(ICON)
Prudential
Pacific
Growth
Fund, Inc.
ANNUAL
REPORT
Oct. 31, 1996
(LOGO)
<PAGE>
Prudential Pacific Growth Fund, Inc.
Performance At A Glance.
It's been another disappointing 12 months for Pacific
stocks. While smaller
markets like Hong Kong performed well in the period, the
Japanese stock
market -- the Pacific region's largest by far -- declined
substantially as
Japan's economic recovery faltered. Unfortunately, the
Prudential Pacific
Growth Fund was heavily invested in Japan, and this resulted
in our poor
performance over the past 12 months. In fact, the Fund
performed significantly
below the average Pacific fund (as measured by Lipper
Analytical Services),
not only because of our holdings in Japan, but because we
invested in small
company stocks to take advantage of an economic expansion
that didn't occur.
These stocks didn't perform as well as Japanese stocks in
general.
Cumulative Total Returns1 As of
10/31/96
<TABLE>
<CAPTION>
One Three
Since
Year Years
Inception2
<S> <C> <C> <C>
Class A 2.0% 2.0%
64.4%
Class B 1.4 -0.1
59.5
Class C 1.4 N/A -
5.9
Class Z N/A N/A -
4.1
Lipper Pacific Fund Avg3 5.1 8.0
60.9
</TABLE>
Average Annual Total Returns1 As
of 9/30/96
<TABLE>
<CAPTION>
One Three
Since
Year Years
Inception2
<S> <C> <C> <C>
Class A -3.4% 0.9%
11.7%
Class B -3.9 0.9
12.1
Class C 0.1 N/A
- -2.0
</TABLE>
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so that an investor's 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 and
a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%,
1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for
one year. Class B
shares will automatically convert to Class A shares on a
quarterly basis,
approximately seven years after purchase. Class Z shares
have been in existence
for less than one year. Class Z shares are not subject to
any sales charge and
are offered to a limited group of investors.
2Inception dates: 7/24/92 Class A and Class B; 8/1/94 Class
C; 3/1/96 Class Z.
3Lipper average returns are for 38 funds for one year, 18
funds for three years
and 15 funds since inception of the Class A and Class B
shares on 7/24/92.
How Investments Compared.
(As of 10/31/96)
(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 returns 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 that is
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 primarily in
stocks of companies in
the Pacific Basin. Because it invests outside the U.S., it
is subject to the
risks associated with foreign investing, including
political, currency and
social risks and illiquidity. There can be no assurance that
the Fund will
achieve its investment objective, which is long-term growth
of capital.
Our Growth
Style.
As growth investors, we look for significant long-term
economic, social and
demographic change and then invest in companies that we
think will benefit.
Strategy Session.
When investing in the Pacific, it's hard to ignore China and
Japan. In fact,
at the start of the period we thought Japan -- the world's
second largest
economy -- and China, with its population of 1.2 billion,
offered the region's
best growth prospects.
In Japan, we saw signs that the five-year economic slump was
nearing an end,
so we bought the kind of stocks that do well in a recovery.
We were more
cautious about China. But we thought we could benefit from
China's rapid growth
by investing in Hong Kong companies that already do
substantial business there.
Japan's Recovery Starts...
Japan last year appeared poised to emerge from its longest
slump in postwar
history. With interest rates at record lows and the yen
declining, we were
optimistic because these are often harbingers of economic
growth. As a result,
we bought stocks in smaller companies, especially in service
industries. These
types of stocks typically do well in the early stages of
recovery.
...Then Stops.
Unfortunately, Japan's short-lived recovery peaked early in
1996. Japanese
consumers cut back on their spending, causing the economy to
shrink in the
second quarter. We didn't foresee a turnaround anytime soon,
so we shifted into
larger companies with strong international business. These
multinationals rely
heavily on revenues from abroad and therefore can better
withstand a weak
economy at home. Even so, as the economy weakened, the
market fell 16% in the
past six months, according to the Morgan Stanley Capital
International World
Index (MSCI).
Hong Kong Surges.
As China rapidly modernizes, Hong Kong-based businesses will
supply many of the
goods and services needed by its 1.2 billion people. As a
result, we almost
doubled our holdings in Hong Kong stocks, to 31% of total
investments (as of
October 31) from 16% a year ago. We bought these stocks at
an opportune
time -- after worries about Hong Kong's change of control
from Britain to
China next summer had depressed prices. Fortunately for us,
anxieties about the
transition faded, and increasing confidence in Hong Kong's
future drove stocks
28% higher over the period, as measured by the MSCI.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 10/31/96.
(GRAPH)
<PAGE>
What Went Well.
Hong Kong Traders.
