(ICON)
Prudential
Pacific
Growth
Fund, Inc.
ANNUAL
REPORT
Oct. 31, 1997
(LOGO)
<PAGE>
Prudential Pacific Growth Fund, Inc.
Performance At A Glance.
The past year was particularly difficult for
dollar-based investors in the
Pacific, with negative 12-month returns in
all countries except China. Stocks
and currencies both came under pressure.
Prudential Pacific Growth Fund shares
declined more than the average Pacific fund,
as measured by Lipper Analytical
Services, because we held less in Japan,
which fared better than most of the
Pacific. Moreover, our holdings in Japan
focused on companies serving the
domestic market, which failed to recover,
instead of the better-performing
export-oriented companies.
Cumulative Total Returns1
As of 10/31/97
<TABLE>
<CAPTION>
One
Five Since
Year
Years Inception2
<S> <C>
<C> <C>
Class A -21.32%
21.50% 29.39%
Class B -21.84
17.28 24.66
Class C -21.84
N/A -26.44
Class Z -21.02
N/A -24.26
Lipper Pacific Fund Avg3 -18.52
29.45 ***
</TABLE>
Average Annual Total Returns1
As of 9/30/97
<TABLE>
<CAPTION>
One
Five Since
Year
Years Inception2
<S> <C>
<C> <C>
Class A -13.57%
7.11% 7.35%
Class B -14.56
7.31 7.51
Class C -10.56
N/A -4.48
Class Z -8.75
N/A -7.14
</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.
1 Source: Prudential Investments 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 are not subject
to a sales charge or a distribution fee.
2 Inception dates: Class A and Class B:
7/24/92; Class C: 8/1/94; Class Z:
3/1/96.
3 The Lipper Pacific Fund average includes 41
funds for one year and 14 for
five years.
***Lipper Since Inception returns are Class A
and Class B, 35.42%; Class C,
- -21.77%; and Class Z, -19.95%.
How Investments Compared.
(As of 10/31/97)
(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 returns 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>
Steve Auth, Toru Komatsu, and Dave Descalzi
Portfolio Managers
(PHOTO)
Portfolio
Managers' Report
The Prudential Pacific Growth Fund invests
primarily in stocks of companies in
the Pacific Basin, selecting a diversified
portfolio aimed at long-term growth
of capital. The Fund is subject to all of the
risks associated with foreign
investing, including currency, political and
social risks and potential
illiquidity. There can be no assurance that
the Fund will achieve its
investment objective.
Our New Team.
In October, a team consisting of Steve Auth,
Toru Komatsu and Dave Descalzi,
assumed management of the Prudential Pacific
Growth Fund. Steve, head of
Prudential's global equity group, designs
overall portfolio strategy. Toru and
Dave lead teams in Tokyo and Hong Kong,
respectively. With portfolio management
closer to the Pacific markets, we expect to
react more quickly to changing
local conditions and to find opportunities
that may be less visible.
Strategy Session.
- ---------------------------------------------
- ----------------------------------
In recent years, investors have been,
perhaps, too enthusiastic about the
Pacific Region. Emerging markets were
receiving money too easily to ensure wise
investment; Japanese brand-name stocks were
expensive. We are now in the midst
of a major market and economic correction.
Japan. We had less invested in Japan than the
size of their stock market would
warrant. Moreover, in the first quarter of
1997 we shifted our focus to
less-expensive companies that were positioned
to benefit should the consumer
sector recover. Both of these moves hurt us.
The best performing stocks, after
the investor panic that swept the region,
were the Japanese exporters.
We have reduced our Japanese investments
further and are holding more cash
because of the current uncertainty throughout
the region. We've also partially
hedged our exposure to a decline in the value
of the yen against the U.S.
dollar. The companies we are buying have
profitable global businesses, such as
magnetic tape and disks for TDK, synthetic
fiber and plastics for Toray, and
optical office, camera and video products for
Canon.
Pacific Basin and South Asia. We are
maintaining a defensive position elsewhere
in the Pacific as well. The region has become
accustomed to such rapid economic
growth that even a slowdown to moderate rates
is politically painful. Some
economies may even contract during this
period of economic restructuring. We
will begin investing slowly in the areas that
we believe are likely to recover
most quickly.
For example, we added to our Hong Kong
industrial holdings. These companies,
such as Wong's International, have excellent
management and strong export
competitiveness. We are also buying Hong Kong
Telecom, which not only has
prospective earnings growth of 10% to 15% a
year and a healthy dividend yield,
but also boasts substantial cash holdings.
Portfolio Composition.
Sectors expressed as a percentage of
net assets as of 10/31/97.
(GRAPH)
<PAGE>
What Went Well.
- ---------------------------------------------
- ----
In a year when no stock market in the Pacific
rose except China, we generally
avoided the worst performing markets. We had
not been caught up in the
overenthusiastic investment binge that
allowed the excesses in Southeast Asia.
Some of our largest individual holdings were
in Hong Kong and Australia. They
performed quite well, some reporting
excellent returns. For example, HSBC is a
Hong Kong-based bank that is among our 10
largest holdings. It derives almost
half of its income from outside of Asia,
primarily the U.K. and the U.S. Our
two largest holdings are Australian firms,
Publishing & Broadcasting and
Brambles Industries. Both helped offset the
weak performance elsewhere.
And Not So Well.
- ---------------------------------------------
- ----
Our move last spring from Japanese exporters
was premature -- they were the
strongest stocks this year. Moreover, we
severely underestimated the impact of
the increase in the Japanese consumption tax.
Although investors generally were
slow to appreciate how Japanese consumers
would react to the increase, our
relative performance suffered. The stocks we
bought were inexpensive and well
positioned to benefit from long overdue
changes in Japan's economy, but those
changes remain overdue. And we do not see any
events that will trigger them.
We sold those holdings.
Five Largest Holdings.
5.3% Publishing &
Broadcasting, Ltd.
Broadcasting & Publishing
4.3% Brambles Industries, Ltd.
Business & Public Services
3.7% Hutchison Whampoa, Ltd.
