a) a vote of
a majority of a quorum of Directors who are neither "interested
persons" of the Fund as defined in Section 2(a)(19) of the Investment
Company Act nor parties to the proceeding, or (b) an independent legal
counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and Directors and any such controlling
person as aforesaid is expressly conditioned upon the Fund's being
promptly notified of any action brought against the Distributor, its
officers or Directors, or any such controlling person, such
notification to be given in writing addressed to the Fund at its
<PAGE>
principal business office. The Fund agrees promptly to notify the
Distributor of the commencement of any litigation or proceedings
against it or any of its officers or Directors in connection with the
issue and sale of any Class B shares.
10.2 The Distributor agrees to indemnify, defend and hold
the Fund, its officers and Directors and any person who controls the
Fund, if any, within the meaning of Section 15 of the Securities Act,
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending against such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Fund, its officers
and Directors or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its
Directors or officers or such controlling person resulting from such
claims or demands shall arise out of or be based upon any alleged
untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Fund for use in the Registration
Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. The
Distributor's agreement to indemnify the Fund, its officers and
Directors and any such controlling person as aforesaid, is expressly
conditioned upon the Distributor's being promptly notified of any
action brought against the Fund, its officers and Directors or any
such controlling person, such notification to be given to the
<PAGE>
Distributor in writing at its principal business office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the date
first above written and shall remain in force for two years from the
date hereof and thereafter, but only so long as such continuance is
specifically approved at least annually by (a) the Board of Directors
of the Fund, or by the vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, and (b) by the vote of a
majority of those Directors who are not parties to this Agreement or
interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of
the Fund's Plan or in any agreement related thereto (Rule 12b-1
Directors), cast in person at a meeting called for the purpose of
voting upon such approval.
11.2 This Agreement may be terminated at any time, without
the payment of any penalty, by a majority of the Rule 12b-1 Directors
or by vote of a majority of the outstanding voting securities of the
Class B shares of the Fund, or by the Distributor, on sixty (60) days'
written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding voting
securities," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
<PAGE>
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, and (b) by the vote of a
majority of the Rule 12b-1 Board of Directors cast in person at a
meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at
the time in effect and the applicable provisions of the Investment
Company Act. To the extent that the applicable law of the State of
New York, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential Pacific Growth Fund
By: _______________________
(Name)
(Title)
EXHIBIT 99.6(f)
PRUDENTIAL PACIFIC GROWTH FUND
Form of
Distribution Agreement
(Class C Shares)
----------------
Agreement made as of ______ __, 199_, between Prudential
Pacific Growth Fund, a Maryland Corporation (the Fund) and
Prudential Securities Incorporated, a Delaware Corporation (the
Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class C shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class C shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class C shares; and
WHEREAS, the Fund has adopted a distribution and service
plan pursuant to Rule 12b-1 under the Investment Company Act (the
Plan) authorizing payments by the Fund to the Distributor with
respect to the distribution of Class C shares of the Fund and the
maintenance of Class C shareholder accounts.
<PAGE>
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class C shares of the Fund to
sell Class C shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class C
shares of the Fund to the Distributor on the terms and conditions
set forth below.
Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class C shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class C shares from the Fund shall not apply to Class C
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class C
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class C
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of
<PAGE>
Additional Information included as part of the Fund's Registration
Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and
the term "Registration Statement" shall mean the Registration
Statement filed by the Fund with the Securities and Exchange
Commission and effective under the Securities Act of 1933, as
amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class C Shares from the Fund
----------------------------------------
3.1 The Distributor shall have the right to buy from the
Fund the Class C shares needed, but not more than the Class C
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class C shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class C shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class C shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
3.3 The Fund shall have the right to suspend the sale of
its Class C shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class C shares if a
banking moratorium shall have been declared by federal or New York
authorities.
<PAGE>
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class C shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class C shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund
------------------------------------------------------
4.1 Any of the outstanding Class C shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class C shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class C shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh day
subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class C shares
shall be paid by the Fund as follows: (a) any applicable
contingent deferred sales charge shall be
<PAGE>
paid to the Distributor and (b) the balance shall be paid to or
for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of Class C shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of
Class C shares as provided herein, the Fund agrees to sell its
Class C shares so long as it has Class C shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class C shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class C shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such
<PAGE>
number of Class C shares as the Distributor reasonably may expect
to sell. The Fund agrees to file from time to time such
amendments, reports and other documents as may be necessary in
order that there will be no untrue statement of a material fact in
the Registration Statement, or necessary in order that there will
be no omission to state a material fact in the Registration
Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class C
shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class C shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class C shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 9.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualifications.
Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class C shares of the Fund, but shall not
be obligated to sell any specific number of Class C shares. Sales
of the Class C shares shall be on the terms described in the
Prospectus. The
<PAGE>
Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers
as set forth in the Prospectus.
6.2 In selling the Class C shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class C shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class C shares only to such selected dealers
as are members in good standing of the NASD. Class C shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
---------------------------
The Distributor shall receive and may retain any
contingent deferred sales charge which is imposed with respect to
repurchases and
<PAGE>
redemptions of Class C shares as set forth in the Prospectus,
subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice. Payment of these amounts to the Distributor
is not contingent upon the adoption or continuation of the Plan.
Section 8. Payment of the Distributor under the Plan
-----------------------------------------
8.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
and this Agreement a fee of 1% (including an asset-based sales
charge of .75 of 1% and a service fee of .25 of 1%) per annum of
the average daily net assets of the Class C shares of the Fund.
Amounts payable under the Plan shall be accrued daily and paid
monthly or at such other intervals as the 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.
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions (including trailer 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. So long as
the Plan (or any amendment thereto) is in effect, at the request of
the Board of Directors or any agent or representative of the Fund,
the Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
8.3 Expenses of distribution with respect to the Class C
shares of the Fund include, among others:
(a) sales commissions (including trailer
commissions) paid to, or on account of, account
executives of
<PAGE>
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 C
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) 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 C shares of the Fund;
(e) amounts paid to, or an account of, account
executives of the Distributor or of other
broker-dealers or financial institutions for
personal service and/or the maintenance of
shareholder accounts; and
(f) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund Prospectuses,
and periodic financial reports and sales
literature to persons other than current
shareholders of the Fund.
<PAGE>
Indirect and overhead costs referred to in clauses (b)
and (c) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
----------------------
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class C shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class C shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class
C shares, so long as the Plan is in effect.
Section 10. Indemnification
---------------
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and Directors and any person who controls
<PAGE>
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, Directors or any such controlling person
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or
Prospectus or arising out of or based upon
any alleged omission to state a material fact required to be
stated in either thereof or necessary to make the statements in
either thereof not misleading, except insofar as such claims,
demands, liabilities or expenses arise out of or are based upon any
such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information
furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus; provided, however, that this
indemnity agreement shall not inure to the benefit of any such
officer, Director or controlling person unless a court of competent
jurisdiction shall determine in a final decision on the merits,
that the person to be indemnified was not liable by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard
of its obligations under this Agreement (disabling conduct), or, in
the absence of such a decision, a reasonable determination, based
upon a review of the facts, that the indemnified person was not
liable by reason of disabling conduct, by (a) a vote of a majority
of a quorum of Directors who are neither "interested persons" of
the Fund as defined in Section 2(a)(19) of the Investment Company
Act nor parties to the proceeding, or (b) an independent legal
<PAGE>
counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and Directors and any such controlling
person as aforesaid is expressly conditioned upon the Fund's being
promptly notified of any action brought against the Distributor,
its officers or Directors, or any such controlling person, such
notification to be given in writing addressed to the Fund at its
principal business office. The Fund agrees promptly to notify the
Distributor of the commencement of any litigation or proceedings
against it or any of its officers or Directors in connection with
the issue and sale of any Class C shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state a
material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and
<PAGE>
Directors and any such controlling person as aforesaid, is
expressly conditioned upon the Distributor's being promptly
notified of any action brought against the Fund, its officers and
Directors or any such controlling person, such notification to be
given to the Distributor in writing at its principal business
office.
Section 11. Duration and Termination of this Agreement
------------------------------------------
11.1 This Agreement shall become effective as of the
date first above written and shall remain in force for two years
from the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of
the Class C shares of the Fund, and (b) by the vote
of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no
direct or indirect financial interest in this Agreement or in the
operation of the Fund's Plan or in any agreement related thereto
(Rule 12b-1 Directors), cast in person at a meeting called for the
purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
<PAGE>
Section 12. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Board of Directors cast in person
at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
-------------
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Securities
Incorporated
By: ________________________
________________________
(Title)
Prudential Pacific Growth Fund
By: _______________________
(Name)
(Title)
EXHIBIT 99.11
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 3 to
Registration Statement No. 33-42391 of Prudential Pacific Growth
Fund, Inc. of our report dated December 15, 1993, appearing in the
Statement of Additional Information, which is a part of such
Registration Statement, and to the references to us under the
headings "Financial Highlights" in the Prospectus, which is a part
of such Registration Statement, and "Custodian, Transfer and
Dividend Disbursing Agent and Independent Accountants" in the
Statement of Additional Information.