Over the last 12 months, our Hong Kong stocks gained 28%,
the best returns of
any country in our Fund. We did especially well with trading
companies like
Hutchison Whampoa and Wharf Holdings that do strong business
related to China.
CITIC Pacific, the Fund's third largest holding as of
October 31, not only
operates toll roads, bridges and tunnels there, but also
distributes consumer
goods. In addition, our banking and property development
stocks provided nice
returns, fueled by a growing demand for housing by Hong
Kong's young and
growing population.
Five Largest
Holdings.
4.7% Guoco Group
Banking
4.3% Mitsui Fudosan
Property Investment
4.1% CITIC Pacific
Multi-Industry
3.8% Sony
Appliances &
Household Durables
3.8% HSBC Holdings
Banking
Expressed as a percentage of total net assets as of
10/31/96.
And Not So Well.
Bad Timing.
Our timing was off in Japan. First, we misjudged the start
of a consumer-driven
economic recovery last year. As a result, our retail and
capital goods stocks
declined when growth faltered in the second quarter of 1996.
Second, we didn't
realize soon enough how weak the recovery was, so we were
late in shifting out
of these economically-sensitive stocks. In retrospect, we
should have invested
sooner in multinational companies with strong international
business. These
companies were some of Japan's strongest performers in the
period.
Market Shifts.
Early in 1996, we were caught by surprise when rising
interest rates in the
U.S. sparked rallies in emerging stock markets like Taiwan,
India and
Indonesia. (These markets don't have as many interest rate-
sensitive
stocks -- such as real estate and banks -- as more
established Pacific Basin
markets, so they're hurt less when lending rates rise.) But
by the third
quarter, interest rates had leveled off and these markets
shed many of their
gains.
Singapore Housing
Woes.
We weren't successful in Singapore, where we had about 10%
of the Fund's total
investments as of October 31, about the same percentage as
12 months ago. We
had invested in some property development and banking
companies to profit from
Singapore's booming demand for private housing. We were
caught off-guard in
May, however, when the government -- seeking to dampen
inflationary
pressures -- suddenly restricted banks' ability to finance
mortgages. This
hurt us because we were heavily invested in such financial
services companies
as Wing Tai Holdings and Overseas Union Bank, which declined
sharply.
Looking Ahead.
After a strong first half, Pacific Basin stock markets
stumbled in the last six
months, especially in Japan. We think Japanese stocks will
rebound if economic
growth picks up. From our talks with company managements, we
think consumer
spending may already have bottomed, so growth could increase
soon. In fact,
our economists estimate that Japan's economy will grow by 3%
in 1997. Once we
see convincing evidence of a sustainable recovery, we'll
probably shift into
stocks that do best in the early stages of the business
cycle. Elsewhere in
the Pacific, we continue to like Hong Kong stocks and we're
carefully looking
at markets like The Philippines for attractive investments.
1
<PAGE>
President's Letter December
2, 1996
(PICTURE)
Dear Shareholder:
For many investors, 1996 may well be the second year of back-
to-back,
double-digit stock market returns. In late November, the
Dow Jones Industrial
Average passed 6500 -- only weeks after breaking the 6000
mark in mid-October.
America's economic expansion is entering its sixth year and
there seems little
evidence of an end to the continued modest growth and low
inflation we've
enjoyed for the last several years.
This is good news. For most investors it's meant an increase
in their share
values for college funds, retirement nest eggs or other long-
term financial
goals. However, as you read your year-end account statements
and make plans for
1997, it's important to remember that there never is a
"sure thing" when it
comes to investment returns. Stock and bond markets go down
just as they go up.
(Did you notice the brief period of decline this past
summer?) No one likes to
see the value of their investments fall but such periods
remind us we must keep
our expectations realistic.
Regardless of the market's direction, a wise investor plans
for tomorrow's
needs today. Your Financial Advisor or Registered
Representative can help you:
- - Review your portfolio and suggest strategies for 1997,
such as diversifying
across different types of investments. Financial markets
seldom move in
lockstep. By investing in a mix of stock and bond funds
(foreign & domestic)
and money market funds you may be in a better position to
achieve your
long-term goals and to weather periods of uncertainty.
- - See why annuities have become popular retirement planning
tools. The choices
are broader than ever. Our new Discovery SelectSM Variable
Annuity offers you
many of the keys to successful retirement planning,
including a personalized
asset allocation program and a choice of 21 variable- or
fixed-rate
investment options offering a broad array of investment
objectives and
styles.
- - Explain new retirement savings developments. For example,
Congress has
expanded the contribution limit on spousal IRAs. And don't
forget, it's not
too late for you to make a contribution to your IRA or
open one for 1996. The
IRS deadline is April 15, 1997, but it's best to act
sooner.
Why not contact your Financial Advisor or Registered
Representative today? If
you are interested in Discovery SelectSM call for a
prospectus, which contains
more complete information. Read it carefully before you
invest.
Sincerely,
Richard A. Redeker
President
P.S. Your 1997 Prudential IRA contribution may qualify you
for a waiver of the
annual custodial fee. Ask your financial representative for
details.
2
<PAGE>
Portfolio of Investments
as of October 31, 1996 PRUDENTIAL PACIFIC GROWTH
FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
EQUITIES AND EQUIVALENTS--90.7%
COMMON STOCKS--89.5%
- ------------------------------------------------------------
Australia--9.3%
646,900 Brambles Industries, Ltd.
(Business & Public Services) $
10,709,925
1,103,988 Coca Cola Amatil, Ltd.
(Beverages & Tobacco)
15,172,839
3,508,100 Publishing & Broadcasting, Ltd.
(Broadcasting & Publishing)
15,784,227
3,990,500 Sea World Property Trust, Ltd.
(Leisure & Tourism)
4,235,797
---------
- ----
45,902,788
- ------------------------------------------------------------
Hong Kong--28.0%
1,289,000 Cheung Kong Infrastructure(a)
(Multi-Industry)
2,400,559
4,162,000 CITIC Pacific, Ltd.
(Multi-Industry)
20,238,897
4,344,600 Guoco Group, Ltd.
(Banking)
22,981,059
6,404,000 Hong Kong & Shanghai Hotels, Ltd.
(Leisure & Tourism)
11,760,793
905,204 HSBC Holdings, Plc.
(Banking)
18,438,430
21,157,000 Hung Hing Printing Group, Ltd.
(Forest Products & Paper)
5,677,656
1,906,000 Hutchison Whampoa, Ltd.
(Multi-Industry)
13,311,089
1,466,700 Jardine Matheson Holdings, Ltd.
(Multi-Industry)
8,286,855
3,027,000 New World Development Co., Ltd.
(Property Development)
17,616,590
1,004,000 Television Broadcasts, Ltd.
(Broadcasting & Publishing)
3,518,843
3,172,000 Wharf Holdings, Ltd.
(Multi-Industry)
13,086,418
---------
- ----
137,317,189
India--1.9%
74,000 Bajaj Auto Ltd. (GDR)
(Automobiles & Auto Parts) $
2,368,000
554,040 Tata Engineering & Locomotive Ltd.
(GDR) (Automobiles & Trucks)
6,994,755
---------
- ----
9,362,755
- ------------------------------------------------------------
Indonesia--1.4%
230,300 PT Indonesia Satellite (ADR)
(Utilities-Telephones)
6,937,787
- ------------------------------------------------------------
Japan--29.6%
303,000 Alpine Electronics, Inc.
(Electrical Equipment)
4,785,680
639,000 Daibiru Corp.
(Property Investment)
7,233,010
506,000 Honda Motor Co., Ltd.
(Automobiles & Auto Parts)
12,076,690
400 Japan Associated Finance Co.
(Financial Services)
32,887
475,000 JGC Corp.
(Construction)
5,001,536
76,000 Keyence Corp.
(Electronic Components &
Instruments)
8,802,703
49,000 Kokusai Denshin Denwa Co., Ltd.
(Utilities-Telephones)
4,235,072
1,708,000 Mitsui Fudosan Co., Ltd.
(Property Investment)
21,131,751
118,200 Namco Ltd.
(Recreation & Other Consumer
Goods)
3,536,717
282,000 Nichiei Construction Co., Ltd.
(Property Development)
2,415,057
781,000 Nichirei Corp.
(Miscellaneous Industrial)
4,666,880
899,000 Nippon Express Co., Ltd.
(Transportation-Road & Rail)
7,296,758
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements.
3 -----
<PAGE>
Portfolio of Investments
as of October 31, 1996 PRUDENTIAL PACIFIC GROWTH
FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Japan--(cont'd.)
51,800 Nippon Television Network
(Broadcasting & Publishing) $
14,999,342
550,000 Nissan Chemical Industries
(Chemicals)
3,238,275
638,000 Nissan Motor Co., Ltd.
(Automobiles & Auto Parts)
4,820,059
60 Nissen Co., Ltd.
(Retail)
500
523,000 Onward Kashiyama & Co., Ltd.
(Textiles & Apparel)
7,296,714
311,000 Sony Corp.
(Appliances & Household Durables)
18,638,442
385,000 Toyota Motor Corp.
(Automobiles & Auto Parts)
9,087,439
140,600 World Co., Ltd.
(Textiles & Apparel)
5,860,132
---------
- ----
145,155,644
- ------------------------------------------------------------
Malaysia--9.6%
4,608,000 Berjaya Capital Berhad
(Insurance)
4,468,474
4,682,000 IJM Corporation Berhad
(Construction)
10,192,361
4,565,500 Kuala Lumpur Kepong Berhad
(Misc. Materials & Commodities)
11,474,738
9,115,000 Renong Berhad
(Multi-Industry)
14,358,876
1,134,000 Resorts World Berhad
(Leisure & Tourism)
6,508,213
---------
- ----
47,002,662
- ------------------------------------------------------------
The Philippines--1.0%
900,000 C & P Homes, Inc.
(Property Development)
410,959
4,897,800 Filinvest Land, Inc.
(Property Development)
1,658,692
13,129,600 Solid Group, Inc.(a)
(Electrical Equipment)
2,697,863
---------
- ----
4,767,514
Singapore--8.7%
1,069,000 City Developments, Ltd.
(Property Development) $
8,424,494
240,750 First Capital Corp.
(Property Development)
557,221
2,661,000 Hong Leong Finance, Ltd.
(Financial Services)
8,123,749
2,427,000 Marco Polo Developments, Ltd.
(Leisure & Tourism)
4,514,547
550,600 Overseas Chinese Banking Corp., Ltd.
(Banking)
6,293,688
940,000 Overseas Union Bank
(Banking)
6,406,816
1,604,750 Sembawang Maritime, Ltd.
(Energy Equipment & Services)
4,238,317
173,160 Singapore Finance, Ltd.
(Financial Services)
248,337
1,537,000 Wing Tai Holdings
(Property Development)
3,775,662
---------
- ----
42,582,831
---------
- ----
Total common stocks
(cost $407,474,285)
439,029,170
WARRANTS(a)--0.5%
- ------------------------------------------------------------
Malaysia--0.1%
932,375 Renong Berhad
expiring Nov. '00 @ MYR4.10
(Multi-Industry)
380,109
- ------------------------------------------------------------
Singapore--0.4%
190,200 Hong Leong Finance, Ltd.
expiring Sept.'98 @ SGD3.25
(Financial Services)
107,355
605,600 United Overseas Bank, Ltd.
expiring June '97 @ SGD3.34
(Banking)
2,149,805
---------
- ----
2,257,160
---------
- ----
Total warrants
(cost $2,938,339)
2,637,269
---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
- -----4 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Portfolio of Investments as of October 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
CONVERTIBLE BOND--0.6%
- ------------------------------------------------------------
The Philippines--0.6%
$2,970 Filinvest Capital Cayman Islands,
Ltd.
3.75%, 2/1/02
(Property Development)
(cost $2,972,700) $
2,925,450
CONVERTIBLE LOAN STOCK--0.1%
Shares
- ------------------------------------------------------------
Singapore--0.1%
631,000 Sembawang Maritime, Ltd.
(Energy Equipment & Services)
(cost $402,347)
551,033
- ------------------------------------------------------------
Total Investments--90.7%
(cost $413,787,671; Note 4)
445,142,922
Other assets in excess of
liabilities--9.3%
45,404,745
---------
- ----
Net Assets--100% $
490,547,667
---------
- ----
---------
- ----
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements.
5 -----
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
October 31, 1996
<S>
<C>
Investments, at value (cost
$413,787,671)...............................................
.................. $445,142,922
Foreign currency, at value (cost
$5,462,957).................................................
............. 5,472,281
Receivable for Fund shares
sold........................................................
................... 49,720,420
Dividends and interest
receivable..................................................
....................... 1,063,865
Receivable for investments
sold........................................................
................... 444,856
Deferred expenses and other
assets......................................................
.................. 42,012
- ----------------
Total
assets......................................................
..................................... 501,886,356
- ----------------
Liabilities
Bank
overdraft...................................................
.........................................
8,229,150
Payable for Fund shares
reacquired..................................................
...................... 1,630,173
Accrued expenses and other
liabilities.................................................
................... 488,500
Distribution fees
payable.....................................................
............................ 302,269
Management fee
payable.....................................................
............................... 295,119
Payable for investments
purchased...................................................
...................... 273,835
Withholding taxes
payable.....................................................
............................ 119,643
- ----------------
Total
liabilities.................................................
..................................... 11,338,689
- ----------------
Net
Assets......................................................
..........................................
$490,547,667
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par.........................................................
.......................... $ 31,569
Paid-in capital in excess of
par.........................................................
.............. 448,970,212
- ----------------
449,001,781
Accumulated net realized gains on investments and foreign
currency transactions........................
10,192,578
Net unrealized appreciation on investments and foreign
currencies......................................
31,353,308
- ----------------
Net assets, October 31,
1996........................................................
...................... $490,547,667
- ----------------
- ----------------
Class A:
Net asset value and redemption price per share
($113,584,733 / 7,160,434 shares of common stock
issued and outstanding)............................
$15.86
Maximum sales charge (5.00% of offering
price)......................................................
... .83
- ----------------
Maximum offering price to
public......................................................
................. $16.69
- ----------------
- ----------------
Class B:
Net asset value, offering price and redemption price per
share
($327,315,059 / 21,259,940 shares of common stock
issued and outstanding)...........................
$15.40
- ----------------
- ----------------
Class C:
Net asset value, offering price and redemption price per
share
($12,360,064 / 802,558 shares of common stock issued
and outstanding)...............................
$15.40
- ----------------
- ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($37,287,811 / 2,346,031 shares of common stock issued
and outstanding).............................
$15.89
- ----------------
- ----------------
</TABLE>
- ------------------------------------------------------------
- --------------------
- -----6 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income October 31,
1996
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $739,922)................... $ 7,795,122
Interest (net of foreign withholding
taxes of $840)....................... 654,062
--------------
- --
Total income......................... 8,449,184
--------------
- --
Expenses
Management fee.......................... 3,692,994
Distribution fee--Class A............... 265,371
Distribution fee--Class B............... 3,575,481
Distribution fee--Class C............... 64,016
Transfer agent's fees and expenses...... 889,000
Custodian's fees and expenses........... 370,000
Reports to shareholders................. 250,000
Registration fees....................... 131,000
Audit fees and expenses................. 48,000
Directors' fees......................... 42,000
Amortization of organizational
expense.............................. 40,000
Legal fees and expenses................. 20,000
Miscellaneous........................... 23,705
--------------
- --
Total expenses....................... 9,411,567
--------------
- --
Net investment loss........................
(962,383)
--------------
- --
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions
Net realized gain on:
Investment transactions (net of Thailand
capital gains taxes of $6,359)....... 28,262,057
Foreign currency transactions........... 7,036,241
--------------
- --
35,298,298
--------------
- --
Net change in unrealized appreciation on:
Investments (net of deferred Thailand
capital gains tax $26,771)...........
(10,053,777)
Foreign currencies......................
(7,868,187)
--------------
- --
(17,921,964)
--------------
- --
Net gain on investments and foreign
currencies.............................. 17,376,334
--------------
- --
Net Increase in Net Assets
Resulting from Operations.................. $ 16,413,951
--------------
- --
--------------
- --
</TABLE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended October 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment loss....... $ (962,383) $
(1,766,039)
Net realized gain (loss)
on investment and
foreign currency
transactions........... 35,298,298
(14,948,681)
Net change in unrealized
appreciation on
investments and foreign
currencies............. (17,921,964)
(17,348,093)
--------------- ----------
- ------
Net increase (decrease) in
net assets resulting
from operations........ 16,413,951
(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 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 conversions)
(Note 5)
Net proceeds from shares
sold................... 2,354,962,543
1,087,055,048
Net asset value of shares
issued in reinvestment
of distributions....... 5,385,091
3,169,310
Cost of shares
reacquired............. (2,326,287,193)
(1,166,639,139)
--------------- ----------
- ------
Net increase (decrease) in
net assets from Fund
share transactions..... 34,060,441
(76,414,781)
--------------- ----------
- ------
Total increase (decrease).... 44,793,495
(113,833,672)
Net Assets
Beginning of year............ 445,754,172
559,587,844
--------------- ----------
- ------
End of year.................. $ 490,547,667 $
445,754,172
--------------- ----------
- ------
--------------- ----------
- ------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements.
7 -----
<PAGE>
Notes to Financial Statements PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
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
LLC (``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 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.
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 year. Accordingly,
realized foreign currency
gains (losses) are included in the reported net realized
gains on investment
transactions.
Net realized gains on foreign currency transactions of
$7,036,241 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 at
fiscal year 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>
Notes to Financial Statements PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
currency transactions. Risks may arise upon entering into
these contracts from
the potential inability of the counterparties to meet the
terms of their
contracts. There were no forward currency contracts
outstanding at October 31,
1996.
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 undistributed net investment
income by $970,112,
increase paid-in capital in excess of par by $4,863,161 and
decrease accumulated
net realized gains by $5,833,273 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 had a distribution agreement with Prudential Mutual
Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class
A shares of the
Fund through January 1, 1996. 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>
Notes to Financial Statements PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
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 year ended October 31,
1996.
PMFD has advised the Fund that it has received approximately
$363,000 in
front-end sales charges resulting from sales of Class A
shares during the year
ended October 31, 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 year ended October 31,
1996, it received
approximately $1,167,000 and $6,000 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 year
ended October 31,
1996, the Fund incurred fees of approximately $753,000 for
the services of PMFS.
As of October 31, 1996, approximately $60,000 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 year ended October 31, 1996, PSI earned aproximately
$85,700 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, 1996 were $423,958,631 and
$430,325,749,
respectively.
The United States federal income tax basis of the Fund's
investments at October
31, 1996 was $415,028,626 and accordingly, net unrealized
appreciation for
federal income tax purposes was $30,114,296 (gross
unrealized
appreciation--$52,019,585; gross unrealized depreciation--
$21,905,289).
For federal income tax purposes, the Fund utilized its
capital loss carryforward
of approximately $17,227,000 to partially offset the Fund's
net taxable gains
realized and recognized in the year ended October 31, 1996.
- ------------------------------------------------------------
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 a limited
group of investors.
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
31,568,963 shares of common stock issued and outstanding at
October 31, 1996,
PMF owned 5,000 Class A shares and 5,000 Class B shares.
- ------------------------------------------------------------
- --------------------
10
<PAGE>
Notes to Financial Statements PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
Transactions in shares of common stock for the years ended
October 31, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------- ----------- ----------
- -----
<S> <C> <C>
Year ended October 31, 1996:
Shares sold...................... 72,006,368 $
1,167,807,248
Shares issued in reinvestment of
distributions.................. 81,750
1,304,673
Shares reacquired................ (69,901,383)
(1,140,331,551)
----------- ----------
- -----
Net increase in shares
outstanding before
conversion..................... 2,186,735
28,780,370
Shares issued upon conversion
from Class B................... 414,180
6,572,012
Shares reacquired upon conversion
into Class Z................... (1,727,041)
(28,514,067)
----------- ----------
- -----
Net increase in shares
outstanding.................... 873,874 $
6,838,315
----------- ----------
- -----
----------- ----------
- -----
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>
Year ended October 31, 1996:
Shares sold...................... 53,304,965 $
842,080,515
Shares issued in reinvestment of
distributions.................. 258,053
4,020,465
Shares reacquired................ (54,287,368)
(859,471,344)
----------- ----------
- -----
Net decrease in shares
outstanding before
conversion..................... (724,350)
(13,370,364)
Shares reacquired upon conversion
into Class A................... (402,952)
(6,572,012)
----------- ----------
- -----
Net decrease in shares
outstanding.................... (1,127,302) $
(19,942,376)
----------- ----------
- -----
----------- ----------
- -----
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>
Year ended October 31, 1996:
Shares sold...................... 17,074,079 $
268,732,474
Shares issued in reinvestment of
distributions.................. 3,599
56,081
Shares reacquired................ (16,433,961)
(259,854,693)
----------- ----------
- -----
Net increase in shares
outstanding.................... 643,717 $
8,933,862
----------- ----------
- -----
----------- ----------
- -----
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
October 31, 1996
Shares sold...................... 4,714,608 $
76,342,306
Shares issued in reinvestment of
distributions.................. 228
3,872
Shares reacquired................ (4,095,846)
(66,629,605)
----------- ----------
- -----
Net increase in shares
outstanding before
conversion..................... 618,990
9,716,573
Shares issued upon conversion
from Class A................... 1,727,041
28,514,067
----------- ----------
- -----
Net increase in shares
outstanding.................... 2,346,031 $
38,230,640
----------- ----------
- -----
----------- ----------
- -----
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- ------------------------------------------------------------
Note 6. Distributions
On December 10, 1996 the Board of Directors of the Fund
declared a distribution
from long-term capital gains to Class A, B, C and Z
shareholders of $.348 per
share, payable on December 19, 1996 to shareholders of
record on December 16,
1996.
- ------------------------------------------------------------
- --------------------
11
<PAGE>
Financial Highlights PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A
----------------
- ---------------------------------------------
July 24,
1992(a)
Year
Ended October 31, Through
----------------
- ----------------------------- October 31,
1996(c)
1995(c) 1994(c) 1993(c) 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)............ .07
.04 (.08) (.01) (.02)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... .23
(1.09) 1.15 5.48 .67
-------- ---
- ----- ------- ------- -----------
Total from investment operations..... .30
(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.......... $ 15.86 $
15.75 $ 16.90 $ 16.10 $ 10.65
-------- ---
- ----- ------- ------- -----------
-------- ---
- ----- ------- ------- -----------
TOTAL RETURN(d)......................... 1.97%
(6.23)% 6.67% 51.39% 6.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $113,585 $
98,998 $98,921 $64,353 $13,918
Average net assets (000)................ $106,148
$101,920 $92,233 $26,264 $12,884
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.37%
1.46% 1.57% 1.63% 2.72%(b)
Expenses, excluding distribution
fees.............................. 1.12%
1.21% 1.33% 1.43% 2.52%(b)
Net investment income (loss)......... .44%
.26% (.50)% (.04)% (.75)%(b)
For Class A, B, C and Z shares:
Portfolio turnover................... 91%
54% 56% 44% 0%
Average commission rate paid per
share $ .0209
N/A N/A N/A N/A
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Calculated based upon weighted average shares
outstanding during the period.
(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.
- ------------------------------------------------------------
- --------------------
- -----12 See Notes to
Financial Statements.
<PAGE>
Financial Highlights PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B Class C
----------------
- ------------------------------------------------ -------
- ---
July 24,
1992(a) Year Ended
Year Ended October 31, Through
October
----------------
- -------------------------------- October 31, 31,
1996(c)
1995(c) 1994(c) 1993(c) 1992
1996(c)
-------- --
- ------ -------- -------- ----------- -------
- ---
<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......................... .25
(1.06) 1.13 5.43 .67
.25
-------- --
- ------ -------- -------- ----------- -------
- ---
Total from investment operations..... .21
(1.14) .92 5.33 .63
.21
-------- --
- ------ -------- -------- ----------- -------
- ---
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.......... $ 15.40 $
15.38 $ 16.62 $ 15.94 $ 10.63 $
15.40
-------- --
- ------ -------- -------- ----------- -------
- ---
-------- --
- ------ -------- -------- ----------- -------
- ---
TOTAL RETURN(d)......................... 1.36%
(6.82)% 5.79% 50.17% 6.30%
1.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $327,315
$344,313 $459,949 $250,997 $20,050 $
12,360
Average net assets (000)................ $357,548
$368,771 $404,506 $ 74,590 $16,025 $
6,402
Ratios to average net assets:
Expenses, including distribution
fees.............................. 2.12%
2.21% 2.33% 2.37% 3.52%(b)
2.12%
Expenses, excluding distribution
fees.............................. 1.12%
1.21% 1.33% 1.37% 2.52%(b)
1.12%
Net investment income (loss)......... (.25)%
(.55)% (1.27)% (.83)% (1.55)%(b)
(.25)%
<CAPTION>
Class Z
- -----------
August 1, March 1,
Year Ended
1994(e) 1996(f)
October
Through Through
31,
October 31, October 31,
1995(c)
1994(c) 1996(c)
----------- --
- --------- -----------
<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) .11
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... (1.06)
- -- (.79)
-----
- ----- -----------
Total from investment operations..... (1.14)
(.06) (.68)
-----
- ----- -----------
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 $ 15.89
-----
- ----- -----------
-----
- ----- -----------
TOTAL RETURN(d)......................... (6.82)%
(.36)% (4.09)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $ 2,443
$ 718 $37,288
Average net assets (000)................ $ 1,624
$ 458 $33,868
Ratios to average net assets:
Expenses, including distribution
fees.............................. 2.21%
3.00%(b) 1.12%(b)
Expenses, excluding distribution
fees.............................. 1.21%
2.00%(b) 1.12%(b)
Net investment income (loss)......... (.43)%
(1.64)%(b) .68%(b)
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Calculated based upon weighted average shares
outstanding during the period.
(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) Commencement of offering of Class C shares.
(f) Commencement of offering of Class Z shares.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements.
13-----
<PAGE>
Independent Auditors' Report PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
The Shareholders and Board of Directors
Prudential Pacific Growth Fund, Inc.
We have audited the accompanying statement of assets and
liabilities, including
the portfolio of investments, of Prudential Pacific Growth
Fund, Inc., as of
October 31, 1996, the related statements of operations for
the year then ended
and of changes in net assets for each of the two years in
the period then ended,
and the financial highlights for each of the four years in
the period then ended
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, 1996 by correspondence with the custodian and
brokers. An audit also
includes assessing the accounting principles used and
significant estimates made
by management, as well as evaluating the overall financial
statement
presentation. We believe that our audits provide 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, 1996, the results of its
operations, the
changes in its net assets, and its financial highlights for
the respective
stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
December 12, 1996
Federal Income Tax Information PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
We are required by the Internal Revenue Code to advise you
within 60 days of the
Fund's fiscal year end (October 31, 1996) as to the federal
income tax status of
dividends paid by the Fund during such fiscal year.
Accordingly, we are advising
you that in the fiscal year ended October 31, 1996, the Fund
paid distributions
from foreign currency gains which are taxable as ordinary
income.
We wish to advise you that the corporate dividends received
deduction for the
Fund is zero. Only funds that invest in U.S. equity
securities are entitled to
pass-through a corporate dividends received deduction.
In January 1997 you will be advised on IRS Form 1099-DIV, or
substitute Form
1099, as to the federal tax status of the distributions
received by you in
calendar 1996.
- ------------------------------------------------------------
- --------------------
- -----14
<PAGE>
Supplemental Proxy Information PRUDENTIAL
PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
The Annual Meeting of Shareholders of the Prudential
Pacific Growth Fund,
Inc. (the ``Fund'') was held on Wednesday, October 30, 1996
at the offices of
Prudential Securities Incorporated, One Seaport Plaza, New
York, New York. The
meeting was held for the following purposes:
(1) To elect Directors as follows: Edward D. Beach, Stephen
C. Eyre, Delayne D.
Gold, Robert F. Gunia, Don G. Hoff, Robert E. LaBlanc,
Mendel A. Melzer,
Richard A. Redeker, Robin B. Smith, Stephen Stoneburn,
and Nancy H. Teeters.
(2) To approve the proposed elimination of the Fund's
fundamental investment
restriction relating to investment in securities of
unseasoned issuers.
(3) To ratify the selection of Deloitte & Touche LLP as
independent public
accountants for the fiscal year ending October 31, 1997.
The results of the proxy solicitation on the above
matters were as follows:
<TABLE>
<CAPTION>
Director/Matter
Votes for Votes against
Abstentions
--
- -------------- ------------- ---
- --------
<S>
<C> <C>
<C>
(1) Edward D. Beach
14,271,976 --
762,849
Stephen C. Eyre
14,273,250 --
761,575
Delayne D. Gold
14,282,758 --
752,067
Robert F. Gunia
14,299,153 --
735,672
Don G. Hoff
14,297,388 --
737,437
Robert E. LaBlanc
14,302,137 --
732,688
Mendel A. Melzer
14,290,302 --
744,523
Richard A. Redeker
14,290,852 --
743,973
Robin B. Smith
14,293,439 --
741,386
Stephen Stoneburn
14,300,254 --
734,571
Nancy H. Teeters
14,280,914 --
753,911
(2) Elimination of Investment Restriction
10,620,075 794,903
889,971
(3) Deloitte & Touche LLP
14,059,766 218,238
756,821
</TABLE>
- ------------------------------------------------------------
- --------------------
15-----
<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>
Comparing A $10,000 Investment.
- -------------------------------
Prudential Pacific Growth Fund, Inc. vs. the
Morgan Stanley Capital International Pacific Index:
Class A
(GRAPH)
Class B
(GRAPH)
Class C
(GRAPH)
Class Z
(GRAPH)
Past performance is not indicative of future results.
Investment return and
principal value will fluctuate so an investor's shares, when
redeemed, may be
worth more or less than their original cost. The boxes on
the top of the graphs
are designed to give you an idea how much the Fund's returns
can fluctuate from
year to year by measuring the best and worst calendar years
in terms of total
annual return since inception of each share class.
These graphs are furnished to you in accordance with SEC
regulations. They
compare a $10,000 investment in the Prudential Pacific
Growth Fund (Class A,
Class B, Class C and Class Z) with a similar investment in
the Morgan Stanley
Capital International Pacific Index by portraying the
initial account values
at the commencement of operations of each class, and
subsequent account values
at the end of this reporting period (October 31), as
measured on a quarterly
basis, beginning in 1992 for Class A shares and Class B
shares, 1994 for Class
C shares and 1996 for Class Z shares. For purposes of the
graphs, and unless
otherwise indicated, in the accompanying tables it has been
assumed (a) that
the maximum applicable front-end sales charge was deducted
from the initial
$10,000 investment in Class A shares; (b) the maximum
applicable contingent
deferred sales charge was deducted from the value of the
investment in Class B
and Class C shares, assuming full redemption on October 31,
1996; (c) all
recurring fees (including management fees) were deducted;
and (d) all dividends
and distributions were reinvested. Class Z shares have been
in existence for
less than one year and average annual total returns are not
available. Class B
shares will automatically convert to Class A shares, on a
quarterly basis,
beginning approximately seven years after purchase. This
conversion feature is
not reflected in the graph.
The Morgan Stanley Capital International Pacific Index is a
weighted index
comprised of approximately 416 companies listed in the stock
markets of Japan,
Hong Kong, Singapore/Malaysia, Australia and New Zealand.
The Pacific Index is
an unmanaged index and includes the reinvestment of all
dividends, but does not
reflect the payment of transaction costs and advisory fees
associated with an
investment in the Fund. The securities in the Pacific Index
may differ
substantially from the securities in the Fund. The Pacific
Index is not the
only index that may be used to characterize performance of
stock funds and
other indexes may portray different comparative performance.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
(LOGO)
Directors
Edward D. Beach
Stephen C. Eyre
Delayne D. Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
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. Vogin, Assistant Secretary
Manager
Prudential Mutual Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
743941106 MF157E
743941205 Cat. #444566S
743941304
743941403