Multi-Industry
3.5% Daibiru
Property Investment
3.3% Aoyama Trading
Retail
Expressed as a percentage of net assetsas of
10/31/97.
Looking Ahead.
- ---------------------------------------------
- ----
As markets throughout the region are
declining indiscriminately, we will focus
on those that are relatively buffered from
the excesses of Southeast Asia,
such as Hong Kong, Australia and India.
India has a large economy that has
been sheltered from world competition, but
which is opening up. That suggests
that there will be more opportunities for
growth investment.
Longer term, the turmoil has pushed many
countries to policies aimed at more
open markets and more tempered growth. Japan
is beginning financial reforms
that can unlock for shareholders value that
has stagnated on corporate balance
sheets. Stock prices throughout the region
have dropped to reasonable, if not
yet inexpensive, levels. Although the
risk/reward ratio is much more favorable
than it had been, we are proceeding with
caution.
1
<PAGE>
An interview with Portfolio Manager Steve
Auth.
- ---------------------------------------------
- ----------------------------------
Q. How and why is our portfolio management
changing?
A. My team has been managing global
investments in growth-oriented companies
for Prudential and for its institutional
clients. We had investment
professionals based in Tokyo and Hong Kong.
Now the Prudential Pacific Growth
Fund takes better advantage of these on-site
resources. We begin with
three-year, company-by-company earnings
projections. We use these, together
with an analysis of the broader influences on
each country, to develop country
allocations. Our local teams have primary
responsibility for selecting stocks
for the funds allocated to their regions. We
believe that their local presence
gives us an advantage in reacting quickly to
overseas market forces.
Q. This occurred at a critical time. What
happened in Pacific Region markets
this year?
A. Let's begin with Japan. Japan had been in
an economic slump and was showing
signs of faster growth early in our reporting
period. However, in April the
Japanese government increased a tax on
consumer purchases to 5% from 3%,
putting the brakes on recovery.
In Southeast Asia, economic growth had been
very rapid, but at the cost of lax
lending, investment and economic policies.
Many of the disclosure requirements
and safeguards that we are accustomed to in
developed markets weren't there.
When Thailand had difficulty raising foreign
currencies for its debts,
investors rapidly withdrew from the entire
area. Currency and stock markets
both fell. The panic even affected Hong Kong,
which had much sounder practices.
Since the region is a major market for
Australia, New Zealand and Japan, they
also were affected. And although the South
Korean economy is much larger than
those in Southeast Asia, it had similar
problems of nontransparent markets and
overinvestment.
Q. What are we doing in response?
A. We sold about $25 million of our Japanese
holdings, in anticipation of
further weakness, and have used the brief
market rallies since October to
lighten up further. We refocused our Japanese
investments to areas where we
foresee stronger growth despite weak domestic
economies, such as exporters and
smaller companies in emerging new industries.
We also hedged about half our
currency exposure to the yen and increased
our cash holdings to 18% of assets.
Q. What do we think the prospects for the
Pacific are now?
A. The road is going to be bumpy. However,
this crisis has forced countries in
the area to address long-standing
inefficiencies and it does not reduce their
natural strengths: large, growing, hard --
working, well -- educated
populations with very high savings rates.
They are likely to emerge much
stronger. Although we will maintain a
defensive portfolio -- a high cash
position and a focus on companies that are
less affected by local conditions --
our onsite teams are constantly watching for
signs of an economic bottom and
for catalysts that will trigger a growth
revival. We think we are well
positioned to pounce on the buying
opportunities we expect to become available
over the next three to six months.
2
<PAGE>
President's Letter
December 18, 1997
- ---------------------------------------------
- ----------------------------------
(PICTURE)
It Was Another Good
Year.
Dear Shareholder:
By many measures 1997 was another good year
for investors. The economy
continued its sixth straight year of moderate
growth. Inflation remained
subdued and unemployment fell to record lows.
Thanks to this favorable
environment, the stock market posted its
third year of double-digit returns
while bond values rose as yields declined to
five-year lows.
There were periods of uncertainty, of course.
The financial markets declined
significantly three times during the year.
Yet following each episode the
markets rebounded as investors took advantage
of buying opportunities. That is
very important because it shows that
investors today are not easily swayed by
temporary setbacks -- they choose to stay the
course and are investing for the
long term.
As we begin a new year, here are a few
thoughts to help guide your investment
decisions:
- - Keep your investment expectations
realistic. Seasoned investors know that
financial markets rise and fall -- as will
the value of their holdings. Over
time, however, stocks have been shown to
produce very attractive returns. In
fact, the S&P 500 rose more than 280% from
the time of the last major market
decline (October 31, 1987) through December
31, 1996, according to Lipper
Analytical Services.
- - Don't make rash decisions. If you have an
investment plan, stick to it. (If
you don't have one, see your Prudential
Financial Professional.) While past
performance is not indicative of future
results, many investors have profited
by the long-term growth prospects of stocks
and income producing potential of
bonds.
- - Review your portfolio. Sit down with your
Prudential Securities Financial
Advisor or Pruco Securities Registered
Representative today. Your Prudential
professional can advise you on financial
strategies and explain important new
developments, such as the federal Taxpayer
Relief Act of 1997, which may change
the way you save for college, a retirement
nest egg or other long-term
financial goal.
Thank you for your continued confidence in
Prudential Mutual Funds & Annuities.
In 1998, we'll do everything we can to keep
you informed and earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
3
<PAGE>
<PAGE>
Portfolio of Investments as of
October 31, 1997
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
EQUITIES & EQUIVALENTS--81.3%
COMMON STOCKS--81.2%
- ---------------------------------------------
- ---------------
Australia--13.9%
242,800 Australia & New Zealand Banking
Group, Ltd. (Commercial
Banking) $ 1,687,087
420,100 Brambles Industries, Ltd.
(Business & Public Services)
8,045,040
1,716,600 Publishing & Broadcasting, Ltd.
(Broadcasting & Publishing)
9,919,735
3,668,800 Sea World Property Trust, Ltd.
(Leisure & Tourism)
2,955,282
629,800 Western Mining Corp. Holdings,
Ltd.