Deloitte & Touche
New York, New York
April 29, 1994
EXHIBIT 99.15(c)
PRUDENTIAL PACIFIC GROWTH 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 Pacific Growth 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.
<PAGE>
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
Prudential Securities Incorporated (Prudential Securities) and
Pruco Securities Corporation (Prusec), including sales
personnel and branch office and central support systems, and
also using such other qualified broker-dealers and financial
institutions as the Distributor may select. Services provided
and activities undertaken to distribute Class A shares of the
Fund are referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder
accounts a service fee of .25 of 1% per annum of the average
daily net assets of the Class A shares (service fee). The Fund
shall calculate and accrue daily amounts payable by the
Class A shares of the Fund hereunder and shall apply such
amounts monthly or at such other intervals as the Board of
Directors may determine.
<PAGE>
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 it deems
appropriate on Distribution Activities which include, among
others:
(a) amounts paid to Prudential Securities for performing
services under a selected dealer agreement between Prudential
Securities and the Distributor for sale of Class A shares of the
Fund, including sales commissions and trailer commissions paid to,
or on
<PAGE>
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) 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.
<PAGE>
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 fees to be paid as provided for in
Sections 2 and 3 hereof so as to increase materially the
amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting
securities (as
<PAGE>
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:
EXHIBIT 99.15(d)
PRUDENTIAL PACIFIC GROWTH 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 Pacific Growth 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
<PAGE>
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 B shares of the Fund and to service shareholder accounts
using all of the facilities of the Prudential Securities
distribution network including sales personnel and branch
office and central support systems, and also using such other
qualified broker-dealers and financial institutions as the
Distributor may select, including Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to
distribute Class B shares of the Fund are referred to herein
as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder
accounts a service fee of .25 of 1% per annum of the average
daily net assets of the Class B shares (service fee). The Fund
shall calculate and accrue daily amounts payable by the
Class B shares of the Fund hereunder and shall pay such
amounts monthly or at such other intervals as the Board of
Directors may
<PAGE>
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;
<PAGE>
(c) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the Distributor for
sale of Class B shares of the Fund, including sales commissions and
trailer commissions paid to, or on account of, agents and indirect
and overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than
current shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid
to, or on account of, broker-dealers and other financial
institutions (other than Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class B
shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the
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 the 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
<PAGE>
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 fees to be paid as provided for in Sections 2
and 3 hereof so as to increase materially the amounts payable
under this Plan unless such amendment shall be approved by the
vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class B shares
of the Fund. All material amendments of the Plan shall be
approved by a majority of the Board of Directors of the Fund
and a majority of the Rule 12b-1 Directors by votes cast in
person at
<PAGE>
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:
EXHIBIT 99.15(e)
PRUDENTIAL PACIFIC GROWTH FUND
Distribution and Service Plan
(Class C 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 Pacific Growth 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 C
shares issued by the Fund (Class C shares). Under the Plan, the
Fund wishes to pay to the Distributor, as compensation for its
services, adistribution and service fee with respect to Class C
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
<PAGE>
primarily intended to result in the sale of Class C 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 C shares of the Fund and to service shareholder accounts
using all of the facilities of the Prudential Securities
distribution network including sales personnel and branch
office and central support systems, and also using such other
qualified broker-dealers and financial institutions as the
Distributor mayselect, including Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to
distribute Class C 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 C shares (service fee). The Fund
shall calculate and accrue daily amounts payable by the
Class C shares of the Fund hereunder and shall pay such
amounts monthly
<PAGE>
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 C shares for the
performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class C
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 C 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 C shares according to
the ratio of the sale of Class C shares to the total sales of
the Fund's shares over the Fund's fiscal year or such other
allocation methodapproved 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
<PAGE>
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 C shares of the Fund, including sales commissions and
trailer commissions paid to, or on account of, agents and indirect
and overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than
current shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid
to, or on account of, broker-dealers and other financial
institutions (other than Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class C
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
amountsexpended for Distribution Activities (including payment
of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of
the 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
<PAGE>
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 C
shares of the Fund.
If approved by a vote of a majority of the outstanding
voting securities of the Class C 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
InvestmentCompany Act) of the Class C shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service
and distribution fees to be paid as provided for in Sections 2
and 3 hereof so as to increase materially the amounts payable
under this Plan unless such amendment shall be approved by the
vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class C 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
<PAGE>
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:
