(ICON)
Prudential
Pacific
Growth
Fund, Inc.
SEMI-ANNUAL
REPORT
April 30, 1996
(LOGO)
<PAGE>
Prudential Pacific Growth Fund, Inc.
Performance At A Glance.
While Pacific Basin stocks showed some volatility over the past six months,
they ended the period with positive performances. The China/Taiwan
confrontation in March temporarily unnerved Hong Kong markets for a few weeks.
Additionally, a decline in the U.S. stock market in early April created a
momentary pause in Japan's and other Pacific Basin countries' markets. For the
six-month period ended April 30, 1996, the Prudential Pacific Growth Fund
finished behind the average Pacific region fund, as measured by Lipper
Analytical Services.
Cumulative Total Returns1 As of 4/30/96
<TABLE>
<CAPTION>
Six One Since
Months Year Inception2
<S> <C> <C> <C>
Class A 10.2% 15.3% 77.7%
Class B 9.9 14.6 72.9
Class C 9.9 14.6 2.0
Class Z N/A N/A 3.5
Lipper Pacific Fund Avg3 13.5 15.9 74.6
<CAPTION>
Average Annual Total Returns1 As of 3/31/96
One Since
Year Inception2
<S> <C> <C>
Class A 9.8% 14.5%
Class B 9.8 14.9
Class C 13.8 -0.3
Class Z N/A N/A
</TABLE>
Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investors shares, when redeemed, may be worth
more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services. The
cumulative total returns do not take into account sales charges. The average
annual returns do take into account applicable sales charges. The Fund charges
a maximum front-end sales load of 5% for Class A shares. Class B shares are
subject to a declining contingent deferred sales charge (CDSC) of 5%, 4%, 3%,
2%, 1% and 1%, for six years. Class C shares have a 1% CDSC for one year. Class
B shares will automatically convert to Class A shares on a quarterly basis,
after approximately seven years. Class Z shares are not subject to a sales
charge or a distribution fee. Since Class Z shares have existed less than one
year, no average annual returns are shown.
2Inception dates: 7/24/92 Class A and Class B; 8/1/94 Class C; 3/1/96 Class Z.
3The Lipper Pacific Fund average includes 39 funds for six months; 38 funds for
one year, and 15 funds since inception of Class A shares and Class B shares, as
determined by Lipper Analytical Services.
How Investments Compared.
(As of 4/30/96)
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total return averages for several Lipper mutual fund categories to
show you that reaching for higher yields means tolerating more risk. The
greater the risk, the larger the potential reward or loss. In addition, we've
included historical 20-year average annual returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments, state
agencies and/or municipalities. This investment provides income thatis usually
exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but, historically their returns have been generally
among the lowest of the major investment categories.
<PAGE>
Daniel J. Duane, Fund Manager (PICTURE)
Portfolio
Manager's Report
The Prudential Pacific Growth Fund invests at least 65% of its assets in stocks
and other securities of companies doing business in, or domiciled in, the
Pacific Basin. It may also invest outside the region. The Fund may invest in
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 to hedge
its portfolio. Because the Fund invests in securities traded outside the U.S.,
it is subject to the risks associated with foreign investing, including
currency, political and social risks. There can be no assurance that the Fund
will achieve its investment objective.
Strategy Session.
Our overall strategy is to invest in the stocks of individual Pacific Basin
companies which show the potential for long-term growth in sales and earnings.
During the past six months, we found opportunity in several places:
(CHART)
- - We found good investment opportunities in Hong Kong's expanding, affluent
population's growing demand for consumer goods and housing. This vibrant,
active market comprised 23% of the Fund's total net assets on April 30, 1996,
compared to 16% six months ago. We also invested in Hong Kong companies that
do business in China as a way to indirectly invest in the growth
opportunities there.
- - Financial services and property investment/development stocks (particularly
in smaller Asian markets) also caught a greater share of our attention at
12% and 13% of total net assets on April 30, 1996, respectively. Bank stocks
performed well as lower interest rates made the cost of their raw
material -- money -- cheaper. Additionally, there's increased demand for
housing as more of Asia's younger population are starting new families.
Construction of new homes, particularly in Singapore and Hong Kong, also
supported financial services and real estate stocks.
- - We held significant holdings in Japan (33% of total net assets on April 30,
1996). Japan appeared to be finally emerging from a prolonged recession. In
April, its stock market was approaching a four-year high, as measured by the
Nikkei 225 Index. Our main investments here were financial services and
retail stocks.
<PAGE>
What Went Well.
Right Places,
Right Stocks.
Our investments in Hong Kong, Singapore and Japan -- among the top performing
regions in the Pacific Basin -- helped Fund performance during the past six
months. Strong economic growth in Southeast Asia lifted stock prices in Hong
Kong and Singapore (the two largest Asian markets outside of Japan). In Japan,
the start of a long-awaited economic recovery spurred renewed interest in
Japanese stocks, which drove their prices higher.
We Trimmed Selectively.
As many of our stocks' prices climbed, we sold or reduced select holdings and
took profits. Some examples were Coca-Cola Amatil and Samsung Electronics. We
trimmed 25% of our holdings in Amatil, the exclusive owner of a Coca-Cola
franchise in Australia, Indonesia and parts of eastern Europe. We sold all our
holdings in Samsung Electronics, a South Korean company. Though Samsung's
stock price declined during the reporting period, we still favor electronics
and technology companies.
And Not So Well.
Right Place,
Wrong Stocks.
Our investment in Japan was well-placed. However, the stocks of larger, more
established Japanese companies were the main beneficiaries of the country's
economic expansion -- not the retail and smaller service company stocks we
favored. If we had invested more of the Fund's assets in larger, more
well-known companies and in basic industries, our performance would likely
have been better.
More Money
In Financial Services.
We were smart to focus on financial services stocks, our only regret was not
owning more of them. These stocks performed well as lower interest rates
enabled banks and other financial services companies to borrow money cheaply.
Additionally, widespread economic growth meant that individuals and companies
borrowed more for cars, new homes, plant expansion or to finance other
long-term purchases.
Looking Ahead.
The long-awaited economic turnaround in the Pacific Basin appears to be
starting. New highs on the Japanese stock market were mirrored by similar
strong growth by the financial markets in Hong Kong and Singapore. This is
welcomed news. Going forward, we believe that Hong Kong and Singapore will
continue to prosper. We also see opportunity in China, but caution is
warranted. Direct investment there carries special risks. To lessen
uncertainty, we prefer to invest in firms that do business in China, rather
than in Chinese companies themselves.
Five Largest
Issuers.
4.6% Guoco Group
Banking
4.0% Nichiei
Financial Services
3.8% Overseas Union Bank
Banking
3.3% Onward Kashiyama
Textiles/Apparel
3.2% Mitsui Fudosan
Property Investment
Expressed as a percentage of total net assets as of 4/30/96.
1
<PAGE>
President's Letter June 3, 1996
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new money
into mutual funds in the first few months of 1996. According to figures
released by the Investment Company Institute, a mutual fund industry trade
group, new investments in mutual funds reached an all-time monthly high of $33
billion in January of 1996. An additional $66 billion was invested in the
following three months.
While we are pleased that mutual funds are attracting new investors, we're
concerned that some of them may be "buying last year's returns." Few expect
1995's virtual non-stop returns from the stock and bond markets. In fact,
1996's markets have been volatile so far (stock and bond prices go down just
as they go up). There's no better time than now to be talking with your
Financial Advisor or Registered Representative. She or he can help you
determine reasonable expectations about both the potential performance and
risks associated with your investments.
Board of Directors Election.
Late this summer, we'll be sending you a notice about a special shareholder
meeting to elect new Prudential mutual fund boards of directors. Your Board of
Directors has approved a proposal to place a common board of experienced
directors across many of Prudential's mutual funds to improve business
efficiency. The materials you'll receive this summer will contain more
complete information about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential that
were made with you in mind. Prudential Mutual Funds has moved under the
umbrella of Prudential's newly created "Money Management Group." This group
manages and administers nearly $190 billion in client assets and provides
mutual funds, annuities, defined benefit and defined contribution plans to our
individual and institutional investors. We plan to improve the range and
quality of investment products and services that we can provide you by better
leveraging Prudential's strengths. There will, however, be no change in the
service you receive from your Financial Advisor, Registered Representative or
our Customer Service unit.
We're excited about our future and hope that you are, too. Thank you for your
continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as of
April 30, 1996 (Unaudited) PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--98.4%
COMMON STOCKS--96.8%
- ------------------------------------------------------------
Australia--11.6%
588,100 Brambles Industries, Ltd.
(Business & Public Services) $ 8,071,054
1,039,500 Broken Hill Proprietary Co., Ltd.
(Energy Sources) 16,015,576
1,386,488 Coca Cola Amatil, Ltd.
(Beverages & Tobacco) 14,600,924
3,189,200 Publishing & Broadcasting, Ltd.
(Broadcasting & Publishing) 14,673,079
832,000 Qantas Airways, Ltd.
(Transportation-Airlines) 1,478,820
163,220 Qantas Airways, Ltd. (ADR)
(Transportation-Airlines) 2,901,118
3,990,500 Sea World Property Trust, Ltd.
(Leisure & Tourism) 3,389,493
-------------
61,130,064
- ------------------------------------------------------------
Hong Kong--22.9%
3,784,000 CITIC Pacific, Ltd. (a)
(Multi-Industry) 14,871,252
4,858,600 Guoco Group, Ltd.
(Banking) 24,182,139
6,071,000 Hong Kong & Shanghai Hotels, Ltd.
(a)
(Leisure & Tourism) 10,477,661
1,028,204 HSBC Holdings, Plc. (a)
(Banking) 15,352,677
21,157,000 Hung Hing Printing Group, Ltd.
(Forest Products & Paper) 5,948,893
2,533,000 Hutchison Whampoa, Ltd. (a)
(Multi-Industry) 15,718,072
1,466,700 Jardine Matheson Holdings, Ltd.
(Multi-Industry) 11,733,600
2,752,000 New World Development Co., Ltd. (a)
(Property Development) 12,345,274
2,884,000 Wharf Holdings, Ltd. (a)
(Multi-Industry) $ 10,681,758
-------------
121,311,326
- ------------------------------------------------------------
India--1.9%
554,040 Tata Engineering & Locomotive Ltd.
(GDR) (a)
(Automobiles & Auto Parts) 9,972,720
- ------------------------------------------------------------
Indonesia--1.4%
158,900 Kabel Metal Indonesia (a)
(Industrial Components) 117,716
209,400 PT Indonesia Satellite (ADR)
(Utilities & Telephones) 7,302,825
-------------
7,420,541
- ------------------------------------------------------------
Japan--33.4%
283,000 Alpine Electronics, Inc.
(Electrical & Electronics) 5,557,219
581,000 Daibiru Corp.
(Property Investment) 7,809,065
360,000 Honda Motor Co., Ltd.
(Automobles & Auto Parts) 8,201,706
85,400 Japan Associated Finance Co.
(Financial Services) 10,582,908
76,000 Keyence Corp.
(Electronic Components &
Instruments) 9,997,617
1,294,000 Mitsui Fudosan Co., Ltd.
(Property Investment) 17,022,258
316,000 Nichiei Co., Ltd.
(Financial Services) 21,085,744
694,000 Nichiei Construction Co., Ltd.
(Property Development) 8,798,627
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as of
April 30, 1996 (Unaudited) PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Japan (cont'd.)
817,000 Nippon Express Co., Ltd.
(Transportation-Road & Rail) $ 8,488,919
46,800 Nippon Television Network
(Broadcasting & Publishing) 14,677,280
68 Nissen Co., Ltd.
(Retail) 1,180
670,000 Nomura Securities Co., Ltd. (a)
(Financial Services) 14,561,746
494,000 Omron Corp.
(Electronic Components &
Instruments) 11,113,293
1,046,000 Onward Kashiyama & Co., Ltd. (a)
(Textile & Apparel) 17,648,539
296,500 Sony Music Entertainment, Inc.
(Recreation & Other Consumer
Goods) 16,025,499
127,600 World Co., Ltd.
(Textile & Apparel) 5,339,727
-------------
176,911,327
- ------------------------------------------------------------
Korea
584 Samsung Electronics Co., Ltd. (a)
(New, Series 1) (Electrical &
Electronics) 77,667
- ------------------------------------------------------------
Malaysia--7.8%
4,256,000 IJM Corporation Berhad
(Construction) 8,192,493
3,266,000 Intiplus Berhad
(Insurance) 3,575,625
5,665,500 Kuala Lumpur Kepong Berhad
(Misc. Materials & Commodities) 14,540,905
8,615,000 Renong Berhad
(Multi-Industry) 14,994,025
-------------
41,303,048
New Zealand--1.1%
4,274,000 Fletcher Challenge Forestry, Ltd.
(Forest Products & Paper) $ 5,514,839
- ------------------------------------------------------------
Singapore--14.4%
972,000 City Developments, Ltd. (a)
(Property Development) 8,503,272
2,222,750 First Capital Corp.
(Property Development) 7,050,829
3,021,000 Hong Leong Finance, Ltd. (a)
(Financial Services) 12,354,730
1,626,000 Keppel Bank of Singapore, Ltd. (a)
(Banking) 5,111,607
2,206,000 Marco Polo Developments, Ltd.
(Leisure & Tourism) 4,801,110
646,000 Overseas Chinese Banking Corp., Ltd.
(Banking) 8,867,568
2,625,000 Overseas Union Bank (a)
(Banking) 20,350,284
1,604,750 Sembawang Maritime, Ltd. (a)
(Energy Equipment & Services) 4,223,026
1,929,000 Wing Tai Holdings
(Property Development) 4,993,997
-------------
76,256,423
- ------------------------------------------------------------
Thailand--2.3%
369,600 Bangkok Bank
(Banking) 5,356,840
283,100 Dhana Siam Finance & Securities Plc.
(Financial Services) 1,995,517
1,536,500 Siam City Bank Public Co., Ltd.
(Banking) 1,840,575
215,700 Siam Commercial Bank Public Co.,
Ltd.
(Banking) 3,177,523
-------------
12,370,455
-------------
Total common stocks
(cost $447,528,575) 512,268,410
-------------
- -------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as of
April 30, 1996 (Unaudited) PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
WARRANTS(a)--1.5%
- ------------------------------------------------------------
Singapore--1.5%
Hong Leong Finance, Ltd.
190,200 expiring Nov.'98 @ SGD3.25
(Financial Services) $ 170,449
Singapore Finance, Ltd.
144,300 expiring June '99 @ SGD1.50
(Financial Services) 131,368
United Overseas Bank, Ltd.
1,755,800 expiring June '97 @ SGD3.34
(Banking) 7,461,526
-------------
Total warrants
(cost $8,278,676) 7,763,343
-------------
RIGHTS(a)
- ------------------------------------------------------------
Malaysia
Renong Berhad
932,375 expiring 5/7/96
(Multi-Industry) 261,735
-------------
CONVERTIBLE LOAN STOCK--0.1%
- ------------------------------------------------------------
Singapore--0.1%
631,000 Sembawang Maritime, Ltd.
(Energy Equipment & Services)
(cost $402,347) $ 556,501
-------------
- ------------------------------------------------------------
Total Investments--98.4%
(cost $456,209,598; Note 4) 520,849,989
Other assets in excess of
liabilities--1.6% 8,327,582
-------------
Net Assets--100% $ 529,177,571
-------------
-------------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>
<C>
Assets
April 30, 1996
Investments, at value (cost
$456,209,598)...................................................................
$ 520,849,989
Foreign currency, at value (cost
$2,673,524)................................................................
2,677,855
Forward currency contracts-net amount receivable from
counterparties........................................ 10,627,464
Receivable for Fund shares
sold.........................................................................
.... 2,096,926
Dividends and interest
receivable...................................................................
........ 1,623,468
Deferred expenses and other
assets..........................................................................
51,183
--------------
Total
assets.......................................................................
...................... 537,926,885
--------------
Liabilities
Bank
overdraft....................................................................
.......................... 1,016,941
Payable for investments
purchased....................................................................
....... 2,280,433
Forward currency contracts-net amount payable to
counterparties............................................. 2,750,501
Payable for Fund shares
reacquired...................................................................
....... 1,230,579
Accrued expenses and other
liabilities..................................................................
.... 515,672
Distribution fee
payable......................................................................
.............. 342,644
Management fee
payable......................................................................
................ 326,371
Withholding taxes
payable......................................................................
............. 148,757
Deferred Thailand capital gains tax
liability...............................................................
137,416
--------------
Total
liabilities..................................................................
...................... 8,749,314
--------------
Net
Assets.......................................................................
........................... $ 529,177,571
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 31,494
Paid-in capital in excess of
par.........................................................................
448,229,866
--------------
448,261,360
Distributions in excess of net investment
income.........................................................
(1,520,952)
Accumulated net realized gain on
investments.............................................................
10,045,296
Net unrealized appreciation on investments and foreign
currency.......................................... 72,391,867
--------------
Net assets, April 30,
1996.........................................................................
......... $ 529,177,571
--------------
--------------
Class A:
Net asset value and redemption price per share
($103,553,589 / 6,040,998 shares of common stock issued and
outstanding).............................. $17.14
Maximum sales charge (5% of offering
price)..............................................................
.90
--------------
Maximum offering price to
public.........................................................................
$18.04
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($387,131,787 / 23,199,022 shares of common stock issued and
outstanding)............................. $16.69
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($5,602,712 / 335,790 shares of common stock issued and
outstanding).................................. $16.69
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($32,889,483 / 1,918,149 shares of common stock issued and
outstanding)............................... $17.15
--------------
--------------
</TABLE>
- -------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income April 30, 1996
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $408,196)..................... $ 3,671,049
Interest (net of foreign withholding taxes
of $334)............................... 422,135
--------------
Total income........................... 4,093,184
--------------
Expenses
Management fee............................ 1,845,114
Distribution fee--Class A................. 143,212
Distribution fee--Class B................. 1,815,148
Distribution fee--Class C................. 25,309
Transfer agent's fees and expenses........ 428,000
Custodian's fees and expenses............. 331,000
Reports to shareholders................... 79,000
Registration fees......................... 61,000
Audit fees and expenses................... 26,000
Directors' fees........................... 21,000
Amortization of organizational expense.... 20,000
Legal fees and expenses................... 12,000
Miscellaneous............................. 8,254
--------------
Total expenses......................... 4,815,037
--------------
Net investment loss.......................... (721,853)
--------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions (net of Thailand
capital gains taxes of $6,359)......... 29,317,743
Foreign currency transactions............. (786,067)
--------------
28,531,676
--------------
Net change in unrealized appreciation on:
Investments (net of deferred Thailand
capital gains tax of $110,645)......... 23,093,947
Foreign currencies........................ 22,648
--------------
23,116,595
--------------
Net gain on investments and foreign
currencies................................ 51,648,271
--------------
Net Increase in Net Assets................... $ 50,296,418
--------------
--------------
</TABLE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Increase (Decrease) Ended Year Ended
in Net Assets April 30, 1996 October 31, 1995
<S> <C> <C>
Operations
Net investment loss....... $ (721,853) $ (1,766,039)
Net realized gain (loss)
on investment and
foreign currency
transactions........... 28,531,676 (14,948,681)
Net change in unrealized
appreciation/depreciation
on investments and
foreign currencies..... 23,116,595 (17,348,093)
--------------- ----------------
Net increase (decrease) in
net
assets resulting from
operations............. 50,926,418 (34,062,813)
--------------- ----------------
Net equalization
credits................ -- 5,303
--------------- ----------------
Distributions in excess of
net investment income
Class A................... (1,382,063) --
Class B................... (4,236,951) --
Class C................... (58,010) --
Class Z................... (3,873) --
--------------- ----------------
(5,680,897) --
--------------- ----------------
Distributions to shareholders
from net realized gains
Class A................... -- (575,474)
Class B................... -- (2,780,214)
Class C................... -- (5,693)
--------------- ----------------
-- (3,361,381)
--------------- ----------------
Fund share transactions (net
of share conversion) (Note
5)
Net proceeds from shares
sold................... 1,023,918,523 1,087,055,048
Net asset value of shares
issued in reinvestment
of distributions....... 5,385,091 3,169,310
Cost of shares
reacquired............. (991,125,736) (1,166,639,139)
--------------- ----------------
Net increase (decrease) in
net assets from Fund
share transactions..... 38,177,878 (76,414,781)
--------------- ----------------
Total increase (decrease).... 83,423,399 (113,833,672)
Net Assets
Beginning of period.......... 445,754,172 559,587,844
--------------- ----------------
End of period................ $ 529,177,571 $ 445,754,172
--------------- ----------------
--------------- ----------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
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.
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 or designated
subcustodians, as the case may be under triparty repurchase agreements, 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 fiscal period, 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 period. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term debt
securities sold during the fiscal period. Accordingly, realized foreign currency
gains (losses) are included in the reported net realized gains on investment
transactions.
Net realized losses on foreign currency transactions of $786,067 represent net
foreign exchange losses 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 at
fiscal period end exchange rates are reflected as a component of unrealized
appreciation on investments and 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: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. 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 or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign
- -------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
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 Net 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. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
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 due to timing differences concerning recognition of income.
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, interest and capital gains 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.
Equalization: Effective November 1, 1995, the Fund discontinued the accounting
practice of equalization. Equalization is a practice whereby a portion of the
proceeds from sales and costs of repurchases of capital shares, equivalent on
a
per share basis to the amount of distributable net investment income on the date
of the transaction, is credited or charged to undistributed net investment
income. The balance of $5,303 of undistributed net investment income at October
31, 1995, resulting from equalization was transferred to paid-in capital in
excess of par. Such reclassification has no effect on net assets, results of
operations, or net asset value per share.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase distributions in excess of net investment income
by $786,067 and increase accumulated net realized gains by $786,067 for
differences in the treatment for book and tax purposes of certain transactions
involving foreign securities, currencies and withholding taxes. 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
through January 1, 1996. Effective January 2, 1996 Prudential Securities
Incorporated (``PSI'') became the distributor of the Class A shares of the Fund
and is serving the Fund under the same terms and conditions as under the
arrangement with PMFD. PSI is also distributor of the Class B, Class C and Class
Z shares of the Fund. The Fund compensated PMFD and PSI for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution, (the ``Class A, B and C Plans'') regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
- -------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD for
the period November 1, 1995 through January 1, 1996 with respect to Class A
shares, for distribution-related activities at an annual rate of up to .30 of
1%, 1% and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Class A, Class B and Class C Plans were
.25%, 1% and 1%, respectively, of the average daily net assets of the Class A,
Class B and Class C shares for the six months ended April 30, 1996.
PMFD has advised the Fund that it has received approximately $284,000 in
front-end sales charges resulting from sales of Class A shares during the six
months ended April 30, 1996. From these fees, PMFD and PSI paid such sales
charges to Pruco Securities Corporation, an affiliated broker-dealer, which in
turn paid commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the six months ended April 30, 1996, it
received approximately $491,700 and $2,500 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
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 six months ended April 30,
1996, the Fund incurred fees of approximately $380,000 for the services of PMFS.
As of April 30, 1996, approximately $65,500 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.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 1996 were $307,441,641 and $272,442,519,
respectively.
The United States federal income tax basis of the Fund's investments at April
30, 1996 was $456,217,370 and accordingly, net unrealized appreciation for
federal income tax purposes was $64,632,619 (gross unrealized
appreciation--$69,455,676; gross unrealized depreciation--$4,823,057).
For federal income tax purposes, the Fund has a capital loss carryforward as of
October 31, 1995 of approximately $17,227,000 which expires in 2003.
At April 30, 1996, the Fund had outstanding forward currency contracts, both to
purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation/
Purchase Contracts Payable Value Depreciation
- -------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Japanese Yen,
expiring 5/15/96-
5/30/96........... $38,497,129 $35,746,628 $ (2,750,501)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
Foreign Currency
Sale Contracts
- -------------------
<S> <C> <C> <C>
Japanese Yen,
expiring 5/15/96-
5/30/96.......... $46,374,092 $35,746,628 $ 10,627,464
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
- ------------------------------------------------------------
Note 5. Capital
The Fund offers Class A, Class B, Class C and Class Z shares.
Class A shares are sold with a front-end sales charge of up to 5%. Class B
shares are sold with a contingent deferred sales charge which declines from 5%
to zero depending on the period of time the shares are held. Class C shares are
sold with a contingent deferred sales charge of 1% during the first year. Class
B shares automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase. A special exchange privilege is also
available for shareholders who qualified to purchase Class A shares at net asset
value. Effective March 1, 1996 the Fund commenced offering Class Z shares. Class
Z shares are not subject to any sales or redemption charge and are offered
exclusively for sale to the participants of the PSI 401(k) Plan, a defined
contribution plan sponsored by PSI.
The Fund has authorized 2 billion shares of common stock at $.001 par value per
share divided into four classes, designated Class A, Class B, Class C and Class
Z common stock each consisting of 500 million authorized shares. Of the
31,493,959 shares of common stock issued and outstanding at April 30, 1996, PMF
owned 5,000 Class A shares and 5,000 Class B shares and Prudential owned 214,497
Class A shares.
- -------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
Transactions in shares of common stock for the six months ended April 30, 1996
and fiscal year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- -------------
<S> <C> <C>
Six months ended April 30, 1996:
Shares sold....................... 33,091,429 $ 541,474,458
Shares issued in reinvestment of
distributions................... 81,750 1,304,673
Shares reacquired................. (31,969,290) (526,841,709)
----------- -------------
Net increase in shares outstanding
before conversions.............. 1,203,889 15,937,422
Shares issued upon conversion from
Class B......................... 277,590 4,545,227
Shares reacquired upon conversion
into Class Z.................... (1,727,041) (28,514,067)
----------- -------------
Net decrease in shares
outstanding..................... (245,562) $ (8,031,418)
----------- -------------
----------- -------------
Year ended October 31, 1995:
Shares sold....................... 38,906,170 $ 589,161,551
Shares issued in reinvestment of
distributions................... 36,104 541,915
Shares reacquired................. (39,986,485) (609,434,118)
----------- -------------
Net decrease in shares outstanding
before conversion............... (1,044,211) (19,730,652)
Shares issued upon conversion from
Class B......................... 1,476,233 20,877,944
----------- -------------
Net increase in shares
outstanding..................... 432,022 $ 1,147,292
----------- -------------
----------- -------------
<CAPTION>
Class B
- ----------------------------------
<S> <C> <C>
Six months ended April 30, 1996:
Shares sold....................... 23,659,612 $ 378,348,508
Shares issued in reinvestment of
distributions................... 258,053 4,020,465
Shares reacquired................. (22,821,079) (365,698,352)
----------- -------------
Net increase in shares outstanding
before conversion............... 1,096,586 16,670,621
Shares reacquired upon conversion
into Class A.................... (284,806) (4,545,227)
----------- -------------
Net increase in shares
outstanding..................... 811,780 $ 12,125,394
----------- -------------
----------- -------------
Year ended October 31, 1995:
Shares sold....................... 29,316,819 $ 437,515,082
Shares issued in reinvestment of
distributions................... 177,755 2,621,884
Shares reacquired................. (33,274,969) (498,258,260)
----------- -------------
Net decrease in shares outstanding
before conversion............... (3,780,395) (58,121,294)
Shares reacquired upon conversion
into Class A.................... (1,504,465) (20,877,944)
----------- -------------
Net decrease in shares
outstanding..................... (5,284,860) $ (78,999,238)
----------- -------------
----------- -------------
<CAPTION>
Class C Shares Amount
- ---------------------------------- ----------- -------------
<S> <C> <C>
Six months ended April 30, 1996:
Shares sold....................... 5,456,750 $ 87,104,663
Shares issued in reinvestment of
distributions................... 3,599 56,081
Shares reacquired................. (5,283,400) (84,798,001)
----------- -------------
Net increase in shares
outstanding..................... 176,949 $ 2,362,743
----------- -------------
----------- -------------
Year ended October 31, 1995:
Shares sold....................... 4,052,224 $ 60,378,415
Shares issued in reinvestment of
distributions................... 373 5,511
Shares reacquired................. (3,936,941) (58,946,761)
----------- -------------
Net increase in shares
outstanding..................... 115,656 $ 1,437,165
----------- -------------
----------- -------------
<CAPTION>
Class Z
- ----------------------------------
<S> <C> <C>
March 1, 1996(a) through
April 30, 1996
Shares sold....................... 1,018,665 $ 16,990,894
Shares issued in reinvestment of
distributions................... 228 3,872
Shares reacquired................. (827,785) (13,787,674)
----------- -------------
Net increase in shares outstanding
before conversion............... 191,108 3,207,092
Shares issued upon conversion from
Class A......................... 1,727,041 28,514,067
----------- -------------
Net increase in shares
outstanding..................... 1,918,149 $ 31,721,159
----------- -------------
----------- -------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- -------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL PACIFIC GROWTH FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
A
- ---------------------------------------------------------------
July 24,
Six Months
1992(a)
Ended Year Ended
October 31, Through
April 30,
- -------------------------------- October 31,
1996(e) 1995(e) 1994(e)
1993(e) 1992
---------- -------- -------
------- -----------
<S> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 15.75 $ 16.90 $ 16.10
$ 10.65 $ 10.00
---------- -------- -------
------- -----------
Income from investment operations
Net investment income (loss)............ .02 .04 (.08)
(.01) (.02)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... 1.56 (1.09) 1.15
5.48 .67
---------- -------- -------
------- -----------
Total from investment operations..... 1.58 (1.05) 1.07
5.47 .65
---------- -------- -------
------- -----------
Less distributions
Distributions in excess of net
investment income.................... (.19) -- (.06)
(.02) --
Distributions from net realized gains... -- (.10) (.21)
-- --
---------- -------- -------
------- -----------
Total distributions.................. (.19) (.10) (.27)
(.02) --
---------- -------- -------
------- -----------
Net asset value, end of period.......... $ 17.14 $ 15.75 $ 16.90
$ 16.10 $ 10.65
---------- -------- -------
------- -----------
---------- -------- -------
------- -----------
TOTAL RETURN(d)......................... 10.20% (6.23)% 6.67%
51.39% 6.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $103,554 $ 98,998 $98,921
$64,353 $13,918
Average net assets (000)................ $115,199 $101,920 $92,233
$26,264 $12,884
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.40%(b) 1.46% 1.57%
1.63% 2.72%(b)
Expenses, excluding distribution
fees.............................. 1.15%(b) 1.21% 1.33%
1.43% 2.52%(b)
Net investment income (loss)......... .26%(b) .26%
(.50)% (.04)% (.75)%(b)
For Class A, B, C and Z shares:
Portfolio turnover................... 59% 54% 56%
44% 0%
Average commission rate paid per
share $ .0179 N/A N/A
N/A N/A
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) 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.
(e) Calculated based upon weighted average shares outstanding during the
period.
- -------------------------------------------------------------------------------
12 See Notes to Financial Statements.
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL PACIFIC GROWTH FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
B Class C
- ------------------------------------------------------------------
- ----------
July 24,
Six Months
1992(a) Six Months
Ended Year Ended
October 31, Through Ended
April 30,
- ---------------------------------- October 31, April 30,
1996(e) 1995(e) 1994(e)
1993(e) 1992 1996(e)
---------- --------
- -------- -------- ----------- ----------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 15.38 $ 16.62 $
15.94 $ 10.63 $ 10.00 $15.38
---------- --------
- -------- -------- ----------- -----
Income from investment operations
Net investment income (loss)............ (.04) (.08)
(.21) (.10) (.04) (.04)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... 1.54 (1.06)
1.13 5.43 .67 1.54
---------- --------
- -------- -------- ----------- -----
Total from investment operations..... 1.50 (1.14)
.92 5.33 .63 1.50
---------- --------
- -------- -------- ----------- -----
Less distributions
Distributions in excess of net
investment income.................... (.19) --
(.03) (.02) -- (.19)
Distributions from net realized gains... -- (.10)
(.21) -- -- --
---------- --------
- -------- -------- ----------- -----
Total distributions.................. (.19) (.10)
(.24) (.02) -- (.19)
---------- --------
- -------- -------- ----------- -----
Net asset value, end of period.......... $ 16.69 $ 15.38 $
16.62 $ 15.94 $ 10.63 $16.69
---------- --------
- -------- -------- ----------- -----
---------- --------
- -------- -------- ----------- -----
TOTAL RETURN(d)......................... 9.85% (6.82)%
5.79% 50.17% 6.30% 9.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $387,132 $344,313
$459,949 $250,997 $20,050 $5,603
Average net assets (000)................ $365,024 $368,771
$404,506 $ 74,590 $16,025 $5,090
Ratios to average net assets:
Expenses, including distribution
fees.............................. 2.15%(b) 2.21%
2.33% 2.37% 3.52%(b) 2.15%(b)
Expenses, excluding distribution
fees.............................. 1.15%(b) 1.21%
1.33% 1.37% 2.52%(b) 1.15%(b)
Net investment income (loss)......... (.49)%(b) (.55)%
(1.27)% (.83)% (1.55)%(b) (.49)%(b)
<CAPTION>
Class
Z
- ---------
August 1, March
1,
Year 1994(c)
1996(f)
Ended Through
Through
October 31, October 31, April
30,
1995(e) 1994(e) 1996
----------- -----------
- ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 16.62 $ 16.68 $
16.57
----- -----
- ---------
Income from investment operations
Net investment income (loss)............ (.08) (.06)
.04
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... (1.06) --
.54
----- -----
- ---------
Total from investment operations..... (1.14) (.06)
.58
----- -----
- ---------
Less distributions
Distributions in excess of net
investment income.................... -- --
--
Distributions from net realized gains... (.10) --
--
----- -----
- ---------
Total distributions.................. (.10) --
--
----- -----
- ---------
Net asset value, end of period.......... $ 15.38 $ 16.62 $
17.15
----- -----
- ---------
----- -----
- ---------
TOTAL RETURN(d)......................... (6.82)% (.36)%
3.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $ 2,443 $ 718
$32,889
Average net assets (000)................ $ 1,624 $ 458
$30,081
Ratios to average net assets:
Expenses, including distribution
fees.............................. 2.21% 3.00%(b)
1.15%(b)
Expenses, excluding distribution
fees.............................. 1.21% 2.00%(b)
1.15%(b)
Net investment income (loss)......... (.43)% (1.64)%(b)
.51%(b)
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) 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.
(e) Calculated based upon weighted average shares outstanding during the
period.
(f) Commencement of offering of Class Z shares.
- -------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
Getting The Most
From Your Prudential
Mutual Fund
Some mutual fund shareholders won't ever read this--they don't read annual and
semi-annual reports. It's quite understandable. These annual and semi-annual
reports are prepared to comply with Federal regulations. They are often written
in language that is difficult to understand. So when most people run into those
particularly daunting sections of these reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "At A Glance" page where we compare the Fund and the comparable average
calculated by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the Fund's
performance -- it generally smoothes out returns and gives you an idea how much
the Fund has earned in an average year, for a given time period. Under the
performance box, you'll see legends that explain the performance information,
whether fees and sales charges have been included in returns, and the inception
dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. And keep in mind that past performance is not
indicative of future results.
Portfolio
Manager's Report
The portfolio manager who invests your money for you reports on successful--and
not-so-successful -- strategies in this section of your report. Look for recent
purchases and sales here, as well as information about the sectors the
portfolio manager favors and any changes that are on the drawing board.
Portfolio Of
Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
Statement Of Assets
And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily along with
the value of every security in the portfolio.
Statement Of
Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here -- both realized and unrealized.
Statement Of Changes
In Net Assets
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it -- through dividends and
distributions -- and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.
Notes To Financial
Statements
This is the kind of technical material that can intimidate readers, but it does
contain useful information. The Notes provide a brief history and explanation
of your Fund's objectives. In addition, they also outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages and distributes the
Fund's shares, and more importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per share
basis. It is designed to help you understand how the Fund performed and to
compare this year's performance and expenses to those of prior years.
Independent
Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information is fairly presented and complies with generally accepted accounting
principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult a
tax advisor.
Performance
Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception or for 10 years (whichever
is shorter). To help you put that return in context, we are required to include
the performance of an unmanaged, broad based securities index, as well. The
index does not reflect the cost of buying the securities it contains or the
cost of managing a mutual fund. Of course, the index holdings do not mirror
those of the fund -- the index is a broadly based reference point commonly used
by investors to measure how well they are doing. A definition of the selected
index is also provided. Investors generally cannot invest directly in an index
<PAGE>
Getting The Most
From Your Prudential
Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can
provide you with the following services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -- sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction -- there
are times when a market sector or asset class will lose value or provide little
in the way of total return. Managing your own expectations is easier with help
from someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance -- not just based
on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
Internet Address:
http:\\www.prudential.com
Directors
Stephen C. Eyre
Delayne D. Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. LaBlanc
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Ellyn C. Acker, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of April 30, 1996 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
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