(Mineral Resources)
2,227,774
193,600 Westpac Banking Corp.
(Commercial Banking)
1,122,827
- -------------
25,957,745
- ---------------------------------------------
- ---------------
Hong Kong--13.0%
320,600 Guoco Group, Ltd. (Banking)
700,924
1,291,666 Hong Kong & Shanghai Hotels, Ltd.
(Leisure & Tourism)
1,152,975
202,004 HSBC Holdings, Plc. (Banking)
4,573,182
6,763,700 Hung Hing Printing Group, Ltd.
(Forest Products & Paper)
3,018,728
1,007,600 Hutchison Whampoa, Ltd.
(Multi-Industry)
6,973,687
480,000 Innovative International
Holdings,
Ltd. (Automotive Parts)
88,176
519,900 New World Development Co., Ltd.
(Property Development)
1,829,402
190,000 QPL International Holdings, Ltd.
(Electronic Components)
117,982
422,900 Swire-Pacific, Ltd. 'A'
(Diversified Industries)
2,259,479
567,300 Television Broadcasts, Ltd.
(Broadcasting & Publishing)
1,577,872
1,005,600 Wharf Holdings, Ltd.
(Multi-Industry)
2,055,431
78,000 Wong's International Holdings
(Electronic Components)
19,777
- -------------
24,367,615
India--2.4%
102,150 Bajaj Auto Ltd. (GDR)
(Automobiles & Auto Parts)
$ 1,818,270
258,440 Tata Engineering & Locomotive
Ltd.
(GDR) (Automobiles & Trucks)
2,713,620
- -------------
4,531,890
- ---------------------------------------------
- ---------------
Indonesia--0.6%
1,845,000 Lippo Securities (Financial
Services)
191,921
709,000 Matahari Putra Prima (Retail)
137,670
1,000 Semen Gresik (Building Products)
971
833,000 Telekomunikasi
(Telecommunications) 774,077
- -------------
1,104,639
- ---------------------------------------------
- ---------------
Japan--44.8%
39,200 Advantest Corp. (Electronic
Components & Instruments)
3,245,195
232,300 Aoyama Trading Co., Ltd. (Retail)
6,242,857
140,000 Canon, Inc.
(Office Equipment & Supplies)
3,401,281
488,000 Chubu Steel Plate Co., Ltd.
(Steel) 1,238,373
603,000 Daibiru Corp. (Property
Investment) 6,472,003
1,069,000 Daido Steel Co. (Steel)
2,152,409
557,000 Daishi Bank, Ltd. (Commercial
Banking)
2,289,359
38,600 Daito Trust Construction Co.,
Ltd.
(Real Estate)
343,639
176,000 Hitachi Credit Corp. (Financial
Services)
3,660,870
135,000 Hitachi Maxell, Ltd.
(Audio/Visual) 3,010,234
273,000 House Foods Corp. (Foods)
4,701,805
400 Japan Associated Finance Co.
(Financial Services)
18,970
244,000 Kanamoto Co., Ltd.
(Auto/Equipment Rental)
1,155,138
56,700 Konaka Co., Ltd. (Retail)
330,227
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of
October 31, 1997
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
Japan (cont'd)
242,000 Kyosei Rentemu Co., Ltd.
(Auto/Equipment Rental)
$ 1,379,233
188,000 Makita Corp. (Tools)
2,643,481
464,000 Michinoku Bank, Ltd.
(Commercial Banking)
2,895,416
87,200 Namco, Ltd. (Recreation & Other
Consumer Goods)
2,923,837
27,400 Nichiei Co., Ltd.
(Building Materials &
Components) 3,009,235
390,000 Nippon Shokubai K. K. Co.
(Chemicals)
2,397,953
220 Nippon Telegraph & Telephone
Corp.
(Telecommunications)
1,867,044
174,000 Nishio Rent All Co.
(Equipment Leasing/Rental)
1,650,387
60 Nissen Co., Ltd. (Retail)
137
78,000 Nomura Securities Co., Ltd.
(Financial Services)
908,561
115,000 Sankyo Co., Ltd.
(Drugs & Medical Supplies)
3,798,569
116,000 Sanyo Coca-Cola Bottling
(Beverages) 1,409,102
53,000 Secom Co., Ltd.
(Security/Investigation
Services) 3,430,735
296,000 Seino Transportation Co., Ltd.
(Trucking & Shipping)
2,561,278
204,000 Shiseido Co., Ltd.
(Cosmetics/Toiletries)
2,783,593
350,000 Sintokogio (Machinery)
1,534,653
41,000 TDK Corp. (Electronic Components)
3,404,443
397,000 Tonami Transportation
(Transportation)
1,063,599
563,000 Toray Industries, Inc. (Textiles)
3,138,447
167,100 Xebio Co., Ltd. (Retail)
2,697,179
- -------------
83,759,242
- ---------------------------------------------
- ---------------
Malaysia--0.1%
378,000 IJM Corporation Berhad
(Construction)
202,893
- ---------------------------------------------
- ---------------
The Philippines--2.5%
6,028,300 C & P Homes, Inc.
(Property Development)
451,909
156,400 Philippine Long Distance
Telephone
Co. (ADR) (Telephones)
3,792,700
8,156,200 Solid Group, Inc.
(Electrical Equipment)
$ 502,985
- -------------
4,747,594
- ---------------------------------------------
- ---------------
Singapore--3.9%
244,000 City Developments, Ltd.
(Property Development)
1,022,152
38,000 Elec & Eltek International Co.,
Ltd.
(Electronics)
273,600
1,230,000 Hong Leong Finance, Ltd.
(Financial Services)
1,678,515
1,159,750 Sembawang Maritime, Ltd.
(Energy Equipment & Services)
2,973,906
993,000 Wing Tai Holdings
(Property Development)
1,260,552
- -------------
7,208,725
- -------------
Total common stocks
(cost $176,333,727)
151,880,343
- -------------
Units
WARRANTS(a)--0.1%
- ---------------------------------------------
- ---------------
Hong Kong
533,666 Hong Kong & Shanghai Hotels, Ltd.
expiring Dec. '98 @ HKD13.79
(Leisure & Tourism)
19,331
- ---------------------------------------------
- ---------------
Malaysia--0.1%
895,375 Renong Berhad
expiring Nov. '2000 @ MYR4.10
(Multi-Industry)
160,198
- ---------------------------------------------
- ---------------
Singapore
190,200 Hong Leong Finance, Ltd.
expiring Nov. '98 @ SGD3.25
(Financial Services)
12,072
- -------------
Total warrants
(cost $314,170)
191,601
- -------------
Total long-term investments
(cost $176,647,897)
152,071,944
- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of
October 31, 1997
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
SHORT-TERM INVESTMENTS--4.3%
RIGHTS(a)--0.1%
- ---------------------------------------------
- ---------------
Indonesia--0.1%
3,532,000 Matahari Putra Prima
expiring Dec. '97 (Retail)
$ 195,950
- -------------
Principal
Amount
(000)
- ---------------------------------------------
- ---------------
Repurchase Agreements--4.2%
$7,887 Joint Repurchase Agreement
Account
5.70%, 11/3/97
(cost $7,887,000; Note 5)
7,887,000
- -------------
Total short-term investments
(cost $7,887,000)
8,082,950
- -------------
- ---------------------------------------------
- ---------------
Total Investments--85.6%
(cost $184,534,897; Note 4)
160,154,894
Other assets in excess of
liabilities--14.4%
26,850,494
- -------------
Net Assets--100%
$ 187,005,388
- -------------
- -------------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
The industry classification of portfolio
holdings and other net assets in excess
of liabilities shown as a percentage of net
assets as of October 31, 1997 was as
follows:
<TABLE>
<S>
<C>
Broadcasting &
Publishing.............................
6.1%
Retail.......................................
......... 5.1
Multi-
Industry.....................................
... 4.9
Business & Public
Services............................ 4.3
Commercial
Banking....................................
4.3
Property
Investment...................................
3.5
Financial
Services....................................
3.5%
Banking......................................
......... 2.8
Foods........................................
......... 2.5
Property
Development..................................
2.4
Leisure &
Tourism.....................................
2.2
Drugs & Medical
Supplies.............................. 2.0
Telephones...................................
......... 2.0
Electronic
Components.................................
1.9
Security/Investigation
Services....................... 1.8
Office Equipment &
Supplies........................... 1.8
Steel........................................
......... 1.8
Electronic Components &
Instruments................... 1.7
Textile......................................
......... 1.7
Forest Products &
Paper............................... 1.6
Audio
Visual.......................................
... 1.6
Building Materials &
Components....................... 1.6
Energy Equipment &
Services........................... 1.6
Recreation & Other Consumer
Goods..................... 1.6
Cosmetics/Toiletries.........................
......... 1.5
Automobile &
Trucks...................................
1.5
Tools........................................
......... 1.4
Telecommunications...........................
......... 1.4
Trucking &
Shipping...................................
1.4
Auto/Equipment
Rental.................................
1.4
Chemicals....................................
......... 1.3
Diversified
Industries................................
1.2
Mineral
Resources....................................
. 1.2
Automobile & Auto
Parts............................... 1.0
Equipment
Leasing/Rental..............................
0.9
Machinery....................................
......... 0.8
Beverages....................................
......... 0.8
Transportation...............................
......... 0.6
Electrical
Equipment..................................
0.3
Real
Estate.......................................
.... 0.2
Electronics..................................
......... 0.1
Construction.................................
......... 0.1
Other assets in excess of liabilities
(including Joint
Repurchase
Agreement)...............................
18.6
- -----
100.0%
- -----
- -----
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 6
<PAGE>
Statement of Assets and Liabilities
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
$184,534,897)................................
.................................
$160,154,894
Foreign currency, at value (cost
$17,080,188).................................
............................
16,883,851
Cash.........................................
.............................................
................ 97,906
Receivable for investments
sold.........................................
..................................
9,271,798
Receivable for Fund shares
sold.........................................
..................................
1,848,883
Dividends and interest
receivable...................................
......................................
652,923
Forward currency contracts - amount
receivable from
counterparties...............................
......... 251,553
Other
assets.......................................
.............................................
.......... 10,211
- ----------------
Total
assets.......................................
.............................................
....... 189,172,019
- ----------------
Liabilities
Payable for Fund shares
reacquired...................................
.....................................
1,161,201
Forward currency contracts - amount payable
to
counterparties...............................
.............. 348,912
Accrued expenses and other
liabilities..................................
..................................
303,595
Distribution fee
payable......................................
............................................
137,982
Management fee
payable......................................
.............................................
. 137,354
Withholding taxes
payable......................................
...........................................
77,587
- ----------------
Total
liabilities..................................
.............................................
....... 2,166,631
- ----------------
Net
Assets.......................................
.............................................
............ $187,005,388
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par..........................................
.........................................
$ 15,710
Paid-in capital in excess of
par..........................................
.............................
194,419,122
- ----------------
194,434,832
Undistributed net investment
income.......................................
.............................
4,756,316
Accumulated net realized gains on
investments and foreign currency
transactions........................
12,470,392
Net unrealized depreciation on investments
and foreign
currencies...................................
... (24,656,152)
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$187,005,388
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($35,859,747 / 2,935,531 shares of
common stock issued and
outstanding).............................
$12.22
Maximum sales charge (5.00% of offering
price).......................................
.................. .64
- ----------------
Maximum offering price to
public.......................................
................................
$12.86
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($128,693,566 / 10,935,656 shares of
common stock issued and
outstanding)...........................
$11.77
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($2,931,822 / 249,103 shares of common
stock issued and
outstanding)................................
$11.77
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($19,520,253 / 1,590,003 shares of
common stock issued and
outstanding).............................
$12.28
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Operations
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income (Loss)
October 31, 1997
<S>
<C>
Income
Dividends (net of foreign withholding
taxes
of
$557,755)............................ $
5,217,268
Interest (net of foreign withholding taxes
of
$840)................................
552,226
- ----------------
Total
income............................
5,769,494
- ----------------
Expenses
Management
fee.............................
2,676,801
Distribution fee--Class
A.................. 184,855
Distribution fee--Class
B.................. 2,444,629
Distribution fee--Class
C.................. 65,568
Transfer agent's fees and
expenses......... 748,000
Custodian's fees and
expenses.............. 350,000
Reports to
shareholders....................
195,000
Registration
fees..........................
72,000
Directors' fees and
expenses............... 38,000
Audit
fees.................................
36,000
Amortization of organizational
expense..... 28,932
Legal fees and
expenses.................... 15,000
Miscellaneous..............................
22,418
- ----------------
Total operating
expenses................ 6,877,203
Interest expense (Note
6).................. 209,200
- ----------------
Total
expenses..........................
7,086,403
- ----------------
Net investment income
(loss).................. (1,316,909)
- ----------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions
Net realized gain on:
Investment
transactions....................
17,785,951
Foreign currency
transactions.............. 2,011,675
- ----------------
19,797,626
- ----------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................
(55,735,254)
Foreign
currencies.........................
(274,206)
- ----------------
(56,009,460)
- ----------------
Net loss on investments and foreign
currencies.................................
(36,211,834)
- ----------------
Net Decrease in Net Assets
Resulting from
Operations.....................
$(37,528,743)
- ----------------
- ----------------
</TABLE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
Statement of Changes in Net Assets
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Increase (Decrease) Year
Ended October 31,
in Net Assets 1997
1996
<S> <C>
<C>
Operations
Net investment income
(loss)................. $
(1,316,909) $ (962,383)
Net realized gain on
investment and foreign
currency
transactions...........
19,797,626 35,298,298
Net change in unrealized
appreciation
(depreciation) on
investments and foreign
currencies.............
(56,009,460) (17,921,964)
--------------
- -- ---------------
Net increase (decrease) in
net assets resulting
from operations........
(37,528,743) 16,413,951
--------------
- -- ---------------
Dividends and distributions (Note 1)
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................
(2,078,862) --
Class B................
(7,004,628) --
Class C................
(268,013) --
Class Z................
(775,335) --
--------------
- -- ---------------
(10,126,838) --
--------------
- -- ---------------
Fund share transactions (net
of share conversions)
(Note 7)
Net proceeds from shares
sold...................
2,461,825,495 2,354,962,543
Net asset value of shares
issued in reinvestment
of distributions.......
9,110,015 5,385,091
Cost of shares
reacquired.............
(2,726,822,208) (2,326,287,193)
--------------
- -- ---------------
Net increase (decrease) in
net assets from Fund
share transactions.....
(255,886,698) 34,060,441
--------------
- -- ---------------
Total increase (decrease)....
(303,542,279) 44,793,495
Net Assets
Beginning of year............
490,547,667 445,754,172
--------------
- -- ---------------
End of year.................. $
187,005,388 $ 490,547,667
--------------
- -- ---------------
--------------
- -- ---------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 8
<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 Investments Fund
Management LLC ('PIFM'). 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, take
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 or losses on foreign
currency transactions represent net
foreign exchange gains or 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 year end exchange rates
are reflected as a component of
unrealized depreciation 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 currency transactions. Risks may
arise upon entering into these contracts
- ---------------------------------------------
- -----------------------------------
9
<PAGE>
Notes to Financial Statements
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
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 were deferred and
amortized over the period of
benefit of 60 months from the date the Fund
commenced investment operations.
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
$6,073,225, increase paid-in capital in
excess of par by $1,319,749 and decrease
accumulated net realized gains by $7,392,974
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
PIFM. Pursuant to this agreement, PIFM
has responsibility for all investment
advisory services and supervises the
subadviser's performance of such services.
PIFM 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. PIFM
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 PIFM 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 a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acts as the distributor of the
Class A, Class B, Class C and
Class Z shares. The Fund compensates 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 PSI.
The distribution fees are accrued daily and
payable monthly. No distribution or
service fees are paid to PSI as distributor
of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the
Fund compensates PSI 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, 1997.
PSI has advised the Fund that it has received
approximately $75,000 in front-end
sales charges resulting from sales of Class A
shares during the year ended
October 31, 1997. From these fees, PSI paid
such sales charges to affiliated
broker-dealers, which in turn paid
commissions to salespersons and incurred
other distribution costs.
PSI has advised the Fund that for the year
ended October 31, 1997, it received
approximately $1,398,000 and $40,000 in
contingent deferred sales charges
imposed upon certain redemptions by Class B
and Class C shareholders,
respectively.
- ---------------------------------------------
- -----------------------------------
10
<PAGE>
Notes to Financial Statements
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
PSI, PIFM 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 LLC ('PMFS'),
a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During
the year ended October 31, 1997, the
Fund incurred fees of approximately $630,900
for the services of PMFS. As of
October 31, 1997, approximately $44,600 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, 1997, PSI
earned approximately $4,500 in
brokerage commissions from portfolio
transactions executed on behalf of the
Fund.
- ---------------------------------------------
- ---------------
Note 4. Portfolio Securities
Purchases and sales of investment securities,
other than short-term investments,
for the year ended October 31, 1997 were
$268,016,877 and $519,493,969,
respectively.
At October 31, 1997, the Fund had outstanding
forward currency contracts, both
to purchase and sell foreign currencies, as
follows:
<TABLE>
<CAPTION>
Value at
Forward Currency Settlement Date
Current
Purchase Contracts Payable
Value Depreciation
- ------------------- --------------- ------
- ----- -------------
<S> <C> <C>
<C>
Japanese Yen,
expiring
4/14/98.......... $20,000,000
$19,861,965 $ (138,035)
<CAPTION>
Value at
Forward Currency Settlement Date
Current Appreciation
Sales Contracts Receivable
Value (Depreciation)
- ------------------- --------------- ------
- ----- -------------
<S> <C> <C>
<C>
Hong Kong Dollars,
expiring
4/24/98.......... $ 2,794,612 $
2,827,673 $ (33,061)
Hong Kong Dollars,
expiring
4/27/98.......... 2,756,745
2,826,180 (69,435)
Japanese Yen,
expiring
3/26-4/20/98..... 49,300,000
49,102,834 197,166
Japanese Yen,
expiring
4/3/98........... 8,000,000
8,053,994 (53,994)
--------------- ------
- ----- -------------
$62,851,357
$62,810,681 $ 40,676
--------------- ------
- ----- -------------
--------------- ------
- ----- -------------
</TABLE>
The United States federal income tax basis of
the Fund's investments is
substantially the same as for financial
reporting purposes and accordingly, as
of October 31, 1997, net unrealized
depreciation for federal income tax purposes
was $24,380,003 (gross unrealized
appreciation--$11,265,317; gross unrealized
depreciation--$35,645,320).
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated
registered investment companies, transfers
uninvested cash balances into a single joint
account, the daily aggregate
balance of which is invested in one or more
repurchase agreements collateralized
by U.S. Treasury or Federal agency
obligations. As of October 31, 1997, the Fund
had a 1.0% undivided interest in the
repurchase agreements in the joint account.
The undivided interest for the Fund
represented $7,887,000 in principal amount.
As of such date, each repurchase agreement in
the joint account and the value of
the collateral therefore was as follows:
Bear Stearns, 5.70%, in the principal amount
of $236,000,000, repurchase price
$236,112,100, due 11/3/97. The value of the
collateral including accrued
interest is $241,912,917.
Credit Suisse First Boston, 5.72%, in the
principal amount of $237,440,000,
repurchase price $237,553,180, due 11/3/97.
The value of the collateral
including accrued interest is $246,134,363.
Deutsche Morgan Grenfell, 5.70%, in the
principal amount of $236,000,000,
repurchase price $236,112,100, due 11/3/97.
The value of the collateral
including accrued interest is $240,720,618.
SBC Warburg, 5.66%, in the principal amount
of $92,714,000, repurchase price
$92,757,730, due 11/3/97. The value of the
collateral including accrued interest
is $94,588,984.
- ---------------------------------------------
- ---------------
Note 6. Borrowings
The Fund, along with other affiliated
registered investment companies (the
'Funds'), entered into a credit agreement
(the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. The Agreement expires on
December 30, 1997. Interest on any such
borrowings outstanding will be at market
rates. The purpose of the Agreement is
to serve as an alternative source of funding
for capital share redemptions. The
Funds pay a commitment fee at an annual rate
of .055 of 1% on the unused portion
of the credit facility. The commitment fee is
accrued and paid quarterly on a
pro-rata basis by the Funds.
The Fund utilized the line of credit during
the year ended October 31, 1997. The
average daily balance the Fund had
outstanding during the year was approximately
$9,302,256 at a weighted average interest
rate of approximately 5.86%.
- ---------------------------------------------
- -----------------------------------
11
<PAGE>
Notes to Financial Statements
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
Note 7. 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. 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
15,710,293 shares of common stock issued and
outstanding at October 31, 1997,
Prudential Trust Company owned 602,943 shares
of Class Z.
Transactions in shares of common stock for
the year ended October 31, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- --------------------------------- ----------
- - ---------------
<S> <C>
<C>
Year ended October 31, 1997:
Shares sold......................
81,011,975 $ 1,296,933,660
Shares issued in reinvestment of
distributions..................
110,855 1,771,786
Shares reacquired................
(85,608,895) (1,376,512,897)
----------
- - ---------------
Net decrease in shares
outstanding before
conversion.....................
(4,486,065) (77,807,451)
Shares issued upon conversion
from Class B...................
261,162 4,152,328
----------
- - ---------------
Net decrease in shares
outstanding....................
(4,224,903) $ (73,655,123)
----------
- - ---------------
----------
- - ---------------
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)
----------
- - ---------------
<CAPTION>
Class A Shares
Amount
- --------------------------------- ----------
- - ---------------
<S> <C>
<C>
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
----------
- - ---------------
----------
- - ---------------
<CAPTION>
Class B
- ---------------------------------
<S> <C>
<C>
Year ended October 31, 1997:
Shares sold......................
40,987,211 $ 633,115,767
Shares issued in reinvestment of
distributions..................
415,124 6,363,693
Shares reacquired................
(51,456,334) (794,472,870)
----------
- - ---------------
Net decrease in shares
outstanding before
conversion.....................
(10,053,999) (154,993,410)
Shares reacquired upon conversion
into Class A...................
(270,285) (4,152,328)
----------
- - ---------------
Net decrease in shares
outstanding....................
(10,324,284) $ (159,145,738)
----------
- - ---------------
----------
- - ---------------
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)
----------
- - ---------------
----------
- - ---------------
<CAPTION>
Class C
- ---------------------------------
<S> <C>
<C>
Year ended October 31, 1997:
Shares sold......................
26,331,596 $ 408,638,884
Shares issued in reinvestment of
distributions..................
12,995 199,203
Shares reacquired................
(26,898,046) (419,221,061)
----------
- - ---------------
Net decrease in shares
outstanding....................
(553,455) $ (10,382,974)
----------
- - ---------------
----------
- - ---------------
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
----------
- - ---------------
----------
- - ---------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
12
<PAGE>
Notes to Financial Statements
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Class Z Shares
Amount
- --------------------------------- ----------
- - ---------------
<S> <C>
<C>
Year ended October 31, 1997:
Shares sold......................
7,750,167 $ 123,137,184
Shares issued in reinvestment of
distributions..................
48,879 775,333
Shares reacquired................
(8,555,074) (136,615,380)
----------
- - ---------------
Net decrease in shares
outstanding....................
(756,028) $ (12,702,863)
----------
- - ---------------
----------
- - ---------------
<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 8. Distributions
On December 10, 1997 the Board of Directors
of the Fund declared a dividend from
ordinary income of $0.40 from Class A, $0.29
from Class B and C and $0.44 from
Class Z and $0.845 from long-term capital
gains to Class A, B, C and Z
shareholders respectively, payable on
December 18, 1997 to shareholders of
record on December 15, 1997.
- ---------------------------------------------
- -----------------------------------
13
<PAGE>
Financial Highlights
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Class A(a)
- ---------------------------------------------
- ------------
Year Ended October 31,
- ---------------------------------------------
- ------------
1997 1996 1995 1994
1993
- ------- -------- -------- -------
- -------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 15.86
$ 15.75 $ 16.90 $ 16.10 $ 10.65
- ------- -------- -------- -------
- -------
Income from investment operations
Net investment income
(loss).................................
.02 .07 .04 (.08)
(.01)
Net realized and unrealized gain (loss) on
investment and
foreign currency
transactions.............................
(3.31) .23 (1.09) 1.15
5.48
- ------- -------- -------- -------
- -------
Total from investment
operations..........................
(3.29) .30 (1.05) 1.07
5.47
- ------- -------- -------- -------
- -------
Less distributions
Distributions in excess of net investment
income............. -- (.19)
- -- (.06) (.02)
Distributions from net realized
gains........................ (.35)
- -- (.10) (.21) --
- ------- -------- -------- -------
- -------
Total
distributions................................
....... (.35) (.19) (.10)
(.27) (.02)
- ------- -------- -------- -------
- -------
Net asset value, end of
year................................. $
12.22 $ 15.86 $ 15.75 $ 16.90
$ 16.10
- ------- -------- -------- -------
- -------
- ------- -------- -------- -------
- -------
TOTAL
RETURN(b)....................................
.......... (21.32)% 1.97%
(6.23)% 6.67% 51.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)................................
$35,860 $113,585 $ 98,998 $98,921
$64,353
Average net assets
(000).....................................
$73,942 $106,148 $101,920 $92,233
$26,264
Ratios to average net assets:
Total
expenses.....................................
....... 1.48% 1.37% 1.46%
1.57% 1.63%
Operating expenses, including distribution
fees........... 1.42% 1.37%
1.46% 1.57% 1.63%
Operating expenses, excluding distribution
fees........... 1.17% 1.12%
1.21% 1.33% 1.43%
Net investment income
(loss)..............................
.14% .44% .26% (.50)%
(.04)%
For Class A, B, C and Z shares:
Portfolio turnover
rate...................................
81% 91% 54% 56%
44%
Average commission rate paid per
share.................... $ .0194 $
.0209 N/A N/A N/A
</TABLE>
- ---------------
(a) Calculated based upon weighted average
shares outstanding during the year.
(b) 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 year reported and
includes reinvestment of dividends and
distributions.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 14
<PAGE>
Financial Highlights
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Class B(a)
- ---------------------------------------------
- ----------------
Year Ended October 31,
- ---------------------------------------------
- ----------------
1997 1996 1995 1994
1993
- -------- -------- -------- -----
- --- --------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 15.40
$ 15.38 $ 16.62 $ 15.94 $
10.63
- -------- -------- -------- -----
- --- --------
Income from investment operations
Net investment income
(loss).................................
(.09) (.04) (.08) (.21)
(.10)
Net realized and unrealized gain (loss) on
investment and
foreign currency
transactions.............................
(3.19) .25 (1.06) 1.13
5.43
- -------- -------- -------- -----
- --- --------
Total from investment
operations..........................
(3.28) .21 (1.14) .92
5.33
- -------- -------- -------- -----
- --- --------
Less distributions
Distributions in excess of net investment
income............. -- (.19)
- -- (.03) (.02)
Distributions from net realized
gains........................ (.35)
- -- (.10) (.21) --
- -------- -------- -------- -----
- --- --------
Total
distributions................................
....... (.35) (.19)
(.10) (.24) (.02)
- -------- -------- -------- -----
- --- --------
Net asset value, end of
year................................. $
11.77 $ 15.40 $ 15.38 $ 16.62
$ 15.94
- -------- -------- -------- -----
- --- --------
- -------- -------- -------- -----
- --- --------
TOTAL
RETURN(b)....................................
.......... (21.84)% 1.36%
(6.82)% 5.79% 50.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)................................
$128,694 $327,315 $344,313
$459,949 $250,997
Average net assets
(000).....................................
$244,462 $357,548 $368,771
$404,506 $ 74,590
Ratios to average net assets:
Total
expenses.....................................
....... 2.23% 2.12%
2.21% 2.33% 2.37%
Operating expenses, including distribution
fees........... 2.17% 2.12%
2.21% 2.33% 2.37%
Operating expenses, excluding distribution
fees........... 1.17% 1.12%
1.21% 1.33% 1.37%
Net investment income
(loss)..............................
(.61)% (.25)% (.55)%
(1.27)% (.83)%
</TABLE>
- ---------------
(a) Calculated based upon weighted average
shares outstanding during the year.
(b) 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 year reported and
includes reinvestment of dividends and
distributions.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 15
<PAGE>
Financial Highlights
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Class C(a) Class Z(a)
- ---------------------------------------------
- ----------
August 1, Year
1994(d) Ended
Year Ended October 31, Through
October
- ----------------------------- October 31,
31,
1997 1996 1995 1994
1997
- ------ ------- ------ -----------
- ----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $15.40
$ 15.38 $16.62 $ 16.68 $
15.89
- ------ ------- ------ -----
- ----------
Income from investment operations
Net investment income
(loss).................................
(.09) (.04) (.08) (.06)
.06
Net realized and unrealized gain (loss) on
investment and
foreign currency
transactions.............................
(3.19) .25 (1.06) --
(3.32)
- ------ ------- ------ -----
- ----------
Total from investment
operations..........................
(3.28) .21 (1.14) (.06)
(3.26)
- ------ ------- ------ -----
- ----------
Less distributions
Distributions in excess of net investment
income............. -- (.19)
- -- -- --
Distributions from net realized
gains........................ (.35)
- -- (.10) -- (.35)
- ------ ------- ------ -----
- ----------
Total
distributions................................
....... (.35) (.19) (.10)
- -- (.35)
- ------ ------- ------ -----
- ----------
Net asset value, end of
period...............................
$11.77 $ 15.40 $15.38 $ 16.62
$ 12.28
- ------ ------- ------ -----
- ----------
- ------ ------- ------ -----
- ----------
TOTAL
RETURN(b)....................................
.......... (21.84)% 1.36% (6.82)%
(.36)% (21.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $2,932
$12,360 $2,443 $ 718 $
19,520
Average net assets
(000).....................................
$6,557 $ 6,402 $1,624 $ 458
$ 31,945
Ratios to average net assets:
Total
expenses.....................................
....... 2.23% 2.12% 2.21%
3.00%(c) 1.23%
Operating expenses, including distribution
fees........... 2.17% 2.12%
2.21% 3.00%(c) 1.17%
Operating expenses, excluding distribution
fees........... 1.17% 1.12%
1.21% 2.00%(c) 1.17%
Net investment income
(loss)..............................
(.61)% (.25)% (.43)%
(1.64)%(c) .39%
<CAPTION>
<S>
<C>
March 1,
1996(e)
Through
October 31,
1996
- -----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.57
- -----------
Income from investment operations
Net investment income
(loss).................................
.11
Net realized and unrealized gain (loss) on
investment and
foreign currency
transactions.............................
(.79)
- -----------
Total from investment
operations..........................
(.68)
- -----------
Less distributions
Distributions in excess of net investment
income............. --
Distributions from net realized
gains........................ --
- -----------
Total
distributions................................
....... --
- -----------
Net asset value, end of
period............................... $
15.89
- -----------
- -----------
TOTAL
RETURN(b)....................................
.......... (4.09)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..............................
$37,288
Average net assets
(000).....................................
$33,868
Ratios to average net assets:
Total
expenses.....................................
....... 1.12%(c)
Operating expenses, including distribution
fees........... 1.12%(c)
Operating expenses, excluding distribution
fees........... 1.12%(c)
Net investment income
(loss)..............................
.68%(c)
</TABLE>
- ---------------
(a) Calculated based upon weighted average
shares outstanding during the period.
(b) 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.
(c) Annualized.
(d) Commencement of offering of Class C
shares.
(e) Commencement of offering of Class Z
shares.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 16
<PAGE>
Report of Independent Accountants
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
To the Shareholders and Board of Directors of
Prudential Pacific Growth Fund, Inc.
In our opinion, the accompanying statement of
assets and liabilities, including
the portfolio of investments, and the related
statements of operations and of
changes in net assets and the financial
highlights present fairly, in all
material respects, the financial position of
Prudential Pacific Growth Fund,
Inc. (the 'Fund') at October 31, 1997, and
the results of its operations, the
changes in its net assets and the financial
highlights for the year then ended,
in conformity with generally accepted
accounting principles. These financial
statements and financial highlights
(hereafter referred to as 'financial
statements') are the responsibility of the
Fund's management; our responsibility
is to express an opinion on these financial
statements based on our audit. We
conducted our audit of these financial
statements in accordance with generally
accepted auditing standards which require
that we plan and perform the audit to
obtain reasonable assurance about whether the
financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements, assessing
the accounting principles used and
significant estimates made by management, and
evaluating the overall financial statement
presentation. We believe that our
audit, which included confirmation of
securities at October 31, 1997 by
correspondence with the custodian and
brokers, provides a reasonable basis for
the opinion expressed above. The accompanying
statement of changes in net assets
for the period ended October 31, 1996 and the
financial highlights for each of
the four periods in the period ended October
31, 1996 were audited by other
independent accountants, whose opinion dated
December 12, 1996 was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
December 23, 1997
- ---------------------------------------------
- -----------------------------------
17
<PAGE>
Change of Auditors
PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ---------------------------------------------
- ----------------------------------
Effective March 1, 1997, Deloitte & Touche
LLP was terminated as the Fund's
auditors. For the years ended October 31,
1992 through October 31, 1996,
Deloitte & Touche LLP expressed an
unqualified opinion on the Fund's financial
statements. There were no disagreements
between Fund management and Deloitte &
Touche LLP prior to their termination. The
Board of Directors approved the
termination of Deloitte & Touche LLP and the
appointment of Price Waterhouse LLP
as the Fund's independent accountants.
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, 1997) as
to the federal 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,
1997, the Fund paid long-term
capital gain distributions of $.348 per share
which are taxable as such.
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 1998, 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 year 1997.
- ---------------------------------------------
- -----------------------------------
18
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
- ---------------------------------------------
- ----------------------------------
Change Your Mind.
You can exchange your shares in most
Prudential Mutual Funds for shares in
most other Prudential Mutual Funds, without
charges. This may be most helpful
if your investment needs change.
- ---------------------------------------------
- ----------------------------------
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains
distributions automatically --
without charge.
- ---------------------------------------------
- ----------------------------------
Invest For Retirement.
There is no minimum investment for an IRA.
Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to
$2,000 a year in an IRA. And if you are
married and not covered by a retirement plan
at work, you and your spouse may
each contribute $2,000 a year to an IRA for a
total of $4,000.
- ---------------------------------------------
- ----------------------------------
Change Your Job.
You can take your pension with you. Use a
rollover IRA to manage your
company-sponsored retirement plan while
retaining the special tax-deferred
advantages.
- ---------------------------------------------
- ----------------------------------
Invest In Your Children.
There's no fee to open a custodial account
for a child's education or other
needs.
- ---------------------------------------------
- ----------------------------------
Take Income.
Would you like to receive monthly or
quarterly checks in any amount from your
fund account? Just let us know. We'll take
care of it. Of course, there are
minimum amounts. And shares redeemed may be
subject to tax, and Class B and C
shares may be subject to contingent deferred
sales charges. We'll gladly
answer your questions.
- ---------------------------------------------
- ----------------------------------
Keep Informed.
We want to keep you up-to-date. Of course,
you receive account activity
statements every quarter. But you also
receive annual and semi-annual fund
reports, as well as other important updates
on events that affect your
investments, including tax information.
This material is only authorized for
distribution when preceded or accompanied
by a current prospectus. Read the prospectus
carefully before you invest or
send money.
<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:
- - Prudential Pacific Growth Fund, Inc.
- - MSCI Pacific Index
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, 1997; (c) all
recurring fees (including management fees)
were deducted; and (d) all dividends
and distributions were reinvested. 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
Directors
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick 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
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad StreetNew York, NY 10004
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
